DID THE BAILOUTS “WORK”?
The NY Times is on a tear this week. In addition to Floyd Norris rolling out the red carpet for the “end of the recession” Andrew Ross Sorkin is now rolling our the red carpet for every banker, politician and economist who had a hand in the bailouts. This is a Bush-like case of declaring “mission accomplished” long before the evidence is in.
To begin with, Mr. Sorkin clearly has no idea how our monetary system works by implying that the U.S. government might “make a profit” from the bailouts. He believes the U.S. government gets a gold coin in return for the bailout “investment” and turns around and says:
“Well ladies and gents, looks like we have some more money to spend since we made a profit from the latest government spending spree!”
That’s just not how the monetary system works. The government is not a household or corporation that generates revenue or income in order to operate. I’ve beaten this point to a bloody pulp in recent weeks, but the U.S. government is not constrained in the same way a household or business is. We do not fund our spending via investments, taxes or debt issuance. This is vitally important when discussing the bailouts because the true cost of the bailouts is not remotely akin to the costs that a household or corporation might incur when spending money. Implying that we somehow make money from the bailouts not only displays an ignorance with regards to our monetary system, but takes the focus off the important issues at hand.
In my view, the only true costs from this highly inefficient form of government spending is increased moral hazard, potentially higher inflation and malinvestment (which has multiple downsides and is almost certainly occurring as too many dollars seek too few productive sources). The argument that we somehow “saved the system” is a moot point. There is simply no way of knowing whether the alternatives might have been more beneficial over the long-term. All we truly know is that we resurrected a banking system that was broken. But I digress.
Aside from not understanding how the monetary system works, where Mr. Sorkin goes wrong is when he implies that somehow this money “earned” is:
“enough to make us all feel rich”
Well that just depends on who you ask. As I described earlier, the U.S. government doesn’t have “more” money because of the bailouts. So they didn’t get rich. The U.S. taxpayer didn’t receive some sort of paycheck or dividend from the bailouts so they didn’t get rich (though they’ll almost certainly become poorer when higher taxes and inflation hit their wallets – thank you inefficient government spending!). Global household equity wealth is still 23% below its pre-recession levels. So who actually got rich from this? Not “all of us” like Mr. Sorkin implies. So who? Of course the banks and bankers – the primary culprits of the entire credit crisis. After all, the only true v-shaped recovery in the last 12 months has been the one in bank profits and banker bonuses:
The obvious counter-argument is that things might have been much worse without the bailouts. Regular readers know I don’t buy into the fear mongering argument that we were on the precipice of Great Depression 2. Clearly, we can’t prove what might have happened so let’s stick with the facts. This is the worst time to be a middle class American in 25 years. Household net worth is down substantially since the recession began. We have 8.1MM more unemployed than we did 18 months ago. The unemployment rate is at a 25 year high. Wages are deflating. Small businesses continue to struggle. Real S&P 500 revenues ex-financials are up a measly 5% year over year. If the bailouts worked for most of America we’re sure not seeing much evidence of it. Sure, the bailout worked for the bankers (and it certainly worked for the New York Times!), but this country isn’t only comprised of bankers and writers. The fact remains – while bankers have been made whole the majority of this country is far worse off than before the credit crisis.
Yes, there are very real signs that the economy is improving, the stock market has surged, but these victory calls are eerily similar to the same victory calls that followed each of Alan Greenspan’s disastrous market interventions and bailouts. I don’t mean to rain on the stock market parade here. I sincerely hope this is a new bull market and not a cyclical turn in a secular bear (trust me, my job is much easier during a nice ripe bull market). I want a strong, organic and robust economy more than you can believe and I have been bullish at several points during the last 18 months when no one on the planet wanted to own stocks, but let’s keep things in perspective.
In my opinion the banking crisis was simply market forces at work imposing their will on a sector that is too large, too unproductive and too destructive. This is a sector that steals our brightest youths out of college, produces few real goods and makes most of their money by further indebting their customers and/or shifting dollars from one pocket to the other (while shaving a fee off the top). Is this an absolutely vital facet of the economy? Of course. But that doesn’t mean it should be THE economy. Only time will tell if reinflating this sector was the right thing to do. I have a feeling the market will once again impose its will on this sector as time passes.
I fear more and more that Bernanke’s great reflation gamble has simply reinflated the problem child of the entire credit crisis – the banking sector. We have handed them money on silver platters with which they recklessly speculate. The inflationary (and potentially deflationary) consequences of this will not be realized for many years. The destructive social and psychological impacts of the bailouts will be remembered by Americans long after the recession is over. Ultimately, we will not be able to judge the success of the bailouts for many years.
I think the crew of writers at the NY Times have unveiled the “mission accomplished” banner a bit too early. I have a feeling investors will feel quite differently about the bailouts the next time we suffer a banking crisis. And yes, there will be a next banking crisis. After all, the worst part of this entire fiasco is that nothing has changed over the last 18 months. Banks remain unregulated, have become too bigger to fail and now wield even greater power over the U.S. consumer and the government….Unfortunately we are doing the same thing over again while expecting a different result. Einstein referred to that as the very definition of insanity. And with all due respect to Mr. Sorkin, I am going to side with Mr. Einstein this time around.
This seems to be the common sense point that so many gloss over. Why is it okay to return to the old system as it was? It was clearly broken. Changes need to be made. Yet we have done nothing. We might recover for a few more quarters or years, but ultimately we will suffer the same consequences. The system is broken and ruled by bankers. And we just handed them the key to the castle.
I think it’s impossible to make the argument that things aren’t much better than they were a year ago. Whether that means we’re out of the woods or not us unknown, but for now the bailouts look like a pretty great idea.
At one point, buying a big MacMansion with $0 down and a teaser rate of 1% also ‘looked like a pretty great idea’, until …
I have just one teeny weenie correction to make to your otherwise thoughtful, clear headed, and prescient post; the banksters didn’t make their money by “shaving” a little off the top; they glommed the money with both fists, using a front end loader, and displaying an avarice that would make Caligula blush, while taking as much as 60% of their bank’s profits as reward for gambling with our money at Ben Bernake’s “Can’t-Lose Casino.”
I’m a peaceful man, but until some of these CEO’s are sent to a super-max, where they can do their 20 years as “Leroy’s Love Doll” this rupture in our nation’s soul will not be healed.
Amen. A society without justice is a society doomed to fail. How many people rationalize ‘strategically’ defaulting on their mortgages because ‘fat cats’ on Wall Street are getting away with fraud?
p.s, just one question, if you please……..
We’ve all heard a billion pundits, and government officials, say a billion times how they heroically “pulled us back from the brink.” They roll their eyes, shake their heads, and want us to imagine something so terrible that not even one of the billions of heroes who did the “pulling” can tell what would have actually happened.
I mean, we know pretty well what would happen if, let’s say, an atomic bomb was detonated in Manhattan. So why can’t anyone tell us, in pathological detail, what would’ve happened had they not raped, looted, and plundered our Treasury, and with it, our American way of life?
Would the Army have run around, clipping clothes pins on our noses, and cutting off our oxygen? Would the corn crop suddenly begin growing “down“ into the ground? Would Ben Bernake’s nose grow into the next universe, piercing the ionosphere and killing us all as he finally was compelled to make a true statement?
What?
The ultimate result of shielding men from the effects of folly is to fill the world with fools.
- Herbert Spencer
I wonder if “The Bush administration” is going to get credit for saving the planet?
The National Enquirer is a more “Creditable Source” of the news than the NY Times.
“Implying that we somehow make money from the bailouts not only displays an ignorance with regards to our monetary system…”
i know you are focused on the monetary system and the way in which you believe it works, as opposed to the way most believe it works…but i think you are missing the point being made here.
which is that you can guage the effectiveness of a policy initiative, such as tarp etc aka bailout, by measuring funds devoted to its implementation as compared to funds derived from its operation…this is an efficiency analysis and i think sorkin’s point (which i don’t think is the result of a completely thorough analysis, mind you) is that the bailout was more efficient at accomplishing its intended purpose than most would have thought (and many still think).
I just couldn’t disagree more.
First off, Mr. Sorkin attacks many people’s reputations in the story. I’ve got a big problem with that because he is attempting to explain how these men are wrong by referring to the accounting of the US government. His argument is ENTIRELY wrong. He doesn’t even understand how the US accounts for its money yet he thinks it is okay to use that as evidence when tarnishing another man’s reputation? Sorry, but I’ve got a big problem with that.
Furthermore, the effecttiveness of the bailouts will is not judged by how much we “make” or “lose” on this. It will be judged by how strong the growth of the US economy is over the next decade. We didn’t do this to “make” money. We did this to stabilize the economy and hopefully lay the foundation for sustained growth. We’ll see if that actually plays out. So far, the organic growth looks pretty meager….
we have a semantic difference, really. i totally agree that to assess whether the bailout “worked” we have to analyze the late returns…namely how the economy, unemployment, deficit, interest rates etc look 3-5 years out.
i think your analogy to W’s mission accomplished is exactly right.
my only point was that most people, moi meme aussi, thought that the treasury would not see the majority of tarp money back…and that thought is proving wrong.
It’s not a semantic point at all. It’s a very concrete point. People want to judge the bailouts by how much we “make” or “lose”, but that misses the whole point of the bailouts.
The bailouts will only be judged a success if the economy sustains growth for several years (on its own) and the banks do not do this to us again. Whether we “make” money on it is pointless.
Not to mention the fact that the US government doesn’t “make” money on the bailouts to begin with….It’s frivolous argument by people who don’t understand monetary operations….In other words, let’s revisit in 5-10 years and see how well people like those bank bailouts….
Talk about thr greedy bankers, appalling as they are with their extorionate bonuses,they do at least serve a purpose, the people we should really worry about are lawyers who produce absolutely nothing and charge the earth . How much better off every country would be if at least 50% of lawyers put their potential skills to produtive use
Nearly impossible for them to get it back, let alone at a profit. AIG’s obligations are being unwound (ie. PAID OUT) to the tune of $100bln plus. BSC cost around $10bln. Lehman’s chugging along through bankruptcy proceedings but you can be assured that sovereign wealth funds and state pension funds were caught in the fray with overnight lending and will see none of it back (along with JPM for that matter). GMAC and GM are around the $80bln mark and I don’t believe they’ve had a profitable quarter yet (and let’s not forget, the bankruptcy essentially voided the pensions of tens of thousands of employee pensions). Meanwhile, the Fed is holding $1 trln of MBS,CDO, and CMOs for which there is nearly no market (“though they plan to start unwinding”). Oh, and FDIC is sitting on a $40 bln deficit and just extended its 250k account insurance program for at least 6 months and into 2011 if necessary….
The same semantic argument exists on this side – even if the treasury gets that money back, it will be very much devalued. And that’s only because it shifted Treasury gave the banks money, Fed took the assets from the banks and gave them cash and the banks went and handed the cash back to the treasury – or some of it….or highly diluted shares.
They’re not netting out funds because the assets they are holding cannot be marked to market because no price exists (though the best bids thus far have been $0.65-0.80 on the $1). At the same time, the banks were able to free up capital (ie. be line with 7.5% capitalization ratios), borrow at near zero rates and charge interest at extremes (29% on classical credit and after reading today, some gunning for the microlending field were charging like 120-130%!). The government gave the banks an absolutely risk free carry trade – why do you think all these banks are killing in “Fixed income trading”?
In fact, considering bond purchases can be used as collateral for derivative trading, the Fed actually did more – they levered up the banks!
And the proposal in Congress for “regulation” is to give the Fed MORE power overseeing the banks. Lol – good stuff.
i was talking about tarp, and you are talking about the fed’s QE. but you make a good point, namely who knows the value of the maiden lanes and whatever else the fed has bought.
Yes, I know you’re talking about TARP but think about what TARP is/was: Cash for Paper – you tell me how much the paper is worth and I hand you cash. But actually its worse because it’s not only paper, its considered TROUBLED paper (the ‘T’ in tarp). Home value have not even begun to stabilize yet, so these assets remain troubled and sitting on the Fed books. Meanwhile, the Fed extended cash AND near zero rates to the banks – so they could carry trade their way out of their situation….and pay back the treasury.
Here’s a big tell – JPM reported net income of $3.3 bln for the quarter. $2.5 bln of that came in the form of “Fixed income trading”. That means, take your cash and your zero interest credit, buy treasuries yielding 3.5 – 4.0% and also engage is some highly speculative trading and perhaps high yield corporate debt. $800 million was from the rest of the bank’s activity – ie. EVERYTHING else a bank does that has nothing to do with Bond trading.
You see where my fury about the modern day banking system arises from? These are no longer lending institutions. They are massive casinos….Banks should be more like utilities and less like casinos.
Yes, and this angers many in banking as well because not all banks function that way. JPM is and always has been absolutely cut-throat neo-capitalist institution. They feed off the carrion of the dead and act like parasites on the living. Meanwhile, Jamie Dimon has been parading around Capitol Hill basically flipping off all the politicians in power and daring them to enact any form of regulation that will diminish powers or profits with the threat that any such measures would pass directly to their customers. And for some reason, they all back off – I guess because the brand is older than the Fed, the Central Bank, and all the Federal Banks….or maybe just because he knows they cant push him around because he’s working directly with both the Treasury and the Fed (just like Goldman). He is a banking genius, there’s no denying that. And he is the ultimate micro-manager (I know a few who’ve sat in meetings with him). He doesn’t mess around and doesn’t give ground if he thinks he’s on the losing end (ie. “No Tiny Tim, we won’t buy back our Warrants at those prices – go sell on the market”). He’s in everyway, the modern embodiment of James Pierpont Morgan. I’d say he’s probably one of the most powerful men in the world these days – and he doesn’t really have a moral bone in his body…
That being said, there was at least one occasion one occasion where Mr. JP Morgan himself was forced to learn a lesson in humility. It was during the crash that started the Great Depression. During that time, the “boy wonder”, Jesse Livermoore, was very highly leveraged on the short side. As the market plummeted, he collected tens of millions (by the time he covered – or was forced to cover, he had made over $140 million in 1930 dollars…). However, JP Morgan came to him and pleaded with him to cover his shorts as he felt Mr. Livermoore was responsible for feeding the plummeting stock market (which was very obviously incorrect). Jesse Livermoore scoffed at him and essentially said (paraphrase), “Would you do the same for anyone else?”. Perhaps Mr. Dimon will be re-playing that same act some day…
“That means, take your cash and your zero interest credit, buy treasuries yielding 3.5 – 4.0%…”
EXACTLY! why do you think i have been overweight and leveraged financials for all this time that the treasury spread has been at historic highs?
you don’t have to have a warm and fuzzy about the name in order to make money in it…in fact, sometimes it works exactly in the inverse.
I have two questions for you and anyone else who might be knowledgable about all this:
1) How much of this FICC or trading revenue is based on equity trading?
2) How come this strategy of buying banks worked so poorly in Japan? They were given the same basic treatment.
Thanks!
no clue
We can’t be sure how much the banks are making from trading, but a pretty good rule of thumb is this – if the stock market was up during the reporting quarter they’ll report a good number. These banks are like big dumb mutual funds. They move in-line with the market more or less. They’re beta junkies. They live and die with the market.
As for Japan – their markets lived and died on government stimulus. I’ll be interested to see how the banks perform in 2011 and 2012 when the government isn’t aiding them. Until then, Chris seems to have the correct playbook.
“I’ll be interested to see how the banks perform in 2011 and 2012 when the government isn’t aiding them. Until then, Chris seems to have the correct playbook.”
no reason to own banks if there is not a large treasury spread. this is a get’em while they are hot game, and banks are hot when they 1) have cheap money and can make a decent return without much risk, and 2) they are carrying alot of merch that can be marked up as carrying values increase. KISS.
i’ll let you know when i get out of banks, but until them, “‘seems’ to have the correct playbook” seems to be an understatement.
All Financials produce a fairly descriptive breakdown of revenues per business. However, its hard, the information is lumped together and very hard to determine where its coming from exactly below a broad level. Beside that fact, different banks have different components for their business lines. Equities and Derivatives could also include Forex, Fixed Income, Commodities, and Equities (and derivatives of all of the above). Structured products blur these lines even more. You pretty much won’t get a detailed picture beyond that unless you work at the bank in question – and even then you’d really have to do some asking around to get a straight answer.
One example would be Equity Derivative trading. Even if this was defined as participation in only classical Equities (ie. Stocks, Mutual Funds, Indexes and all their derivatives – obviously this would include OTC as well). You’d get an overall number from this business line compared to the past 3 quarters and a year over year number. However, that number doesn’t tell the full story. That business has cash flows from many different places – sales of data, reporting services, custodial fees, brokerage fees, proprietary trading, flow trading, stock lending, dividends, etc etc. This is why its very hard for people to value invest in banks. Even if you can read the full income statement and understand each component, it won’t tell you the whole story – and it never will because that’s highly proprietary information.
Most BANKS don’t prop trade with huge leverage – its just simply not allowed for a number of reasons (as underwriters, brokers, and custodians – there’s strict limits on what they can and cannot trade). However, this is not to say that they don’t have massive asset exposure – they do. I believe in the US, Banks hold about 56% of ALL assets (I use the term hold mainly in regards to custodial assets, but there’s more than just that as well). Each of the top 10 banks in the world have more than $1 trln in assets (and this is not Notional). This is why a global downturn like we faced can cause such huge problems because as liquid assets are pulled (ie. cash), illiquid assets are not covered and the bank is essentially in default. This is a very dicey game because even rumors spreading can cause a banks share price to tank and then deposit customers get fearful of default and start pulling cash – which will then induce a default.
Anyway, trading is a broad term. You definitely can’t think of bank “trading” as you think of trading your 401k or IRA or even your own brokerage account. The picture is many more times complex and runs 24/7/365
I’m not disagreeing with you. I’ve also been long since Dec 2008 and made a nice chunk of change but am now about 60-70% in cash.
However, I see the tide changing – populist anger is growing by the minute and the economic situation is not improving for the masses, nor are the banks doing anything with all that bailout money to aid them. At one point, the favoritism is going to end and it can come quicker than you can imagine. I think when TPC says “buying here is being greedy” he (correctly) believes that the downside risk potential is much greater than continued upside profitability given the performance of the past year and the still dire economic situation for so many (and remember, just because real unemployment is “only” around 20%, its not to say that the other 80% are having a great time either – many are just scraping by and still staying away from consumerism and investing).
Just take this example: Both the recent Credit Card and Healthcare bills passed recently hit the banks very hard (and every big company for that matter). Jamie Dimon stomped his feet and essentially decided to cut back the entire Credit Card business because of this (and also stated hundreds of millions in charge offs). Neither was really even targeted at the banks and more so for the average person (and even the Credit Card Bill does very very little). Yet both of these have had a very significant impact on the bottom line. Can you imagine what a significant regulatory change targeted at financial institutions could do to them? For example, breaking up banks via re-institution of at least some parts of Glass-Stegall. Or trading limits. Or requiring OTC transactions to flow through exchanges. These sorts of things not only shrink the businesses that Banks engage in, but also have enormous costs associated with implementing said rules (software developers, engineers, compliance officers, legal personal, traders, etc). The Banks are not stupid, they know this. That’s why they’re still not lending, building up cash reserves, and not hiring any new personnel (while growing technology infrastructure). This great for technologists in the industry like myself where there’s a huge demand and a very small supply of proven workers, but it doesn’t help anyone else – not even people skilled in IT but with no working experience (ie. college grads) because implementing such changes requires specific knowledge of systems in place and current rules in order for them to be modified.
Oh and they’re also spending record amounts of lobbyists or going directly to capitol hill themselves. But I don’t think this will pay off in the end – not with so much visibility now.
Personally, I’d prefer to miss out on some small profits rather than to time when the market will turn (or jump in and out, getting hammered by broker and exchange fees). Things can be much much clearer from the sideline and frequently the best bet is taking no bet at all. And if I’d state a systematic methodology for value investing that has been proven to work enormously well, it would be Bill O’Neil’s CANSLIM. This is the basis for his now very popular Investor’s Business Daily newsletter, newspaper, and website – and also the basis of his astronomical performance over the past 20 years.
At the end of this absolutely surreal orgy of corruption and incompetence, there will only be quietly smouldering craters where the “titans” of the banking industry once stood. This game cannot go on forever. The ivory tower types, who view their grossly distorted data in a vacuum apparently devoid of questioning or critical thinking, have pronounced the all clear, but these folks are only as good as the ignorance that got them to the same conclusions that all was well going into 2008. Anyone can look at lagging data and say “gee, things went better than expected in 2009″. Of course numbers looked good, the addict wasn’t even forced to to TRY to kick the addiction, no such hardship in the land of milk and honey, just more of the sauce that got us here. The worst problem of all of this is that politicians and bankers still seem to think that everything’s ok, no one wants to contemplate what happens when the blood money runs out, and the concept of pay your mortgage or you and your family are gone comes back into vogue. This sucker’s gonna blow. It’s only a matter of when. Did the bailouts work? If the definition of “the bailouts worked” means that the alcoholic got more booze and also developed a heroin addiction, then yes, they were a smashing success.
Or, quoting from Ayn Rand’s novel Atlas Shrugged, written more than 50 years ago: “Do you wish to know whether that day is coming? Watch money. Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by compulsion–when you see that in order to produce, you need to obtain permission from men who produce nothing–when you see that money is flowing to those who deal, not in goods, but in favors–when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed. Money is so noble a medium that is does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot.”
Our government (at all levels) is seeming ever more like it has transformed into some kind of mafia-styled “protection” racket, ever more hungry for the wealth and property of its subjects, rather than a genuine protector of the individual rights and property and contracts of the People it is supposed to serve.
on the subject of moral hazard. We spend years being frugal, saving for retirement and college expense for our children. At this point, we feel like fools. We’ll leave the college savings alone. But for ourselves, we finally realize that the best investment is to spend the money on ourselves. This country does not want safers, it wants debters. Why should we saved in order to see it inflated or taxed away.
There isn’t a neoclassical economist worth diddly-squat. What I read above is a consensus of fools that believe in increasing structural deficits to support unethical behavior and it is good policy as long as it benefits the present generation of stockholders. I was raised to judge a person not through their reputation but their words and actions, to observe if their views of this world stand with reason and for the most part without self preservation and glorification. The actions of multiple generations which include and have followed the baby boom generation attests to a collective flawed character and massive delusion.
What does it mean to squander the potential of the future to support the follies of the past and present. We live in a time where stealing from the mouth of babes is justified and passively accepted by common men and women on the precept of self preservation. Where grownups find it acceptable to apply the laws of physics to financial markets, where FASB is no longer useful, where liabilities suddenly are in fact Shrodinger’s cat. This is not a question of whether we see our actions, we see all to clearly and continue to live in cognitive dissonance. No, this is a question of whether we correct our actions so that we can live with the consequences.
Oscar Wilde: “We know the price of everything and the value of nothing.”
The weight of our actions will crush our infantile form of capitalism.
We think we can get something from nothing. Thats the new American attitude.
TPC- the government has ro borrow to fund, thats what the bond market is for. Look what happened in greece when they couldnt borrow. The fed cant buy every bond forever because the currency would eventually evaporate and we would have a hyperinflation.
Yes the bailouts did work. They took implicit government guarantees for mortgage paper and TBTF institutions and made them explicit. Lehman failing was the best thing to happen for the other bankers.
It worked great if:
- you got out of the market before the train wreck and put your money into banks in Mar 2009
- you won’t have kids so you don’t care about anyone’s future
- you work for a bank
- …
Why would any government internationally ever have to bailout a single bank?
All they need, is have national governmental bodies create a national lottery connected exclusively to financial institutions and business communities?
OBAMA WHITE HOUSE – A DIVISION OF GOLDMAN SACHS
The bailouts may appear to be “working” for now. And Bernanke, Paulson and Geithner may appear to be “heroes” for now for “saving” the system. But in the long run history wiil view them and their policies very differently.
Some day a young economist will study this era to learn what not to do just as Bernanke did with the Great Depression. History will repeat.
oh my.
Sorkin is a joke.
he´s juggling with numbers as if they were nothing.
quote:
“Of course, we’re still expected to lose $48 billion on the government’s rescue of the American International Group. But two people close to the board suggested to me that as the company recalculates the value of assets in its portfolio that were once considered “toxic,” the government could actually claw its way back to even on that investment, if it holds on to its stake long enough.”
o-kay.
48b don´t matter because two AIG guys claim that things COULD get better?
reminder: they insured subprime stuff. that money won´t come back.
he completely forgets about GM, GMAC and chrysler. (some 80b i guess).
but the
“Of course, there’s a small problem with all this happy Washington math: it doesn’t take into account the piles of cash we’re likely to lose on Fannie Mae and Freddie Mac, the huge mortgage finance companies. The Congressional Budget Office estimates that figure to be about $320 billion. That would wipe away any gains made elsewhere.
…
But if you can put that aside for a moment — and I know that’s difficult to do — do any of these numbers persuade you, the skeptical public, that we might one day declare the bailouts a victory?”
there you have it – fannie and freddie don´t matter too.
this whole article has that smell of NON GAAP accounting (or “normalized earnings” for banks) that leaves out all that inconvinient stuff.
that´s propaganda but not journalism, Mr. Sorkin.
Read the Book “The Creature From Jekyll Island” (Griffin)to see how corrupt the government really is?