'(2) The Crisis was Almost Exclusively About Liquidity Wall Street, Treasury, the White House, and the Congressional leadership of both major political parties (who came together to support the infamous bailout legislation that created TARP), desperately want you to believe that in the Fall of 2008 America’s largest and most prominent financial firms were illiquid as opposed to insolvent (for the record, insolvent financial firms have made this claim since the beginning of time). From the beginning, the story peddled by Wall Street, Treasury, and the White House is that a momentary, irrational, and essentially groundless “panic” had gripped financial markets, causing a passing, albeit catastrophic, decline in the price of otherwise good and worthy assets. As a consequence, those assets could no longer serve as collateral for the short-term lending that had become lifeblood of Wall Street financing. This perspective, one that remains unquestioned across Manhattan and Northwest Washington, was enshrined in the name given to the bailout legislation – the Troubled Asset Relief Program. Notice, these assets were described as “troubled,” not “failed,” not “garbage,” not “riddled with fraud and misrepresentation.” No, they were merely “troubled.” To affirm their contention that the problem was one of liquidity rather than insolvency, Wall Street, Treasury, and the White House have never passed on any opportunity to tell us that taxpayers actually “made money” on the bailout. This claim, as with so much else that they have told us, is a whopping falsehood. To maintain this illusion requires a great deal of “creative accounting,” as my co-author and I demonstrated in our re-estimation of the true costs of the AIG bailout.'
Posted on: Sat, 21 Sep 2013 04:51:48 +0000
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