"...financial derivatives played a role in the run-up of Greek debt. Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere. ...
Critics say that such deals, because they are not recorded as loans, mislead investors and regulators about the depth of a country’s liabilities."
Now, these deals were apparently perfectly legal, and most of the blame, IMO, rests with the overspending politicians and those who elected them. And the accounting rules that don't count these future liabilities as "debts" are silly too. But still, the banks profited from the addictions of countries like Greece and Italy.
In related news, Mark Pittman, an investigative reporter, filed a Freedom of Information Act (FOIA) request in September 2008 with the Fed for details of the bank bailout. He was rebuffed - the Fed didn't even bother to answer. Mark Pittman died in November 2009. Unfortunately for would be conspiracy fans, there seems to be no conspiracy, which probably convinces them that there is one. :-)
Fortunately for the rest of us, Bloomberg News has taken up the mantle with a lawsuit, Bloomberg L.P. v. Board of Governors of the Federal Reserve. Last summer, District Judge Loretta A. Preska ruled in favor of Bloomberg, but the ruling was appealed by a consortium of banks to protect “the substantial interests of its members in confidential information that they provided to the Federal Reserve.” They argue that if people knew which banks were taking loans from the Fed, there could be a run on the bank, or that it's reputation would be damaged. Yeah, sure, banks are held in such high regard, it would be terrible if they were stigmatized. The Fed did bring up one interesting argument:
"The Fed, meanwhile, has worried that if the appeals court rules for Bloomberg, then savvy traders could quickly get their hands on such data in the future and use it to their advantage even as the government was trying to stabilize the markets."People everywhere are very skeptical of the bank bailout. No need for me to cite any links even for that one. It seems to have saved greedy institutions who took huge risks in order to make huge bonus payouts. I'm no wild-eyed socialist or populist, and I believe that those who truly create something useful for society deserve ample compensation, but I find it hard to believe that bankers truly create all that much. I usually disagree with Paul Krugman, but I completely agree with him that banking should be boring.
If the bailout were truly needed, and did save banks and the American (and world) economy from a disastrous collapse, one would think that The Fed would want us to know the facts. Ex-President Bush, Fed Chairman Ben Bernanke, and President Obama et. al. would want us to know. Because it would make them look good, proving that they were rapid responders who risked public disapproval to save the economy, and they are not dupes nor tools of Wall Street. Since they haven't provided these facts, I conclude that the bailout was a scam or a panic.
Perhaps there will soon be a book with hard facts about the bailout. Anybody know of one? From what most can see, it rewarded bad behavior, and the banks are going back to the same bad habits, with no shame or remorse. Not sure what anybody can really do about it. For my extremely small part, Tim Geithner went to my Alma mater, Dartmouth College. This year they will get no alumni donation from me. Take that!
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