I ask only because I’m watching my home’s value freefall and paying 50% or more for things like, oh, prescriptions and, yes, pizza crust. (The cost of pizza dough from Adams Fairacre Farms has increased 100% over the last 18 months!) Don’t misinterpret my feeble attempt at alliterative humor as flippancy.
After reading the Congressional Oversight Panel‘s [COP] second report to Congress regarding Treasury’s administration of TARP funds, I can tell you Treasury (1) still doesn’t give a whit about stabilizing the housing market, (2) remains wholly convinced capitalization of banks will lead us to salvation, and (3) either has no guiding philosophy to address the financial crisis through TARP or holds so much contempt for the American public, it would not demean itself to share this tidbit of information with us.
In its first report, COP asked Treasury to answer 45 questions in 10 general areas related to its TARP mandate. Treasury’s answers are amazing, like its description of its strategy to stabilize financial markets:
- What is Treasury’s vision of the problem? No response.
- What is Treasury’s overall strategy? Reiteration of general soundbite promises to stabilize financial markets, prevent avoidable foreclosures, and protect the taxpayer.
- What does Treasury think the central causes of the financial crisis are and how does its overall strategy for using its authority and taxpayer funds address those causes? No response.
Here are some of Treasury’s views regarding using TARP to stabilize the housing market:
- What steps has Treasury taken to reduce foreclosures? Identification of private-industry programs or voluntary government programs (that went bust because lenders did not voluntarily participate), almost entirely begun prior to passage of TARP legislation.
- Why has Treasury not generally required financial institutions to engage in specific mortgage foreclosure mitigation plans as a condition of receiving taxpayer funds? No response.
- Should Treasury be considering others models and more innovative uses of its new authority under the Act to avoid unnecessary foreclosures? No response.
Yikes! and more Yikes! after the jump
Basically, Treasury’s administration of the first $350 billion of TARP funds amounts to everyone’s favorite economic strategy: TRICKLE-DOWN! Dollars and prosperity trickle down from the big, smart bankers to the “pee-ons” (us), so that we might enjoy participation in the U.S. economy at their pleasure.
The bailout promised mortgage- and housing-market stabilization through the purchase of mortgage-backed securities, but the legislation gave Treasury a great deal of latitude to do what it saw fit to most efficiently stabilize financial markets as a whole. For reasons that remain unclear, Treasury thinks bank capitalization is the best — and seemingly only — strategy; though, the department offers no metrics by which to measure success.
Remember, the crisis began in 2007 when adjustable-rate mortgages were hitting their first “adjustment” and a slew of subprime borrowers began defaulting. Mortgages which have long been repackaged and traded between lending institutions had taken on new personae as complex derivatives, high-risk loans bundled with safe-bet mortgages with tiered dividend schedules, traded by investment banks and hedge funds (that investment banks were also funding). It was an orgiastic game of telephone … a high-school gym floor full of dominoes just waiting for the first to fall … No one knew what these derivatives were actually worth, and as long as there were payouts (from safe-bet mortgages and the sheer volume of subprime loans), no one cared.
Why not address this early, primary reason for the financial crisis as a way to rebuild confidence in the markets? Treasury would purchase mortgage-backed securities at some negotiated price. Where securities holders think the government is overpaying, they will rush to sell. Where investors think the government is underpaying, they will rush to buy. Either way, a market is created; asset value is known; confidence grows from stability; the housing market stops its slide down the drain.
There is still $350 billion of TARP funds available for release, and Obama has asked the Bush Administration to request these monies from Congress. A request now likely means funds are available when Obama takes office, but it appears there are going to be more specific and stringent standards for their use, thanks to the work of hounds like Elizabeth Warren and COP. If nothing else, TARP will make for a fireworks spectacular at Timothy Geithner’s confirmation hearing.
After all, entertainment might make drowning a little more fun.
I’ve always thought that the trickle down theory was an apt description of the term. The top 1% or so keep all the money they want and trickle down just enough to the rest of us to keep us from starving to death just long enough to squeeze out another generation of wage slaves.
Posted by Jello | January 13, 2009, 8:01 amDM,
This is all to be expected. You see, no matter what else they are, the current Administration is populated with afull suite of Social Darwinists. They firmly believe in markets as the end all and be all of everything. They firmly believe that if you’ve got money/wealth, no one in government has any right to tell you what to do with it. They firmly believe that banks will, eventually, begin to lend, and eventually sell off toxic mortgages because that’s what a rational market does. Nevermind the facts this is ideology.
And Congress won’t do anything about it because the American people have let Congress get rid of its back bone.
Posted by Philip H. | January 13, 2009, 9:40 amPhillip, Question: If social darwinism is bad and the liberal solution of ‘smoothing out the bumps’ in natural selection is good….what do you say about the theory that social darwinism creates the strongest society? By effectively curtailing competition, aren’t we doing ourselves a disservice as a people?
Posted by Mike at The Big Stick | January 13, 2009, 11:03 amIsn’t there enough evidence around that shows that most rich people and their children remain rich and if you start out impoverished you remain impoverished?
Of course there are some that escape those things, but upbringing also has a lot to do with it and the statistics show it’s difficult.
I think smoothing out the bumps means trying to provide the resources for people to have the ability to change their fortunes and move up. Anyone.
I don’t think having children go to “bad” schools just because they’re from a poor area and having a dumb rich kid go to college because they have a parent who has a trust fund is necessarily “social Darwinism” and wouldn’t create the “strongest society”. I think trying to support the lower class families you would create an upswing in competition from those families.
I’m specifying children because that’s probably the time where it’s most important and rather easy to observe where things go wrong.
Posted by Oneiroi | January 13, 2009, 12:19 pmOK first off the concept of Social Darwinism is a gross and vile misapplication of the concept of natural selection with direct links to the eugenics movement. It was used by Victorian era plutocrats to justify paying their workers starvation wages to work in criminally dangerous conditions while they established themselves as the new nobility. To say that modern business moguls are trying to bring that era back in the US may be a bit much though if you have seen the working conditions in Southeast Asia you may disagree. No one here is trying to smooth out the bumps in natural selection, were trying to empower as great a proportion of society as possible to participate effectively in our economy and government. The only think the free marketers really do is sit back and watch while multinationals merge into larger and more powerful monopolies and depress wages by producing overpriced, poor quality products overseas by underpaid, underskilled workers. This is not effective capitalism with well paid workers producing high quality goods and management collecting a reasonable sum for their oversight and reinvesting their wealth into the economy. This is gross abuse of the system by a very powerful few to line here pocket off of other people’s efforts. To sum up, the only thing Social Darwinism produces is rampant economic abuse and corruption and I’m deeply disappointed that anyone still subscribes to it.
Posted by Jello | January 13, 2009, 12:25 pmOneiroi / Jello,
I think that we are in agreement that it is a societal obligation to help those farther down the ladder acheive more by giving them the tools to help themselves. Unfortantely most of the pressure to stay at the bottom comes from within that group, rather than from above, as current liberal doctrine seems to imply.
While obviously there are flaws in free market principles that should be addressed by anti-monopoly efforts, doesn’t an equal potential exist for liberal policies to completely kill competition and create a stagnant environment where innovation is seen as bad? I think it’s been proven fairly well that a lack-of-competition is one culprit in the poor performance of schools (compounded with cultural shortcomings).
Posted by Mike at The Big Stick | January 13, 2009, 1:09 pmMike,
No I don’t think social Darwinism leads to a strong society. You see, once wealth gets concentrated in the hands of a few, they fight tooth and nail to keep it, and to deny others the chance. American history is littered with examples of this. In the incident example, providing public dollars to banks (some so alrge that failure is SUPPOSED to destroy or economy) without any strings allows the banks to concentrate wealth – either by holding capitol or buying other banks. The banks (and their shareholders/owners) make out very well in that scenario (as they are now), but society continues to suffer. TARP was sold as THE way to keep the economy from sliding further because it would allow banks to begin lending again, which would allow business to remain open, dampening unemployment, preventing foreclosure, etc. It hasn’t turned out that way, nor did I expect it to.
Posted by Philip H. | January 13, 2009, 1:17 pmAnd I’ll add that innovation and competition are not joined as concepts. Plenty of innovation occurs in this country which competition then squashes – just look at the history of electric cars.
Posted by Philip H. | January 13, 2009, 1:18 pmAn extension of the electric car example of competition crushing innovation is evident in our thirty year quest for energy independence which, with oil company backed GOP lead stalling efforts, has only increase our dependence on foreign oil. The oil companies using political influence to undermine government programs intended to fund research and development of these technologies while subsidizing the enormous profit margins of these companies with taxpayer dollars is not what I call a free market.
Posted by Jello | January 13, 2009, 1:40 pmPhillip,
History is also littered with people like Carnegie, Vanderbilt, Turner, Buffet and Gates who gave trmendous amounts of their fortunes to help others. Putting money in the hands of those who are going to do the most good with it is often better than cutting a check for $500 to every American so they can buy a new Playstation.
Posted by Mike at The Big Stick | January 13, 2009, 2:01 pmOn another note I will say that there is a pervasive culture of underperformance in the poorer communiteis throughout the U.S. This culture is not due to some inherent difficiency on the part of the populace however. It is due to systemic neglect on the part of the political and economic structure in which we all live. It is very difficult for any indvidual within these communities to forsee a future greater then what hey have when they live in poverty, their schools go underfunded and overcrowded and job prospects are limited to meanial labor with not chance of advancement. Its one thing to ask some to be responsible for building there own life, it quite another to chide them for building there life out of straw when no better material is available to them.
Posted by Jello | January 13, 2009, 2:06 pmIt is very difficult for any indvidual within these communities to forsee a future greater then what hey have when they live in poverty, their schools go underfunded and overcrowded and job prospects are limited to meanial labor with not chance of advancement. Its one thing to ask some to be responsible for building there own life, it quite another to chide them for building there life out of straw when no better material is available to them.
The soft prejudice of low expectations is the fatal flaw of liberalism.
A culture of under-acheiving IS something they can overcome, especially since the shackles are primarily self-made and imagninary.
Posted by Mike at The Big Stick | January 13, 2009, 2:21 pmMike
I’ll agree with you that the bush stimulus plan was probably the biggest joke I’ve ever seen, though I did get new tires out of the deal. However, I will remind you that the scheme was the result of an ardent free marketer applying some warped idea of direct investment. The end result being that the money was spread so thin that the only outcome was to delay the meltdown just long enough to synch the election for the Dems. Also, how is relying on the fickle nature of philanthropy from multi-billionaires any less ridiculous? Not that I’m decrying the generosity of the people you mentioned but its hardly a workable public policy. If the problems of poverty in the country are going to be effectively addressed the government has to take an active role at all levels. The hands off approach does not work.
Posted by Jello | January 13, 2009, 2:27 pmI do not have low expectations of people in impoverished communities. I’ll admit my above statement was melodramatic and cliche so I’ll clarify. Vast portions of the public education system have been decaying for decades, both physically and figuratively. This decay is the most prominent in poor communities were decades of wage depression have left the schools with barley enough funds to maintain the status quo much less modernize and provide a twenty first century to there children. These shackles are not imaginary and these school and communities are in desperate need of outside investment from public and private concerns alike.
Posted by Jello | January 13, 2009, 2:44 pmJello,
You forgot to add the loss of inner city-based manufacturing jobs due to application of “free market principles” including so-called Free Trade, which led many companies to send jobs to other countires where costs of production are cheaper.
Posted by Philip H. | January 13, 2009, 3:16 pmFrom Jello
Vast portions of the public education system have been decaying for decades, both physically and figuratively. This decay is the most prominent in poor communities were decades of wage depression have left the schools with barley enough funds to maintain the status quo much less modernize and provide a twenty first century to there children. These shackles are not imaginary and these school and communities are in desperate need of outside investment from public and private concerns alike.
It’s not a matter of dollars. To use my city as an example, everyone working in Louisville is paying city taxes, a portion of which go to education. So this is one big bucket. Funds are allocated to different schools based on pereceived need. I happen to live in the more affluent part of the county. Our schools look no different than schools in our blue collar areas or in our urban areas, other than a lack of graffiti and barbedwire. Most are all circa 1960 – 1970 and have that same public school architecture you see across the country. As for facilities, they have the same access to technology, supplies, etc…when things can be kept in workng order.
Maybe some school systems allocate funds district by district, which would of course be bad policy, but I think most follow the Louisville model. So it’s not a funding issue.
Recent studies all indicate that when you take poor kids (regardless of race) and place them in schools where the kids come from more affluent (i.e. stable) homes…they do better in school. There are less distractions, the kids are more motivated, there is better parental involvement, etc. None of this is based on the budget for those schools. It is about the culture surrounding those schools.
The sad truth is that when poor parents and poor kids start caring about school as much as their higher-income counterparts, these schools will do better, with an indifference to funding.
Posted by Mike at The Big Stick | January 13, 2009, 4:21 pmPhillip,
Protectionism has never worked in this country. Low-skilled manufacturing workers are vulnerable to foreign competition because they are low-skilled. The easiest way to fix that is to help them become skilled workers, which are in short supply. That will also put them in positions that can’t be outsourced. (As my uncle says, when your crapper is clogged, you can’t outsource that one to India).
Posted by Mike at The Big Stick | January 13, 2009, 4:25 pmYou can’t outsource the burger flipper at McDonalds either but I wouldn’t call that skilled labor. Gearing our education system toward vocational training for the non-college bound makes sense but isn’t a silver bullet. Additionally, not all skilled labor is safe, many tech industry jobs have gone to India because labor is cheaper over there.
As for the schools I do know of states where the funding is determined by county income alone and there is no pooling of resources, which causes a huge disparity in the quality of schools. I beleive South Carolina is one of these states.
I do not dispute that there is an intense and pervasive attitude in poor communities that education is useless and that it is reinforced from within. But a big factor that goes into this attitude is the perception that the outside world does not care. A big part of breaking that attitude is demonstrating that the outside world is interested in providing opportunities to theses areas through direct and highly visible intervention. I agree that poor students bused to more affluent schools do better. Part of that is because they are in a more stable environment, the other is that they are directly exposed the people and organizations that can facilitate upward mobility that are not present in poorer areas.
Posted by Jello | January 13, 2009, 5:47 pmAs a general rule though, it’s much better to gain skills that will at least limit competition for jobs. low-skilled workers are competing with a huge international supply of workers.
Posted by Mike at The Big Stick | January 13, 2009, 7:38 pmMike,
While you may be right that low skilled American laborers are competing globally, and they can benefit from re-training into higher skilled fields, there are still a few holes in your plan. 1)Few of the steel workers who loose their jobs to, say, China, are likely to call themselves low skill workers. The burger flipper may, and that distinction causes all sorts of public policy problems. 2) I’m not advocating protectionism, but I bristle at those who say that we need free and open trade, global markets, and then wash themselves in false patriotism when, as global markets do, American jobs go overseas. You can’t have it both ways. 3) in all our economic discussions, you have yet to outline (in numbers and job typo examples) which industries these displaced workers need to be retrained in. Yes, the steel workers I mentioned could become HVAC techs, or do plumbing, or do computer assembly work. But really, how many such jobs are there in America?
Posted by Philip H. | January 14, 2009, 10:27 amwhat about engineering jobs that are being shipped to china, south, and southeast asia? what mistake did people these with bachelors and masters degrees and even ph.d.s make … what culture of poverty led them down the wrong track?
this idea of merit always prevailing (unfortunately referred to as social darwinism by mike) is a fantasy.
Posted by didionsmommy | January 14, 2009, 10:38 amPhillip, DM
I didn’t say that low-skilled jobs were the only ones that were vulnerable, but they are obviously the most vulnerable (unless you’re talking about the growing number of workers that are being shuttled into the service industry by crappy urban renewal programs in U.S. cities – but that’s another conversation I suppose). As for free-market and in its effects, you’re right, you can’t have it both ways. If we open ourselves up to the free market than we can’t complain when jobs are shipped overseas, which I haven’t.
There’s a lot more to the equation than just cheap labor though. One thing to consider is shipping costs. It might be cheaper to produce a good overseas but when you factor in shipping costs (going up every year due to gas hikes). On top of that quality control is usually better here. So when companies begin to factor those two things in, some are starting to bring their businesses back to the states. This is going to happen with a lot of industries. I’m also seeing it with call centers. I work with some vendors who tried using call centers in India for a couple of years and now have call centers back in the states because the custoemr service is better.
At the end of the day the pendelum has to swing both ways. U.S. companies were drunk on overseas labor for awhile, but now many are having second thoughts. Eventually there will be a balance and while some U.S. jobs will never come back, others will.
As for where to move these displaced workers to, skilled manufacturing is clamoring for machinists, welders, etc. Infrastructure spending would train a lot of people for skilled positions. There will also be a high demand for engineers I suspect. While DM is right and some of them can be outsourced (planning phase) you still need on-site engineers to monitor jobs. I have friends who are engineers that previously spent a lot of time in design. Now they mostly do field inspections on things like bridges, railroad lines, etc. It’s just a matter of shifting focus. The greatest problem I see it with liberal philosophy seems to be that instead of preachign worker flexibility in a changing world economy, funding training programs, telling these workers the truth about how to survive….there’s a lot of talk about unemployment assistance, living wage laws, penalties for companies shipping jobs overseas, etc. Instead of learning to cope, they are just trying to deal with the fallout.
DM, you’re right, merit doesn’t ALWAYS prevail…but the American experience is that it succeeds far more often than it doesn’t. If you want to wring your hands about that be my guest.
Posted by Mike at The Big Stick | January 14, 2009, 11:13 amI have to take a minor issue with DM’s seemingly equating college level global job competition with working class competition. I’m an engineer myself and my professors were very adamant about stressing the high level of competition we would face from China and India but its incorrect to try to paint us as victims of globalization when we enjoy advantages that a steel worker or autoworker do not have. First of our higher level of income on average places us in a much better position to establish enough savings to weather a prolonged period of joblessness. Secondly, college educated technically oriented people that are overabundant in one industry are almost always in demand in another and many companies are willing to cover costs of relocation for new hires moving across the country. I for instance am a metallurgist who was educated in Colorado and went to work in Houston. Most people in the professional sector have long since accepted that the era of working for one company in one place your whole life is over.
I would rather hold up the global job market for engineers as a model for improving the lot of blue-collar workers. Expanding training to include making them aware of jobs in related industries they can easily train into can do this. Also encouraging and enabling a mentality of financial planning for the long term and openly challenging the spend, spend, spend mentality that has us in the fix where in. Teaching people to be open to the possibility of cross-country moves once every five to ten years to look for work is also a sound idea. This places new pressures on the working class that will be difficult to manage, but they are changes that can be absorbed with openness on the part of workers and attentive oversight on the part of the government. This means an end to the hometown mystique but as I said that era is over. I probably sound like a free market drone right now but I will add that the conservative habit in the past is to assume that private industry will provide these opportunities all on its own while I feel government programs to directly facilitate these ideas are needed through on the ground intervention.
Posted by Jello | January 14, 2009, 1:03 pmFrom Jello: I would rather hold up the global job market for engineers as a model for improving the lot of blue-collar workers. Expanding training to include making them aware of jobs in related industries they can easily train into can do this. Also encouraging and enabling a mentality of financial planning for the long term and openly challenging the spend, spend, spend mentality that has us in the fix where in. Teaching people to be open to the possibility of cross-country moves once every five to ten years to look for work is also a sound idea. This places new pressures on the working class that will be difficult to manage, but they are changes that can be absorbed with openness on the part of workers and attentive oversight on the part of the government.
Well said!
Posted by Mike at The Big Stick | January 14, 2009, 1:26 pmi, in no way, would equate a steel worker with an engineer, but to say engineers, by definition, are in a better lot than a (usually unionized) working-class individual is inaccurate.
my point was that this idea that working-class or poor individuals somehow deserve their lot because they didn’t take advantage of schooling or chose to perpetuate a defeatist mentality (which is what social darwinists reason) — just get them out of the environment and slap them upside the head — is not a good analysis of why the wealthy succeed while the poor do not … that this perceived failure of the poor is seeping into the middle class, into highly educated sectors …
and to echo what philip said from the beginning … the wealthy in power (specifically with the aid of the bush administration) do not care …
socialism for the rich … capitalism for the poor (and middle class).
Posted by didionsmommy | January 14, 2009, 4:19 pmmy understanding, too, of the movement of call centers back to the states is that indian companies are actually outsourcing work back here … and in other instances, companies maintain small call centers in the u.s. for cases where a customer has exhausted all the levels available to them in india.
Posted by didionsmommy | January 14, 2009, 4:21 pm