Is Obama playing chess with bankers, too?

And who’s winning?

Let’s get straight to the point: instead of using TARP/bailout money to make loans and get the economy humming again,

Banks are reportedly hoarding money to beef up their balance sheets, using TARP funds to pay out dividends and bonuses, or buying up smaller, sicker institutions.

This is a problem.  Now let’s look at the TED spread over the past five years.  The lower TED is, the easier it is for banks to make loans:

As you can see, TED was lower during the period when the worst mortgages were lent, then shot up to obscenely high levels when the financial house of cards came tumbling.  After the government stepped in with bailout money, TED shows that things have started to calm down.

In short, banks should be lending again.  But they’re not.  Why?

To quote the nihilists from my favorite movie, “We vant the money, Lebowski!

Furthermore, given the fact that Obama’s economic team and Wall Street executives have been in close collaboration about setting up a “bad bank,” which would wildly overpay (with taxpayer money) for worthless securities and enrich bank CEOs to the tune of $250 billion

Besides the afore linked post, others have been critical of Obama for the way he’s handling the bank executives.  Going into criticism of Obama might veer away from the point of this post, but it needs to be asked if Obama is being played by Wall Street.  I mean, banks generate profit from making loans and charging interest on the return payments, right?  So when banks aren’t making loans, the next logical question is what are they doing to make profit … Banging on the government’s door for another quarter trillion dollars?

Why the hell are these executives still employed, anyway?  Haven’t they fucked up enough?  Shouldn’t these business school rejects be flipping hamburgers at fucking McDonalds instead of being given the reins to our economy yet again?  Can’t the government, say, attach preconditions to bailout money like “Nobody gets bonuses, dividends, and by the way you’re all fired for doing a shitty job” ?  Hello, McFly?  I mean seriously, what the fuck man?

Regardless, the way I see it right now is that, for some reason, banks are holding back from lending — their main source of profit — when they don’t need to.  Given all the bailout money flying everywhere, I can’t help but think banks aren’t doing their jobs for nefarious purposes.  Like the GOP, they’re playing chess with Obama, too — but do they have our new king checkmated?  Without loans, there’s no economy.  What’s Obama to do?

Nationalization, perhaps.

How would it work? The government would put teetering institutions deemed too big to fail under trusteeship. Many among the current management teams would join the ranks of the unemployed, shareholders would get wiped out — an important piece of tough love that might dissuade people from following the herd into the next speculation-fueled bubble.

And then the government would liquidate the institutions’ assets in an orderly, gradual way. Then, finally, it would sell back smaller, leaner institutions — without the burden of piles of bad paper on their books — to the private sector at a later date.

Some would call this option socialism.  Others may call it a threat to get banks to shape the fuck up.  At this point I’m down with either option — like any other normal American, I’ve got the procurement of loans to worry about.

But if the bank executives who got us into this mess won’t start lending again until they get billions — possibly trillions — in bailout money, making us cover the costs of the needless risks they and their precious shareholders undertook, then options of punishment need to be on the table.  And that’s the only way to play chess with these assholes.

(edited by DrGail)

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