As a situation gradually deteriorates, human beings have a remarkable ability to adapt to the new circumstances. The longer this goes on, even as the world gets completely turned upside down, the more oblivious or detached people become. So we no longer notice just how bad things are, or we do notice but don't care. That's the sad story of the America's Decline. Surely it's a story that applies to all waning Empires.
I'm well aware that this story also applies to this blog. You might say: What's that guy prattling on about today? More corruption? Whatever! Been there, done that, what's next? Despite this kind of reaction, which I'm sure happens all the time, I will continue to point out just what a cesspool our society has become. It's in your best interest to set your future expectations correctly. For example, were you a big Obama supporter? Did you get your hopes up? How do you feel now?
We have two stories of egregious Imperial Corruption today. The first comes from Backdoor Bank Bailout? Fannie And Freddie May be "Losing Money as a Matter of Policy". You need to watch the video below, but here's a short summary of the story.
Fannie Mae lost $11.5 billion in the first quarter while Freddie Mac lost more than $6.7 billion. After posting those massive losses, they asked for a combined additional sum of nearly $20 billion in government assistance.
"Are they losing money as a matter of policy or are they losing it as bad judgment?" asks Dean Baker, co-director of the Center for Economic and Policy Research, who calls the Fannie and Freddie the elephant in the bailout room.
Baker and Fusion IQ's Barry Ritholtz are convinced the government is effectively sponsoring a backdoor bailout of the banks via the GSEs. "This is a conscious, willful decision," says Ritholtz, author of The Big Picture blog and Bailout Nation. "Fannie And Freddie act as a conduit for taking all this junk off the banks' balance sheets."
Even 15 years ago, the idea that the government is carrying out a covert bail-out of the Too-Big-To-Fail banks using Fannie & Freddie as a conduit would have provoked shocked outrage. Today? Ho-hum, nobody bats an eye.
The second story is just as outrageous. Barry Ritzholtz reports that some Big Banks had perfect trading quarters—
Those of you who assumed that Goldman’s perfect, no-money losing quarter HAD to be the result of something nefarious best go back to Roswell and come up with a new conspiracy theory — cause the Gold-men have got company.
Bank of America, Citigroup, and JPMorgan Chase also pitched perfect quarters:
[Barry quotes the New York Times' 4 Big Banks Score Perfect 61-Day Run] —
“It is the Wall Street equivalent of a perfect game of baseball — 27 up, 27 down, the final score measured in millions of dollars a day. Despite the running unease in world markets, four giants of American finance managed to make money from trading every single day during the first three months of the year...
Likening this "achievement" to a perfect game in baseball is flawed, but the analogy can be fixed. If all the batters had one hand tied behind their backs, or wore blindfolds, or both, the analogy would be perfect. It is a rigged game. Throwing a perfect game on Wall Street is easy if you're JPMorgan Chase. Everything that can be done has been done to make sure the banks make money. This is perfectly outrageous, but who cares? Here is Barry Ritholtz's reaction in toto to the news—
A super steep yield curve, ZIRP, and a rip roaring market make trading easier than usual...
[My note: ZIRP stands for the Fed's zero interest rate policy, ie. free money]
Nothing to see here, folks, move on. We could throw in unregulated (but legal) high-frequency trading, lack of SEC oversight in general, etc. Is trading "easier than usual" for Citigroup? You betcha! Tech Ticker's Henry Blodget and Aaron Task explain why in Huge, Ongoing Wall Street Subsidy Allows Banks to Coin Money Every Day at Savers' Expense—
Social Injustice!
So there you have it. Two stories of Imperial Corruption on a large scale, both of which show how the government subsidizes the Too-Big-To-Fail banks at the expense of the taxpayer, or in the stock market, at the expense of retail traders (little people like you). Tech Ticker's Henry and Aaron are clearly pissed off, but they are paid to notice this kind of stuff. Who else is upset? Angry? Outraged?
At one time in the now-distant-past these reactions would have been commonplace, but not anymore. There's only token resistance now. The Powers That Be can get away with anything they want. Taking this outrageous corruption for granted hastens the Empire's Decline.
Zero comments? Really? This is ridiculous.
The author is completely right, and the apparent silence proves it.
Posted by: Brett | 05/27/2010 at 12:55 AM