I intend to sound like a broken record here. To beat a dead horse. To, well, you get the idea.
the American people will never again be asked to foot the bill for Wall Street’s mistakes
President Obama upon signing the Dodd-Frank Wall Street Reform and Consumer Protection Act.
That’s a great sentiment. It’s exactly what I want. Private actors should be responsible for private mistakes. If that doesn’t work, then their business should go through bankruptcy. If there’s some unique, socially valuable purpose that the business serves, then it should be nationalized. In fact, nationalizing the home mortgage market would be a much better option than what we’re doing now.
Every indication, though, is that we are going to be asked to foot the bill for Wall Street’s mistakes. We’ll be asked tomorrow, and the next day, and the day after that, too.
How do I know this? Because we’ve been asked to do this for years. President Bush asked us to do it. Chairman Greenspan. Secretary Paulson. Chairman Bernanke. FRBNY President Geithner. Secretary Geithner. Senator Obama. President Obama. Speaker Pelosi. Majority Leader Reid. And so forth.
In particular, the Treasury, HUD, and the FDIC have backed, bought, and otherwise guaranteed or paid out huge sums of money to wealthy interests in our economy. Much of this money is out the door, gone forever. We will need to tax the beneficiaries; there is no direct recovery possible.
But like the President pronounces, we could at least make sure that no more public money goes out the door footing the bill for Wall Street’s mistakes. The President obviously agrees with the Federal Reserve system since he renominated Chairman Bernanke, but the White House does not have direct control over the Fed. It does, however, control the other federal agencies. Tomorrow we could start the task of making Wall Street pay for its own mistakes. We could end guarantees of private debts and start selling the various private assets we’ve accumulated on the government books. In fact, setting aside the unlimited and unbudgeted backstops guaranteeing future losses on debt, just the current expansion of government assets over the past year has been as large as the TARP program funded by EESA in 2008. From the last SIGTARP report (PDF Warning).
Or, we could keep doing what we’re doing. We could keep backing private liabilities that have no legal claim upon the public coffers. We could keep not investigating criminal activities that would be inconvenient for the financial crooks should they be prosecuted. We could keep the double standards of firing auto CEOs while the financial CEOs make massive amounts of personal compensation. We could keep ‘pretending and extending’ instead of forcing financial firms that made bad bets to write down their bad debts.
There are many folks swirling around Washington who want the President to continue using taxpayers to pay for the financial industry’s mistakes. I say we hold the President to his word. Let’s stop footing the bill for Wall Street’s mistakes.
You can read this again at Daily Kos at FDL.