best case, break this banks to smaller ones,as someone stated before so if one failed the nation does not fall with it.How can capitalism be so great when one company with bad judgement can bring down a whole market sector.

i thought we learned from not having monopoly’s, or institutions that can gamble and reap the gains, yet when they fail or start to the public takes the cost of business, by there tax money, than again by the banks again trying to get more money, by higher interest rates, nickle and dime methods,

a ceo, or officer who made millions or billions with high risk for years, than losses him job can weather it but this is much harder for the common worker, and on top that ceo gets a golden package to boot.

if we dont break this banks up, than american capitalsim is and will be heard hostage when i group of big banks decides not to lean unless they given money by the government, and we will here who ceo, and banks paid massive bonus, and spent like crazy on pointless things with the money we provided

tom, i would like your guests to speak less to what can be done to improve the health of banks as measured by balance sheets and stock prices, and more about policy prescriptions for the banking sector that are designed to achieve broader economic goals, such as injecting liquidity into capital/credit markets and improving conditions in the housing market.

specifically, guests should discuss the pros and cons of policy options, including nationalization, federal loan guarantees for banks, the use of a “bad bank”, and so on.

the focus should be on the nature of the policy prescription with an eye to the cost of implementation versus the likihood and magnitude of success.

Today’s show should placate those who thought yesterday’s Feldstein interview lacked balance. I hope Tom is as tough on her as he was on Feldstein. That means he needs to keep asking her the same question over and over again so it sounds like his mind is already made up in disagreement with the guest. It won’t be easy for Tom.

Morgenson was on Diane Rehm’s show last week and proved that they will give a Pulitzer to anybody, especially at the Times. Her ideas are simplistic and her bias is readily apparent.

We will bailout the greedy bandits on Wall Street who got us into this mess with their credit swaps and deregulation of the banks, and yet we won’t do anything for the 40 million plus Americans who have no health insurance, or for the 9,000 Americans who have their homes foreclosed on everyday. Where is the justice in that?

Nationalize the banks, divide into smaller units with limited purposes, make them utilities, wipe out the stock holder who made Billions on the ride up, provide absolute transparency with quarterly reports to Congress.

OR Set up a new good national bank funded by the Fed. and let the marketplace determine which model the depositor wants to use.

As for the “Toxic Assets” aka bad bets on the banks’ books … let them be transferred to Toxic Asset Holding Co. and the taxpayer buy the “assets” for $0! Wipe them of off the banks’ books, take your beating in the market, and allow that TAHC to help replenish the US treasury for the expenses we have incurred due to the financial industry’s failures. NO TAX DOLLARS TO PURCHASE YOUR TOXIC BETS AT ANY PRICE.

Linda McQuaig writes in the Toronto Star and Common Dreams: “Let’s imagine, for a moment, how different the public debate would be today if it had been unions that had caused the current economic turmoil”. She asks whether union people would then be in charge of their own bailout. I doubt it.

The people who have appointed themselves to the position of explaining it all to us are often the people who were responsible for the debacle from the getgo. And many of them persist in trying to persuade us that it’s the government we have to be wary of. How long will we continue to give those seductive moneylenders credibility?

Please ask your guest to explain to viewers the basics of our banking system. She needs to explain that our banking system as created in 1913 by the Federal Reserve Act is a fractional reserve system and inherently it can never be fully solvent because there is not enough $ in the world to cover all of the debts and obligations. That’s why the Fed is having to intervene and inject all of this capital into the banks – all they are doing is printing money which further devalues the dollar and causes inflation in the long run. As Henry Ford said “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

Years of bad banking won’t be cured by a massive input of cash from the government. Let the big banks fail, get bought out etc…we need more smaller banks and not these huge massive banks…

An “atta girl” for Anne Greene’s comment with one additional caveat; nationalize the obscene wealth of the obscenely wealthy whom are being propped up by the Bush and Paulson shenanigans and use their ill gotten gains to pay off their greed induced debts.

Yes, these corporations have been badly run, and what’s worse their executives received MBAs from our top business schools–so, what’s up with that? As Socrates asked, “if virtue can be taught then where are the teachers of virtue?”

Question for Gretchen:
Please explain the government “Printing Money.”
What does this actually mean in this day and age?
Thanks

Listening to yesterday’s guest ,ie the conservative economist, i was struck by the fact that conservative economists( it seems to me anyway) are totally unable to “pick the tab” for what was the result of their policies. Yesterday, it was the fault of the regulators , of the politicians, basically of everybody except their presciptions.

The base of their argument seems to be that not enough time was allowed for the prescription to work, a bit like the fact that one has to take the full prescription of antibiotics.

The doctor is always right even when he is wrong.

Listening carefully to what Gretchen Morgenson has said, enormous sums of money (without any safeguards) were doled out to the country’s banks in hopes that they would be used to help attend to bad loans & shore up debts (which it seems they haven’t done). But when asked if that money would have been better spent going directly to the citizens it was stated that they would likely use it to attend to their own debts (rather than extend consumerism further) and that this isn’t helpful to the economy. Doesn’t this make it manifest that the real problem is capitalism itself, and that one can speak about the “health of the economy” at the same time the majority of the citizenry drowns.

It my opinion we have this “Bad” bank idea backwards. We should create “Good” banks and transfer the known good assets and let them thrive and let the “Bad” banks ie. Citigroup and Morgan Stanley fall along with the people who got us into this.

OK, I am not a person who holds shares, owns real estate (anymore) or enjoys the luxury of a job at present.
However, I do have a solution for the epidemic problem of usurious, risk-addicted (as long as it’s not their personal risk) financial captains:

Cut off their greedy, pilfering hands and let them spend their stolen cash on bionic replacements. Good for the medical industry, good for assuaging the anger of the irate taxpayers who have bankrolled these thieving schmucks.

why is it that the local community banks seem to be doing well as the giant mega banks are in trouble? Why are we not looking to the community banks for a guide to solving the problem? My local community bank pays 4.25% on checking accounts (no minimum); gives loans within the community and is generally a good corporate citizen.

I know two people trying to buy houses from banks. These are foreclosed properties that the banks now own. Each has had multiple closing dates over the last 2 months and the bank has cancelled and extented the agreement every time because they just can’t get it together. These are not people to give taxpayer money. The other possibility is they are waiting to see how much the bailout will be and it it makes them more than selling the house.
A comment was made that they are limiting access of lobbyist to congress. That is good. However, It seems similiar to groups hiding woman behind veils so that men are not tempted to misbehave. Lets educate and require the congressional members to act ethically and in our best interest.

Did I just hear her say that the “I got mine, forget everyone else!” attitude is un-American? What planet is she living on?! That’s exactly the attitude that has driven American capitalism and executive compensation for the last 3 decades, at least. Please. Sorry lady, but I’m due back on planet Earth now.

“Sorry lady, but I’m due back on planet Earth now.”- Chris

May I say, Chris, you are due back on Wall Street and that’s NOT anything like the planet we all share.

The rest of the world has drawn an opinion of Americans- not a flattering one, either- from the nasty, torturing, dog-eat-kid practices of rampant “Gimmee Mine or I’ll Steal it From You Capitalism”.

Did nobody educate these people about decency, integrity or common courtesy? The imbalances created by self-centered, greedy narcissists, out strictly to “grab my own” affect the health of Planet Earth in a very negative way.

It’s MY planet, too, and I don’t like the way my fellow Americans have treated it or the majority of humans who inhabit it. Your mileage may vary if you have no conscience or manners at all.

I agree with you Mari – I guess my attempt at sarcasm fell short. The attitude of I Got Mine is the problem, but the guest sounded shocked, like she just couldn’t believe people could behave that way. I was saying that they do, and have for a long time, and if she didn’t realize that then she is either naive or has her head in the sand.

See blog post for links to post below:
http://tinyurl.com/3BankRecs

WBUR: What’s Next for Banks? Three proposals to protect home buyers & tax payers’ investment

Pulitzer Prize-winning New York Times business columnist, Gretchen Morgenson, told NPR / WBUR listeners that tax payers — who collectively will invest an estimated $1 trillion to rescue the banking system (see “The End of Banking as We Know It”) — should insist on more regulation to protect consumers. Thus far, only 1 in 4 foreclosures has been listed in the real estate industry’s multiple listing service (MLS), according to a recent article entitled “Banks to unleash flood of REOs.”

Morgenson’s recommendation and reader comments on WBUR’s blog (particularly Joe B and Peggy Gale), lead this blogger to ask if the Obama administration should enact three new regulations to insure an open and cost effective foreclosure disposition process particularly for prudent first time buyers who sat out the housing bubble?

1. Require any vendor involved in foreclosure disposition to sign a “no conflict of interest policy” which, among other things, prohibits “dual agency” and “designated agency” — a business practice that allows real estate agents / agencies to represent both buyer and seller in the same real estate transaction. (See related blog post: “Double Bubble: How counterfeit buyer agents inflated the housing bubble.”)

2. Establish transparency guidelines for real estate offers so buyers, who are easily manipulated by fear of loss, don’t engage in irrational “bidding wars” and overpay for properties, particularly when there isn’t really a competing buyer. (Here’s an example of one software solution that banks could use with foreclosed properties, and potentially save tax-payer money by selling direct to home buyers without a listing agent.)

3. Set-aside a significant percent of the foreclosed inventory for low and moderate income, first-time home buyers and non-profit agencies, so they do not have to compete against investors. The RTC (Resolution Trust Corporation) demonstrated the cost effectiveness of this policy during the last foreclosure cycle (1990-1995). (See Wall Street Journal editorial to “Resurrect the Resolution Trust Corp.”)

One of the last WBUR callers also talked about organizing a class action suit. That has a familiar ring to it. In fact, a story in the New York Times a year ago caused us to write this blog post, “Misleading home buyers: Conflict of interest? What conflict of interest?”

EXCERPT: The NYTimes speculates that consumers, angry that their counterfeit buyer agents did not provide adequate advice and protection, will increasingly take legal action. Will their collection actions rise, at some point in some overvalued market, to a class action lawsuit?

If readers feel they were harmed by dual agency or designated agency, please contact The Real Estate Cafe. Got other ideas about how to reform the residential real estate industry to avoid conflicts of interest and prevent future housing bubbles ? Listen to some idea starters…LINKS on
http://tinyurl.com/3BankRecs

So nice to hear a guest on this show is just as frustrated and upset as we the average Americans.

And I totally agreed with the last caller, if same thing done in the medical field would be considered mal-practice, and those executives need to be held responsible. And I don’t care if it’s a drop in the bucket, it’s the principals that matters. This financial crisis is a result of ethical crimes. And it is still going on after the bail out. Whoever fully supported the lose financial regulations truly don’t have a clue about the worst of human natures. Shame on them!

I disagree with the idea that Americans using stimulus money to pay down debt would be a poor aggregate result for several reasons.

First, if tens of millions of Americans reduce (consumer) debt, that would be very good for tens of millions of American individuals – and therefore good in the aggregate. Paying down consumer debt and living within our means would be a giant leap for the personal finance of Americans.

Second, if they reduce this debt, it will improve the balance sheet of many financial institutions (as well as the individuals) and they will be more inclined to begin loaning again… more prudently, this time. Hopefully. This will lead to better allocation of savings and investments and thus a stronger aggregate economy.

If stimulus recipients use the money to consume more TVs, houses, cars, furniture, expensive food, etc. it would reinforce an unsustainable habit.

Why is everyone complaining because the banks will not lend hand over fist? Isn’t that what the problem was the last time?

Until the vast majority of households are again financially sound — not just with a stimulus but with real incomes and benefits (not always the same as “jobs”) — lending is just putting good money after bad.

I support a bottom-up stimulus that mandates long-term earnings timelines for Main Street as well as Wall Street. And needless to say, we need to worry less about “productivity” as measured at the shareholder level and more about “stability” as experienced by us peons.

If you’re going to bail out homeowners, be prepared to bail out stockholders.

It is time to face the problem head on and take over the insolvent big banks. The FDIC needs to declare them failed and sell off the assets in pieces to the 8,000 smaller, profitable banks. Below is what I said the problem was in October 2008 and we should correct it.

When Adam Smith talked about “rational self interest” and competitive markets he envisioned many consumers interested in buying goods and services from many producers. This “free market” system would best serve the private and public good. He was not talking about producers, companies, being too big to fail.

This is a major problem in today’s economy. We lost our way in regards to allowing competitive markets becoming oligopolistic markets. The financial institutions that are here to serve our needs have gotten so big, and have such a huge impact on our markets, that the public sector is forced to step in and save them because of the irreparable harm that would be caused by having them no longer in the market.

Everyone is talking about reforming the “system”. A major part of that reform is to break up the size of our financial institutions Make each of them small enough, relative to the size of our economy, that we yawn as one of them cease to exist. This will result in them no longer counting on the taxpayer to bail them out and will provide the added benefit of keeping the compensation of the scoundrels running these companies from being ludicrous. Small is Good!!

Public hanging/execution to restore moral hazard…
of both CEOs and public regulatory and elected officials
that perpetrated scams. This would include members of the Republican Party who looked the other way and grew rich and members of the Democratic Party with their hand in the till (Hilary Clinton and Bill Clinton are prime examples). Then shun their children’s children. Until then opt out of the corruption.

It is time to get a gun.
That’s what I’ve been thinkin’.

What was broken first?

The corrupt political system that has been selling a free lunch for years, the corporations that have learned how to rig the system, the public that has long turned from truth in the interest of aquisition of toys, or a nation that can no longer discern right from wrong?

1) Ms Morgenson warned that the Swedish model
might not scale up to the current US disaster. But why does she not worry about this with the S&L ’solution’? What was the relative sizes of all these things n absolute terms as a percentage of GDP for both countries..Pulitzer prize or no, the guest sounds like she’s a fundamentalist market worshiper.
Market schmarket. When any few entities are too big to fail, Adam Smith goes out the window.

2) Ms Morgenson says nationalization is bad because of danger of politicization and example of Freddy Mac.
a) First a question, Was politicization a problem with Freddy Mac?
b) Freddy is NOW nationalized. Its disasterous period was when it was a quasi-private entity. (Corporate socialism).
It worked well while it was a pure government entity.

Good show. But it would be better if you had two guests with differing opinions.

-T Nearey

The guest posed the question – what will finally humble these CEO’s?!

How about we let “Bubba” humble them when they reach down to get the soap in JAIL. We put poor, uneducated people in jail everyday for small petty crimes and these guys walk free? If they hav’nt broken any laws then our representatives in congress should do their job and make some up!

These guys deserve to be in jail – not their luxury houses. In fact, sell all their properties, cars, jewelry etc. and put it toward fixing this mess!

I’d like to hear what Ms. Morgenson and others thinking through our option for resolving the economic mess think about an idea we have been kicking around our family (which includes some bank executives and shareholders) for a few months. How about a bailout that bypasses the banks? What if the bailout money went instead directly to the citizens – say $1 million per adult citizen. Debts could be paid with no need to negotiate complicated terms. Savings could be prudently invested – recapitalizing banks. Small businesses could be started without resorting to bank loans. Demand for consumer items would rebound, creating/maintaining jobs. The profits would go directly to citizens rather than hiding in executive compensation packages, and more available to support a reasonable revenue stream for necessary governemnt work.
Of course there will be some challenges and some opportunities. For example, the payment due to citizens in state custody (prison, medical facilities, etc. could be escrowed by the state and used to fund their upkeep. Those currently receiving public income support might have to decline the payment or agree to a term of ineligibility. But we can face these situations with creativity and compassion – and good old consumerism.
Any other ideas?

wow, excellent interview. Thanks to Gretchen Morgenson and to OnPoint.

@ wyogirl

Fully support your idea!