Ward on Words

Americans, dragged down by a sagging economy, high unemployment and a rather astonishing number of people living at risk of poverty , have new reality show to watch: Hoarders - the bank holding company version. Emboldened by bonuses supplied by the US taxpayer and bolstered by the lack of any oversight or consequences for reprehensible behaviors on Wall Street that led to the collapse of the economy, America's biggest " bank holding companies " are expanding their businesses. No longer content to supply loans and CDOs and synthetic CDOs , those clever Ivy-educated bankers are in the commodities storage business. And they're hoarding these commodities like those hoarders you can watch on A&E. What does this mean? Your cans of Pepsi, Budweiser and Heineken have just gotten pricier. And the hoarders on Wall Street have just gotten richer. This Business Insider story quotes a Goldman Sachs "commodities strategist" on how  "for investors, the...

In an article called Too Big to Fail or Too Big to Change , Harvard Law School starts with a bang... "Two and half years removed from the worst financial crisis since the Great Depression, the investing public has grown increasingly frustrated with the lack of criminal prosecutions of, and absence of truly significant fines levied against, the senior executives and companies responsible for igniting the subprime meltdown." Good point! Jail the crooks who dragged the economy off the cliff. But that would require a system backed  by ethics and law, not greed and corruption. And that would require BIG CHANGES in America....

That's why rebranding "too big to fail" (TBTF) institutions as "systemically important" doesn't really change the fact that they are still TBTF. In fact, due to consolidation and bankruptcies, these institutions are even bigger and more "systemically important" than in 2008. I had never heard of "TBTF" until the crash of 2008, but apparently, the phrase had been bandied about at least since the 1984 collapse of Chicago's Continental Bank, a failure that motivated Ronald Reagan to abandon his free market principles and bail out the bank. I myself prefer VoxEu's characterization of these institutions as "systemically risky." Let's use language that does not cloud the reality of our financial sector today. Is a "preowned" car any different than "used"? That's why I like "systemically risky." It does not obfuscate the fact that our financial system is as rickety (or even more ricke...

In recent months, there has emerged a terrible mythology around Henry Paulson's audacious plan to save our financial sector. The whispers have grown into kind of a roar: TARP will turn a profit for the government. To understand this mythology, we need to go back to those dark days of the fall of 2008, when our economy went into a free-fall of its own weight and it looked like nothing would save us from a Depression as terrible as the one that we call the Great Depression. Henry Paulson, then Bush's Treasury Secretary, cobbled together his rescue plan we all know as the Troubled Asset Relief Program, or TARP. In September 2008, Paulson did his best to explain his new plan . Here's some of what he said back then: As we all know, lax lending practices earlier this decade led to irresponsible lending and irresponsible borrowing. This simply put too many families into mortgages they could not afford. We are seeing the impact on homeowners and neighborhoods, with 5 million...