Zombie Banks and Your Financial Future

September 16, 2010 by  
Filed under Economics

People tend to forget all of the taxpayer money that has been spent to prop up “too big to fail” financial institutions. Some of those “forgetful” people include the jerks that still run these institutions, which others have referred to as “zombie banks.”

A recent opinion piece from Jonathan Weil at Bloomberg News highlights the issue with this introductory paragraph:

How long will it take before we see some semblance of robust free-market capitalism return, where the value of an asset is based on what bona fide market participants will pay for it, the cost to borrow money is based on a company’s fundamental financial strength rather than its ability to access a government safety net, and corporations are free to fail no matter what their size?

Let’s also remember that two of the largest money-sucking institutions still have their mouths firmly attached to government teats.  Freddie Mac and Fannie Mae are billions in the red and counting. They played (and continue to play) a huge role in the slow bleed in the housing market.

Saving Freddie and Fannie has not helped, because the foreclosure rate is up 25% since August 2009 and is higher now than at any other time in this financial crisis. (Source)

This is death by thousands of foreclosures. At this rate, we will all be dead by the time the housing market finds a bottom and starts to recover.  The government should rip the bandage off and get it over with.

Moving on to AIG – still pathetic while the Treasury tries to devise a taxpayer exit plan from the insurance business.

What else have these bailouts brought us? The highest U.S. poverty rate since 1994. (Source)

Weil suggests that the financial system will continue to be rigged as long as we tolerate leaders who are running a “bailout nation.”

It’s hard to argue against that, don’t you think? Does anyone believe that our government is driving this economy in the right direction? If so, show me some data.

BTW – this is not a Bush vs. Obama debate. They are both blameworthy.

Here is a link to Weil’s piece: Zombie Banks Have Us Right Where They Want Us


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3 Responses to “Zombie Banks and Your Financial Future”
  1. Rick Beagle says:

    I think you, and many economists are missing the point. We need jobs. Until someone can find the magic wave that creates them, we are destined to see a constant stream of bad news.

    I think the desire to encourage and promote small business is a good idea, but it will take many years for those efforts to reach maturation.

    As to whether this is a Bush or Obama disaster, really, does it matter? The masses allowed the free flow of deficit spending to occur since Reagan, and as long as people are eager to believe in quick fix solutions, we are destined to continue this trend.

    We are to blame, and I am eagerly awaiting a twelve step program for stupidaholics to be provided by our government, wall street, and BP. /snark

    Peace.

  2. MasterPo says:

    Ricky:

    1) Jobs aren’t coming any time soon. At least not meaningfull, high paying, long term/career jobs. Companies that provide those are well sitting on the side lines to see what comes from DC. There are just too many unknowns with this administration. Even if the Bush tax cuts are extended (and extended for all income levels) a year it won’t matter. No business or investor is going to plunk down on a long term strategy based on a 1 year extension. By summer 2011 we’ll be having this conversation all over again. MAYBE, if the Republicans and more importantly the TEA Party candidates win big in November there could be a momentary spike in the economy as the psychology improves. But don’t bet the farm. Even if they do win big what can they *really* do to turn things around? At best, slow it which is important. But not turn it around.

    2) Yes it is VERY important to fix blame for all this because it determines who we listen to, whose word we trust, and whose policies we support. Obama took an $8 trillion dollar debt (not good I totally agree) and in 16 months turned it into an $13 TRILLION dollar debt while giving us 9.6% unemployment (U6 is around 17%!), record poverty, housing market crash, soon-to-be commerical property crash, a sideways at best stock market, and taxes up the wah-zoo coming January 2011. You want more of the same? Even you can’t be that blind that this just isn’t working.

  3. Jack Clark says:

    “BTW – this is not a Bush vs. Obama debate. They are both blameworthy.”

    Thanks for finally writing something honest and non-partisan TML.

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