Deeply troubling
On Monday, The Sydney Morning Herald reported the release of a new book called A Fighting Chance by Elizabeth Warren, Democratic senator from Massachusetts, and the chairwoman of the Congressional Oversight Panel for the Troubled Asset Relief Program (TARP) during the financial crisis.
We thought the following excerpts were noteworthy:
“Although the book recounts Ms Warren’s childhood and formative years as a law professor, mother and dog lover, it also examines in considerable detail the government’s deeply inequitable response to the financial crisis of 2008.
“Ms Warren was on the scene for the aftermath of that mess, when she became the chairwoman of the Congressional Oversight Panel for the Troubled Asset Relief Program (TARP), which carried out one of the government’s major bailout deals. In her retelling, we watch as the banks that caused the crisis receive special treatment and costly rescues while troubled homeowners get little or nothing.
“The Congressional Oversight Panel, she writes, ‘couldn’t change a system that seemed hellbent on protecting the big guys and leaving everyone else by the side of the road.”
And this:
“A second revealing story recounts an autumn 2009 meeting that the oversight panel members had with Timothy F. Geithner, then the Treasury secretary. Ms Warren recalls asking why the government’s response to the foreclosure crisis had been so lacklustre – the equivalent of trying to put out a forest fire with an eyedropper.
“In her telling, Mr Geithner responded this way: ‘The banks could manage only so many foreclosures at a time, and Treasury wanted to slow down the pace so the banks wouldn’t be overwhelmed. And this was where the new foreclosure program came in: It was just big enough to ‘foam the runway’ for them.’
“To Ms Warren, Mr Geithner’s message was clear, if startling. ‘Millions of people were getting tossed out on the street, but the government’s most important job was to provide a soft landing for the tender fannies of the banks,’ she writes.”
And, finally:
“Washington, instead of being a place that builds opportunity for young people, has turned into a place that helped concentrate money and power with those who’ve already made it,”
A Fighting Chance is the latest in a line of books by participants in the government’s response to the financial crisis, including Bailout by Neil Barofsky, former special inspector general of TARP, and “Bull by the Horns” by Sheila C. Bair, former chairwoman of the Federal Deposit Insurance Corporation.”
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
Ric Ric
:
In the history of mankind over the longer term, a country’s prosperity doesn’t increase unless the ‘middleclass’ increases its prosperity.
Yet USA average real wages haven’t increased for 30 odd years.
I wouldn’t be betting on a sustainable longer term US recovery at this point in time, and after being ‘long’ US equities for the last few years, I am moving into a higher cash position.
I have made fantastic returns over the last 5 odd years, returns that if I cant protect my capital will far outperform any recent ‘average return on equities’ over 5, 10 or 15 year benchmark performances.
Nick Dragovic
:
Yet in all the evidence that has come out in the last several years from the GFC, our govt is not doing a thing to make the big 4 less influential. It is an oligopoly and if just one of them were to experience some serious turbulence govt would have to bail them out as they are deemed TBTF, at the expense of virtually everyone else, worst of all at the expense of everyone else not invested in them.
Then in a year or so, the government would then say oops we have a debt problem we have to cut back on some funding, and guess who would cop it the most, the single mothers, pensioners and all the weakest groups who do not have a lobby to fight for their interests, i.e. when has a normal pensioner or a single mother/father struggling to make ends meet, been able to lunch and dine with a politician such as certain Ms Rinehart has been able to do in recent times or go on a trip to China with the PM such as some billionaires just did recently.
I read a book some time ago, an autobiography of a man (name escapes me) from 1800s, where he says you might be a successful business person, but you still haven’t made it as until you get into the politics and be in a position of power to influence the law to protect your interests. Until then you are at the mercy of the market and your fortune could be wiped out at any time. Seems like some more people have read that that book.
pj2105
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The above is nothing that everybody had been told before.
‘Too big too fail’ was a popular cry of the media and citizens, at the time, it was only the government that was saying otherwise at the time. The above just says that actually the government admits that the banks were ‘too big to fail’.
Given their time over again the government would have bailed out Bear Stearns too.
Greg McLennan
:
Hmm, yes.
Mind you, I’m a bit wary of taking too much that Ms Warren says at face value.