Over the last six months, Treasury has spent or committed $590.4 billion of the TARP funds. Treasury has also relied heavily on the use of the Federal Reserve’s balance sheet which has expanded by more than $1.5 trillion (not including expected TALF loans) in conjunction with the financial stabilization activities it has undertaken beyond its monetary policy operations. This has allowed Treasury to leverage TARP funds well beyond the funds appropriated by Congress.
The total value of all direct spending, loans and guarantees provided to date in conjunction with the financial stability efforts (including those of the FDIC as well as the Treasury and the Federal Reserve) now exceeds $4 trillion.
The Neil Barofsky TARP inspector general as well as the GAO also confirm the U.S. has spent $3 trillion dollars so far on the financial crisis. (What's a trillion discrepancy among friends?)
Elizabeth Warren overviews the report:
Now see what the Panel has identified as the Treasury's belief on the crux of the financial crisis problem:
One key assumption that underlies Treasury’s approach is its belief that the system-wide deleveraging resulting from the decline in asset values, leading to an accompanying drop in net wealth across the country, is in large part the product of temporary liquidity constraints resulting from nonfunctioning markets for troubled assets. The debate turns on whether current prices, particularly for mortgage-related assets, reflect fundamental values or whether prices are artificially depressed by a liquidity discount due to frozen markets – or some combination of the two.
The report doesn't state the Treasury is wrong. But out here in blog land, experts and us regular folk who have been looking into these Ponzi scheme derivatives know it is simply not a liquidity crisis.
The crux of the report identifies, four key elements of past financial crises resolution successes.
- Transparency. Swift action to ensure the integrity of bank accounting, particularly with respect to the ability of regulators and investors to ascertain the value of bank assets and hence assess bank solvency
- Assertiveness. Willingness to take aggressive action to address failing financial institutions by
- taking early aggressive action to improve capital ratios of banks that can be rescued, and
- shutting down those banks that are irreparably insolvent.
- Accountability. Willingness to hold management accountable by replacing – and, in cases of criminal conduct, prosecuting – failed managers.
- Clarity. Transparency in the government response with forthright measurement and reporting of all forms of assistance being provided and clearly explained criteria for the use of public sector funds.
Let's translate this to blogger terms we all can understand. Kick the bums out (executives), take their ill gotten gains, prosecute them if possible, tell the American people the truth about the (ahem) assets, stop being a Pansie to corporate CEOs and special interests (such as China's desire to protect it's investments), grow a pair, just say no and stop playing accounting games to try to make insolvent banks look solvent.
In Yellowstone National Park, warnings, signs state over and over: Don't Feed the Bears. Someone needs to put signs up all over D.C. which say:
Don't Feed the Zombie Banks
The Director of the Swedish Financial crisis government response, Bo Lundgren testified. He clearly believes this current crisis can be handled with the Swedish approach. One of his recommendations I found to be most compelling:
In order to limit moral hazard and get public support, it is important to have a stronger approach and deal with the banks firmly, enforcing the principle that losses are to be covered in the first place by the capital provided by the shareholders. If that means that banks must be nationalised, then so be it. They can be privatised again at a later stage.
The entire hearing is below:
I recommend visiting the COP website. They have all sorts of media, information, videos online.