but could nonetheless provide a great source of free entertainment to a nation suffering through a severe downturn

From Dean Baker:

"Do "Officials" Have Names? Post Conceals Obama Administration Effort to Hand Tax Dollars to Bankrupt Banks

The Washington Post must be shooting for the Pulitzer for incredibly bad reporting. How else can one explain an article on plans for bailing out the banks that never once conveys the basic fact to readers that many, if not most, of our banks are in fact bankrupt.

Instead the article uses euphemisms to conceal this fact. For example, it tells readers that the scope of the toxic asset "problem" has reached $2 trillion. What does this information tell readers. Do the people reading this article know that this sum vastly exceeds the capital of the banking system?

That seems unlikely. So most readers would not know that the Robert Rubins of the world are sitting on bankrupt banks. In other words, they would be shut down and put out of business if we let the market run its course.

Instead the Obama administration is looking to hand taxpayer dollars to the banks through a variety of complex mechanisms. The main reason for using complex mechanisms (rather than simply seizing bankrupt institutions) seems to be to conceal the fact that we are handing taxpayer dollars to bank shareholders and the wealthy executives who run them.

The Post is obviously eager to assist in this effort. At one point, it even is so polite to tell us that the administration doesn't want to limit executive compensation as part of getting welfare from taxpayers because "officials" are worried that such limits would discourage banks from participating.

Isn't it neat how the people who work in the Obama administration don't have names. Are they called "official 1," "official 2" etc.? Since "officials" are not always entirely truthful in what they tell reporters, it is important for readers to know who made such claims.

Who cares if some banks don't participate in getting handouts? Citibank, Bank of America, and many other major banks have no choice. They will go bankrupt without assistance. If some banks actually can get by without the government's assistance, why would we want to force it on them?

If their toxic assets have really frozen lending, although not actually jeopardized their solvency, then the shareholders would have a great lawsuit against any bank executive who refused to act in the interest of the shareholders in order to preserve their own high pay. Such instances would presumably be rare, but could nonetheless provide a great source of free entertainment to a nation suffering through a severe downturn.

In short, there is good reason to believe that the Obama administration is trying to slip hundreds of billions of dollars to bank shareholders and their top management. The Washington Post seems to be helping.

--Dean Baker"

And I say:

"then the shareholders would have a great lawsuit against any bank executive who refused to act in the interest of the shareholders in order to preserve their own high pay."

Right now, these shareholders are backing these bankers because they are at the point of being wiped out. But, when that happens, you might well see lawsuits for fiduciary mismanagement, collusion, fraud, and negligence.

In allowing such ghastly management by bankers, the shareholders must take some of the blame. But, given the situation the bankers have left their banks in, does anybody really doubt that there are grounds for some my listed complaints?

Posted by: Don the libertarian Democrat | January 31, 2009 11:37 AM

If the country of bare-knuckled capitalism no longer believes in it - at least temporarily - all bets are off.

John Gapper in the FT:

"Americans now distrust the free market

January 28, 2009

I started my day in Davos with Richard Edelman of the eponymous public relations company at a breakfast to launch its annual trust barometer report.

The conclusion is that trust in chief executives and private enterprise is at an all-time low. Trust in US business fell from 58 per cent last year to 38 per cent, bringing it in line with levels similar to the other side of the Atlantic.

The statistic I found most interesting is that only 49 per cent of Americans, living in the country of capitalism and free enterprise, thought the free market should be allowed to operate independently.

As Richard put it: “America is the new Europe”.

I find that, if not surprising, quite a sobering figure. If the country of bare-knuckled capitalism no longer believes in it - at least temporarily - all bets are off.

Nick Burns, a Harvard professor and former undersecretary of state for the US, said the world was at “a hinge point in history” similar to 1919, when the public’s trust in institutions is exhausted and political change results.

I plan to write more about the issue in my FT column tomorrow.

January 28th, 2009 in Davos09 | Permalink"

Here's my reply awaiting moderation:

"The conclusion is that trust in chief executives and private enterprise is at an all-time low."

This is one big reason that I favor nationalization. The bankers are part of the panic. Leaving them in place is a panic accelerant. What people view as the free market is our system of crony and corporate capitalism, in which investors and businesses count on government largess for themselves at the expense of others. Wittgenstein said "If a lion could speak, we could not understand it". For these bankers we can say, "If a free market existed, they could not compete in it". Life is full of paradoxes. Right now, we need to take these disasters over, and spit them back out into the private realm as quickly as possible. As for the free market, I'll email you the minute I see it.

"Two-thirds of Britons want the rich to face punitive tax rates not seen since the 1980s"

Some people might worry about why I'm such a Burkean. I seem to worry about how fair the system seems to citizens, whether or not crimes are prosecuted, pissing on high wages for workers, conflict of interest, etc. Here's why from the Guardian:

"Public wants taxes that hurt the rich

Credit crunch provokes backlash against bankers

• Gaby Hinsliff, political editor
• The Observer, Sunday 4 January 2009
• Article history

Two-thirds of Britons want the rich to face punitive tax rates not seen since the 1980s, according to a new poll which suggests that the recession has hardened attitudes towards the wealthy( REALLY. WHO KNEW ? ).

Bankers are now seen second only to footballers as being overpaid, while seven in 10 think that ordinary workers should sit on remuneration committees setting executives' pay to ensure that high salaries are deserved.

The findings - in a poll for the think tank the Fabian Society, to be published this week - suggests that the credit crunch has provoked a backlash against the rich, with the public seeking retribution for alleged mistakes made by City figures( MY MY ).

The findings will encourage Labour MPs who want Gordon Brown to go further in next spring's budget and rebalance the tax system in favour of more modest earners( BETTER GET GOING ).

His gamble in pledging to introduce a top rate tax of 45 per cent for those earning more than £145,000 is backed by three-quarters of those polled, while 69 per cent would support Labour introducing a higher top rate of 50 per cent for those earning more than £250,000.

Tax has not been that high in the UK since 1988, when Margaret Thatcher brought the top rate down from 60 per cent. Neil Kinnock's threat to introduce a 50p tax rate in the 1992 election is widely held in New Labour circles to have cost him Middle England's support.

However, the Fabian report found new demand for forcing the wealthy to contribute more, with 70 per cent of those polled by YouGov agreeing that "those at the top are failing to pay their fair share towards investment in public services"( DEAR ME ).

Louise Bamfield, senior research fellow at the Fabian Society, said the public had previously considered footballers and business "fat cats" overpaid but had largely accepted it as a fact of life. That had now changed. "There is a shift to a new group of people - bankers and traders - and the sense that not only have they been paid too much but what they have been paid has had a direct negative consequence on other people( SILLY ME. TO WORRY ABOUT SUCH PERCEPTIONS. )," she said.

"People had assumed that this group were more than competent( PROVEN WRONG CHAPS ) and it must have been deserved. There is now a feeling that these people have been responsible for others losing their jobs( WELL NOW )."

However, she said the anti-rich backlash had not greatly benefited those at the bottom. Focus groups conducted alongside the poll found that while there was sympathy for those losing their jobs, people still expected them to find work as quickly, despite the recession. Those polled significantly underestimated the cost to the Exchequer of tax avoidance by the wealthy and over-estimated the cost of benefit fraud. They blamed the government for failing to stop tax dodges rather than individuals, but saw benefit fraud as the fault of the individual( IT IS ).

The findings may explain why Labour's poll ratings have increased; 55 per cent of the public blame reckless lending by the banks for the credit crunch( THAT'S MY VIEW ), while fewer than a quarter think the government was mainly responsible.

Labour's private polling suggests that two-thirds of Britons blame America for starting the credit crunch - the argument that Brown uses( HE LOVES TO PISS ON EVERYONE BUT BRITAIN ), to the frustration of Conservative MPs who argue that he left the economy overexposed. Bamfield said the poll suggested Brown had pitched his tax rise correctly. More than half of respondents wanted not only to see bonuses reduced, but for executives of failed companies to repay past bonuses as penance for mistakes( HERE'S WHERE I AGREE WITH THE SKEPTICAL CPA. I SIMPLY DON'T YET ACCEPT HIS SOLUTION )."

Who would think that citizens, instead of just accepting calls for them to suck it up and accept a recession or depression, might want to alter the Social and Political Culture instead? A Burkean.