Home > Cande = Conjecture & Exaggeration, Fande = Fact & Evidence, The Economy > Almost 300 bank failures in 2 years…all attributable to the mismanagement of the economy under President George W. Bush and the Republican-majority Congress of the 2000s

Almost 300 bank failures in 2 years…all attributable to the mismanagement of the economy under President George W. Bush and the Republican-majority Congress of the 2000s

The results of the Great Recession are still “trickling in.” Here’s the “Trickle-down Economics” the Republicans fantasize about.

source: http://finance.yahoo.com/news/Regulators-close-banks-in-Ga-apf-3911928937.html?x=0&sec=topStories&pos=3&asset=&ccode=

EXCERPTS:

“Regulators on Friday shuttered three small banks in Georgia and one each in Florida, Arkansas and Minnesota, raising to 157 the number of U.S. banks brought down this year by the struggling economy and soured loans….

Other states that have seen large numbers of bank failures are California and Illinois, amid an avalanche of bad loans, especially for commercial real estate….

The 157 closures nationwide so far this year tops the 140 shuttered in all of 2009 and is the most in a year since the savings-and-loan crisis [started under President Ronald Reagan] two decades ago….

The number of banks on the FDIC’s confidential ‘problem’ list jumped to 860 in the third quarter from 829 three months earlier. The 860 troubled banks is the highest number since 1993, during the savings-and-loan crisis.

The FDIC expects the cost of resolving failed banks to total around $52 billion from 2010 through 2014.

Depositors’ money — insured up to $250,000 per account — is not at risk, with the FDIC backed by the government. That insurance cap was made permanent in the financial overhaul law enacted in July [2010].”

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For Perspective:

More from Matt Taibbi...

EXCERPT:

http://www.rollingstone.com/politics/story/26793903/the_big_takeover/print

http://broadcatching.wordpress.com/2009/04/06/matt-taiibi-the-big-takeover-rolling-stone-magazine/

The situation worsened in 2004, in an extraordinary move toward deregulation that never even got to a vote. At the time, the European Union was threatening to more strictly regulate the foreign operations of America’s big investment banks if the U.S. didn’t strengthen its own oversight. So the top five investment banks got together on April 28th of that year and — with the helpful assistance of then-Goldman Sachs chief and future Treasury Secretary Hank Paulson — made a pitch to George Bush’s SEC chief at the time, William Donaldson, himself a former investment banker. The banks generously volunteered to submit to new rules restricting them from engaging in excessively risky activity. In exchange, they asked to be released from any lending restrictions. The discussion about the new rules lasted just 55 minutes, and there was not a single representative of a major media outlet there to record the fateful decision.

Donaldson OK’d the proposal, and the new rules were enough to get the EU to drop its threat to regulate the five firms. The only catch was, neither Donaldson nor his successor, Christopher Cox, actually did any regulating of the banks. They named a commission of seven people to oversee the five companies, whose combined assets came to total more than $4 trillion. But in the last year and a half of Cox’s tenure, the group had no director and did not complete a single inspection. Great deal for the banks, which originally complained about being regulated by both Europe and the SEC, and ended up being regulated by no one.

Once the capital requirements were gone, those top five banks went hog-wild, jumping ass-first into the then-raging housing bubble. One of those was Bear Stearns, which used its freedom to drown itself in bad mortgage loans. In the short period between the 2004 change and Bear’s collapse, the firm’s debt-to-equity ratio soared from 12-1 to an insane 33-1. Another culprit was Goldman Sachs, which also had the good fortune, around then, to see its CEO, a bald-headed Frankensteinian goon named Hank Paulson (who received an estimated $200 million tax deferral by joining the government), ascend to Treasury secretary.

And the Fed isn’t the only arm of the bailout that has closed ranks. The Treasury, too, has maintained incredible secrecy surrounding its implementation even of the TARP program, which was mandated by Congress. To this date, no one knows exactly what criteria the Treasury Department used to determine which banks received bailout funds and which didn’t — particularly the first $350 billion given out under Bush appointee Hank Paulson.

The situation with the first TARP payments grew so absurd that when the Congressional Oversight Panel, charged with monitoring the bailout money, sent a query to Paulson asking how he decided whom to give money to, Treasury responded — and this isn’t a joke — by directing the panel to a copy of the TARP application form on its website. Elizabeth Warren, the chair of the Congressional Oversight Panel, was struck nearly speechless by the response.

“Do you believe that?” she says incredulously. “That’s not what we had in mind.”

Another member of Congress, who asked not to be named, offers his own theory about the TARP process. “I think basically if you knew Hank Paulson, you got the money,” he says….

That’s the essence of the bailout: rich bankers bailing out rich bankers, using the taxpayers’ credit card.

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