Historical note: 2008 crash, a couple deals

Status
Not open for further replies.

Craig234

Lifer
May 1, 2006
38,548
348
126
I might create some threads with a theme of 'historical note' to mention something with a lesson.

A couple notes about how the 2008 crash affected a couple banks:

- We all know that Lehman Brothers went bankrupt. Something interesting:

They had so much toxic real estate debt they were a very bad acquisition, but a couple banks - Bank of America and Barclays - had some interest, then declined to buy them.

That's what guaranteed they went bankrupt.

Immediately after they did, Barclays came back to buy the bankrupted assets.

If someone offered to hand you $4 billion, you'd like it - but that's what happened.

Barclays paid $250 million to buy $72 billion assets and $68 in debt - they did not have to take the toxic real estate assets - making an immediate $4 billion, 16x return.

Must be nice.

- Right after that, Merrill Lynch and Bank of America were told to make a deal. It was a bad deal for Bank of America, and got a lot worse in coming months as Merrill kept plummeting in value. Normally, Bank of America would have backed out of the deal because the value had gone down so much, but competitor Goldman Sachs' recent CEO then Treasury Secretary Paulson told Bank of America CEO Ken Lewis if they backed out, he and the board would be fired. So they didn't back out - too bad for the shareholders.

Paulson made a secret deal with Bank of America and poured tens of billions of TARP money into Bank of America to make up for losses in value of Merrill.

That secret deal in addition to how the $182 billion he paid to AIG to secretly be used to pay off Goldman Sachs at 100 cents on the dollar for bad investments.

Less than a year before, the Merrill CEO had been hired with a $15 signing bonus; now that his firm was headed to bankruptcy and acquired, he applied for a $10 million additional bonus for taking it to acquisition - to be paid for out of the taxpayer money. The press got wind and they had to cancel the request - but Merrill still paid out $3.8 billion in executive bonuses for 2008, moving the payments up to just before the acquisition.

This is the sort of craziness and greed going on because the public has almost no power over the industry. One Goldman Sachs said that the CEO of Merrill was a hero to other investment bankers for being able to get such huge bonuses despite the firm going so badly, that's how they look at it.

The recent statement by the US Attorney General and others that they decided not to prosecute crimes by the banks because it would hurt the economy further shows the problem; after the public widely agreed 'too big to fail' was a main problem and cause of the 2008 crash, the same banks are bigger than ever.

The net effect of the 2008 crash has been to take something like 40% of the middle class wealth and transfer it to the few at the top, who are much richer than ever.

Mission Accomplished.

That's why we have such a distorted debate on our policy options - instead of undoing some of this wealth distribution to the top and investing in America, we talk austerity.

But we can't afford investment in America! Right, when trillions of dollars are sitting idle setting new records in hoarded wealth with corpoations and the most wealthy.

This is the game - the American middle class, created out of progressive and FDR policies, has to be put in its place, with little wealth and power, for those at the top to have more.

And that's what we've been doing since Reagan - next up, start rolling back the entitlements, including the Republicans' plan for a 2/3 cut to Medicaid.

If they can just find the right propaganda for it - call the cuts destroying the programs 'saving' the programs - that's all they need to get voter support, they think.

The 2008 crash resulted in no prosecutions, no policy changes that broke up 'too big to fail' doing the opposite; only minor reforms in Dodd-Frank that are now being gutted.

Is this democracy?
 
Last edited:

Sonikku

Lifer
Jun 23, 2005
15,749
4,558
136
Of course it is democracy. Americans want to vote for the guy that has the most campaign money and by extension can bombard their message the most into our eyes and ears. That means candidates that want to win must suck up to those with the most cash to donate to their cause. That comes from wallstreet/bankers/corporations etc that figure a few million in someones super pac can mean a few billions made in the continued looting of the American economy unregulated and unabated. People vote and their votes have concequences. They just don't realize they vote against their own interests.
 

Bowfinger

Lifer
Nov 17, 2002
15,776
392
126
It's an interesting bit of history. I also think it's a perfect example of how Democrats, the purported champions of the middle class, are little better than Republicans. Think of how much we could clean up corruption if Obama went on national, prime time television and laid all that out. Think if he showed the American working class exactly who is taking away their prosperity and how. Think if he used his bully pulpit to call Americans to action, to launch a full court press to remove all of the corrupt politicians that allowed this looting.

But he won't, because Congress would be virtually empty, and he would be out of a job too. Our government in corrupt, and both Republicans and Democrats are complicit.
 

chucky2

Lifer
Dec 9, 1999
10,038
36
86
Super smart business guys with deep pockets/head of companies with deep pockets are always going to get what the want legally because they've got the super smart political guys they're pals with writing law/policy with super smart economic guys and super smart legal guys pumping out whatever needs to be done to justify it.

You will keep getting these results until the populace, who by far and large as a group is Fing stupid beyond measure (we can't even secure our own border from a decades long illegal invasion while simultaneously having the greatest military the Earth has ever seen), will elect actual politicians who are actually about the long term stability of the US and not the short term goals of the super smart crowd.

We've got too big to fail banks and too big to fail Corps, and an even bigger problem, a too big to fail Fed gov. This is what the US citizen wanted, and now they get to live with it... (all the while having OWS rallies while it's convenient using their Apple cell phones on ATT/Verizon service, etc. etc. etc.) I don't really know why people complain anymore, they really should just ensure they live the utmost during these good times...we really owe it to the future generations who are going to be really F'd.

Chuck
 

chucky2

Lifer
Dec 9, 1999
10,038
36
86
It's an interesting bit of history. I also think it's a perfect example of how Democrats, the purported champions of the middle class, are little better than Republicans. Think of how much we could clean up corruption if Obama went on national, prime time television and laid all that out. Think if he showed the American working class exactly who is taking away their prosperity and how. Think if he used his bully pulpit to call Americans to action, to launch a full court press to remove all of the corrupt politicians that allowed this looting.

But he won't, because Congress would be virtually empty, and he would be out of a job too. Our government in corrupt, and both Republicans and Democrats are complicit.

You knew this would never happen given campaign contributions and how fast he moved to stroke the Med Corps. for ACA. Maybe in 80 years or so we'll get to listen in on the tapes (if they even exist) on how bad we were sold down the river...
 
Status
Not open for further replies.