A post by Pat
Eh, it’s only money. The financial crisis started here with subprime mortgage defaults but the geniuses on Wall Street had cleverly spread the risk all over the world. The toxic assets were sliced and diced and blended into a financial soup. No one knew how much poison was in their cup. The U.S. and other countries took steps to protect their financial institutions. Everybody else was much better at it.
“While most nations targeted their funds to save individual institutions, America simply flooded the markets with money to stabilize the system,” the report declared.
“Since much of this money accrued to U.S. institutions with extensive international operations, it appears that America’s rescue had much greater impact internationally than other nations’ rescues had on the U.S.”
In other words, our money wound up in other people’s pockets.
For example, billions of dollars in bailout money actually ended up in large banks in France, Germany, among other nations (in connection with the rescue of American International Group) — an inevitable result given that company’s extensive foreign operations. However, the U.S. government bore the entire $70-billion risk. Indeed, the U.S. share for this single rescue exceeded the size of France’s entire $35-billion capital injection program and was nearly half the size of Germany’s $133-billion program.
I remember financial blogs and forums at the time warning about money winding up in foreign banks. It only took until now for a Congressional Oversight Panel (COP) to figure it out. They still can’t assess the impact. Treasury didn’t keep good records.
Even at this late date, COP noted, it is difficult to assess the precise international impact of the TARP or other U.S. rescue programs because the Treasury gathered very little data on how TARP funds flowed overseas.
Had the U.S. received better data and tracked the flow of bailout funds, it might have been possible to share the cost of the rescue package with foreign nations, COP asserted.
We were throwing around money with no idea where it would wind up. Oh well, better luck next time.
Based on its findings, COP recommends that the U.S. Treasury collect data on cross-border flows of funds, increase the scope and frequency of stress-testing on financial institutions, and collaborate with foreign policymakers on a cross-border resolution regime and for regular crisis planning and financial “war games.”
“Policymakers need strong, clear data to measure the success of their rescue efforts and to respond effectively to future crises,” COP noted. “[The] Treasury gathered very little data on how bailout funds flowed overseas, which makes pinpointing the exact amounts and sources of the flow of cross-border rescue funds impossible.
And let’s call the next one CRAP, Congressional Rip-off (of the) American People