At the same time that the hearings have started into the risky behavior by the big banks, Obama is ready to announce a fee of up to $120 billion to recoup some of the TARP losses. Companies are already queueing up for exemptions.
The fee is a start, but it's comparable to tinkling on a forest fire.
The cost of TARP is a tiny fraction of the cost of massive irresponsibility.
There have been virtually no meaningful investigations on issues such as how AAA investment ratings were assigned to securitized crap. There have been no meaningful investigations on anything.
Did Paulson in fact threaten troops in the streets of America if Congress didn't acquiesce to his demands? Is that the plan going forward? We put the Treasurer in charge of the military, and send troops into the streets? What would they do, shoot people?
The economy is completely managed right now. Mortgage rates are being held low through the massive purchases of crap bonds each and every week by the Fed. It's supposed to stop, but it won't, because the "economy is still too fragile". Fine. I can buy into that if it means getting the economy back on its feet.
There is a difference between getting an economy on its feet, and telling us its on its feet. One is sustainable, and the other, not. The Fed, with the cooperation of the government, is attempting to reinflate the bubbles in the hope that the wealth effect kicks in. People will feel wealthier, and spend more, and that in turn, might lower unemployment... the only true salve to sustainability. Nothing is indicating that will actually happen. Credit is still massively contracting, and the banks are ready to feel another round of pressure from commercial real estate.
Now here's the thing: by keeping interest rates near 0%, the Fed is driving investment toward higher returns through speculation, not investment. That's fine too, as long as the gains are used properly, but they aren't. The gains are being used to pay out massive bonuses.
The economy is in shambles, the banks are still insolvent, and jobs are being sacrificed to drive speculation for the banks to recover, but they see the gains as their own rewards.
Something that Obama could do right now is to propose something that nobody but bank execs would protest.
Don't alter the bonuses at all. Let them have their bonuses, but hold the money in an account that will only start paying out once the unemployment rate hits 5%. In the meantime, loan that money out to small businesses. It will actually help them get their bonuses faster.
It doesn't have to hurt.