HOLD THE CHAMPAGNE

What I post below the asterisks below is from nakedcapitalism.com.

Those of you who follow this blog regularly will recognize the argument from many of my earlier posts. In a few words, I've been saying that the "recovery" on Wall Street (and in our economy) is an illusion because it's based on taxpayer subsidies and favorable legislation. I'm posting this argument from nakedcapitalism.com because (1) this point can't be reinforced enough and (2) I think it's necessary to acknowledge when others also recognize that Wall Street's recent "successes" are both empty and misleading.

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It simply amazes me that those who are cheerleading the seeming return of Wall Street to health overlook the extensive, hydra-headed subsidies they've received and continue to receive. The media has bought and is touting the line, "Hey, they (more accurately some) paid back the TARP, so what's the beef?"

Let us consider the other forms of support:

Bailout of AIG, in which collateral payments went directly to counterparties, particularly Goldman, which was most heavily exposed. The new urban legend about the firm is that it has good risk controls. Getting in that deeply to one counterparty is clear evidence of deficient risk controls. Recall the firm also got a costly lifeline from Warren Buffet on the eve of the TARP infusion. The firm most assuredly on the ropes last year and would not be around ex extraordinary assistance.

FDIC guaranteed bond issues. Has anyone paid those back?

ZIRP-level interest rates

A list too long to keep track of of Fed "goose the market" special facilities

We've inveighed along these lines elsewhere. The industry has gone from a supposed bastion of capitalism to the poster child of Mussolini-style corpocracy.

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The post continues, "Many in the community ... object strenuously to a poker player who has an extra set of aces up his or her sleeve. We also object to a casino capitalist model where the winnings are kept but the losses are forced onto someone else. And that, dear reader, is what Goldman and the rest of the big banks have been doing for the last two years."

In a few words, don't break out the champagne just yet. The same guys who got us into this mess are running the show now, and want to do it all over again.

- Mark