About AJ DiCintio
A.J. DiCintio is a Featured Writer for The New Media Journal. He first exercised his polemical skills arguing with friends on
the street corners of the working class neighborhood where he grew up.
Retired from teaching, he now applies those skills, somewhat honed and
polished by experience, to social/political affairs.
Damned Lies & Statistics
Is Method in Obama's Healthcare Madness
Perverse Financial Elites
Flying Under the Radar
Obama: No JFK
Massachusetts: Vote! For God's Sake, Vote!
Cowardice, Expediency, Language & Liberals
Tax & Principles
Christmas Times Four
Snake in the Grass
Narrative & Afghanistan
Prostitution & The Healthcare Bill
That Killed at Fort Hood
Who Are the Know-Nothings?
All the Tomatoes!
It's Not a
War Against FOX News
Hope) We’re Not Gonna Take It Anymore
Hyperpartisanship, Propaganda & Hypocrisy
& Sherman's Legacy
Epistemology, Materialists & Morality
the Stench of the Stable
Shameful Education Affair
Reform: The Good, The Bad & The Ugly
(Audaciously Arrogant) Mob
The Boiled Frog
the Last Cow Has Come Home
and The Big Hate
Jefferson: Don’t Question a Supreme Court Nominee Without Him
Language: A Canary in the Coal Mine
Language: A Canary in the Coal Mine
Colin Powell Comes Up Small
Headlines, Torture & American Values
Something Very Deep and Dark
Miss California’s Unforgivable Mistake
The President in the Garden
Liberals & The Triumph of Reason
Messiah, Lincoln or Less?
Obama, Big Bangs & Selling Make Believe
Hostile Alien Case Exposes Danger of Activist...
Age of Arrogance
Lenin Lite, Perhaps?
Where’s the Guilt?
In the Matter of Public v. Stimulus Bill
Bigger Than the Bacon Explosion
Where Bill O’Reilly’s Going Wrong
Liberals, Israel & Wolves
Israel & The Neurotic Mind
The TARP-Profit Lie
April 12, 2010
After the Obama administration leaked
news it is preparing to sell the Citigroup stock the federal government acquired
in exchange for bailing out the bank, it didn't take very long for ideological
con artists to begin puffing a sales pitch about an $8 billion "profit" that is
emblematic of the wonderfully profitable TARP in general.
The Washington Post's David Cho, for instance,
hawked the "windfall" as a "validation of the rescue plan adopted by government
officials during the height of the financial panic."
And Mr. Cho isn't alone as evidenced by articles
such as "Citigroup Bailout Now Looking Good" (stltoday.com), which opens with
this blatant example of the propaganda technique called Card-Stacking:
"[TARP] investments have netted the government
$15.4 billion from dividends, interest and the sale of bank stock warrants. . ."
After asking us to believe that Bailout, the
slimy leech that properly creeped-out a common sense public, has metamorphosed
into a beautiful, loveable butterfly called Investment, the piece continues with
laughably simplistic testimonials such as the following:
"The banking part of [TARP] is going to be a
moneymaker...When you strip away all that emotion, this has turned out to be a
good bet." Banking analyst Bert Ely:
"Selling at today's prices would give the
government an 18 percent return on its $45 billion investment...Citigroup stands
to be our most profitable bank investment, bar none." Finance professor Linus
Of course, once the stock sale actually occurs,
shills such as those just mentioned will be rudely pushed aside by big shot
administration and congressional blowhards who will bark a million half-truths
and lies about the billions TARP has made for the American people.
(Not that we ought to express surprise at this
latter group's contemptible deceit, for to be a politician or political toady is
to spend one's life denying Lincoln's truth that "You can't fool all of the
people all of the time.")
So, what are the facts about the TARP
Well, it is true that using money borrowed from
our great-great-great-grandchildren, the federal government made enormous loans
to banks that were brought to ruin by the behavior of selfish, greedy, perfectly
stupid executives and their identical twins who go by the name of "Honorable
Members of Congress."
However, it is equally true that the very
politicians who allowed banks to become casinos that are "too big to fail" and
who promoted the "sub-prime mortgage" as the greatest boon to humanity since
Prometheus handed humans his glowing gift will be the biggest-mouthed braggarts
about the "profit" made on the deal.
(But that is what corrupt, power-grubbing
politicians do; and that is why Swift satirized them as depraved, disease-rotted
creatures "who never [tell] a truth but with an intent that you should take it
for a lie; nor a lie, but with a design that you should take it for a truth.")
Now, in one brief sentence, here's why the
"profit" business is nothing but reeking bull:
People in the know who base their assertion
of a TARP profit solely on the notion that the government has been repaid $15
billion more than it gave out in loans are consciously spewing a hellish,
monstrous lie of omission.
For example, politicians blabbing "profit"
conveniently avoid this fact, which the Washington Post's Binyamin Appelbaum
reported last December.
"[The Obama administration has] issued an
exception to long-standing tax rules for the benefit of Citigroup and a few
other companies partially owned by the government. As a result, Citigroup will
be allowed to retain billions of dollars worth of tax breaks . . ."
A consequence of this lavish gift, given as
Democrats raise taxes on the rest of the nation?
"While the ...administration has said taxpayers
are likely to profit from the sale of the Citigroup shares, accounting experts
said the lost tax revenue could easily outstrip those profits."
As significant and shocking as those billions in
special tax breaks are, they aren't the most important part of the story because
the really big money — and the immense, frightening bottom-line cost to the
American people — has to do with the fix the Federal Reserve System put in (1)
to get the balance sheets of big banks back in order and (2) allow bailed out
banks to repay the government.
How does the fix work?
For a Plain English answer to that question, we
can thank the Columbia Journalism Review, which uses Citigroup as an example to
explain what banks have been doing with money the Federal Reserve has been
allowing them to borrow virtually interest free:
"Since one of the main uses of this money was
buying government bonds, Citigroup was essentially getting free money from the
government. If it borrowed $200 billion at near zero interest and lent it back
to the government by buying 10-year Treasury bonds at 3.7 percent interest, then
the government was effectively handing Citigroup $7.4 billion a year for
Let's see, just as Bernanke, Geithner, et al.
planned it, the big banks are borrowing for a pittance at the Fed "window" and
then using the cash to buy Treasury bonds, thereby fattening their balance
sheets and profits with easy, guaranteed money — all the while freezing small
business, the major engine of job creation, out of the credit markets.
However, honest folks know that if the fix comes
without a cost, Congress will announce tomorrow that it has invented the first
successful perpetual motion machine. Therefore, the truth is that it comes with
a very big cost. Trouble is, Truth doesn't get along with Expediency, whose
dirty, dangerous, wasteful advice is beloved by power-grubbing politicians.
That's why they very conveniently fail to
subtract the enormous costs of the Fed's "generous" interest rate policy from
TARP "profits," for example, the hit on interest and dividend income that since
January, 2009, has been taken by every individual and company that has money in
a savings account, a CD, or money market fund.
To arrive at this mammoth amount of money, one
need not have a degree in finance.
In fact, all that is necessary is knowledge of
simple arithmetic and use of the Internet to research easily available data
about sums held in bank time deposits (CD's, for example), retail money market
funds (the kind used by ordinary folks), institutional money market funds (where
wealthy individuals, corporations, and other entities park big bucks), the
average return of these financial vehicles between 2000-2008, and their average
return since 1/1/09.
With that data and a little math, this author
discovered that in calendar 2009 alone, the American public "lost" at least $70
billion in interest and dividend income on $1.4 trillion held in CD's, $1
trillion in retail MMF's, and $2.5 to $3.0 trillion in institutional
In addition to money that we know the federal
government has robbed from Peter (the people) to pay Paul (the banks), there is
the possibility that the Fed's Fantastic Money Pump will cause astonishing
amounts of wealth to be lost in the future, for example, by the remorseless,
wealth-sucking maelstrom that is always set spinning in its awful, corrective
motion by the bursting of a presumed Infinitely Expansive Bubble.
As reported by CNBC, the learned and common
sense Thomas Hoenig, President of the Kansas City Federal Reserve Bank, put the
frightening possibility this way:
"I am confident that holding rates down at
artificially low levels over extended periods encourages bubbles, because it
encourages debt over equity and consumption over savings ...While we may not
know where the bubble will emerge, these conditions left unchanged will invite a
credit boom and, inevitably, a bust."
Only time will tell whether speculation fueled
by cheap money will make a gigantically painful joke of the TARP "profit." But
what is no joke is the pain caused by unrestrained speculation and bursting
Consider, for example, just the possibility that
this summer some of the Fed's cash flood seeps its way into oil markets and
causes a rise in the price of gasoline, which has already reached the $3 mark.
Consider, also, that at current U.S. gasoline
consumption of 378 million gallons/day, a fifty cent rise in the price of gas
sustained for one year will cost Americans $70 billion.
Yes, that effect of cheap money alone will pick
70 billion budget-busting dollars from the pockets of the American people just
as surely as it will send the cowardly, hypocritical politicians ultimately
responsible for the theft screaming about the "obscene" behavior of oil
Finally, there is easy money's Worst Case
Outcome, which sends shivers through the mind and heart of every American —
except Washington's politicians and financial gurus, not a one of whom is
capable of recognizing a nuclear-sized sub-prime mortgage bomb forming right
under their noses.
The disaster is expressed in the following brief
sentence, which owes many thanks to Scotland's most beloved poet.
Because "The best laid schemes o' mice and
men/gang aft agley/An' lea'e us nought but grief and pain," the Fed's Fantastic
Pump could leave us with nothing but the horrendous suffering caused by runaway
If such a catastrophe occurs, we will find the
"profit" hucksters lying their lies from beneath the biggest rocks they can
find, which is where they belong anyway.
Enough, then, about TARP "profits," at least for
every American who understands there is no free lunch...for every American who
knows that that because government is incapable of producing one penny of
wealth, it is the people who produce everything — as well as pay for everything
that leftists love to lie government "gives" us.