When The Big Banks Come Crawling Back, Screw 'Em! Punish The Bondholders Mercilessly, Sack Management Teams, And Prosecute For Fraud!
Talking Points for the Anti-Bank Bailout Revolution
Don't get slapped in the face by the irony.
As you find yourself rooting against the banks, be prepared when the too-big-to-fails come begging for taxpayer help, because as we've been warning, a hastened request for TARP v. 2.0 is on the way. So let's see if we can get everyone following the same playbook before it happens.
This is the issue we need to remain aware of - the more banks suffer from mortgage putbacks and foreclosure fraud, the more likely it becomes that a second round of taxpayer assistance is requested next year by Geithner's replacement at Treasury. Chris Whalen has been warning for weeks -- here, here, and here -- that 2011 will bring another round of bank bailouts.
- The strategy is simple, and we've been screaming along these lines since we launched. Punish the bondholders, sack managements, turn operations over to the FDIC, investigate fraud and prosecute.
Bill Black argued -- here and here -- that even our largest banks, that's you Citigroup (nyse:C), and Bank of America (nyse:BAC), could be successfully placed into government receivership, the same as Sheila Bair does for a half-dozen smaller banks every weekend.
- Bill Black says that the FASB 157 Hour Of Power, and delusion, is over. Banks are still insolvent, and the Federal Reserve is complicit in the delusion due to massive MBS holdings. Put the banks with the most fraud into government receivership.
- "Foreclosure fraud is the only thing standing between banks and Armageddon. The financial media treats Bank of America as if it were a legitimate bank rather than a "vector" spreading the mortgage fraud epidemic throughout much of the Western world."
Speaking of Sheila, she laid out a proposal just last week calling for bank bondholders to be punished in future bailouts.
And Janet Tavakoli made the argument in detail, before anyone else:
Joe Nocera recognized the irony earlier this week in the NYT:
I admit it: I want to see the banks feel some pain. Most people do, I think. Banks did terrible things during the subprime bubble, and they still haven’t paid any real price. I find myself rooting for judges to rule against banks in foreclosure cases. I would love to see these big investors put the serious hurt on Bank of America, which will encourage other investors to pile on. I know this colors my thinking. I can’t help it.
Yet I also know the flip side. If the foreclosure lawyers start winning a lot of cases, if judges halt foreclosures on a widespread basis, if investors start to extract billions upon billions of dollars from the banks — and if banks become seriously weakened as a result — we’ll be right back where we were two years ago. The banks will need to be saved for the good of the economy. The taxpayers will have to come to the rescue. That’s an appalling prospect too.
Here's more evidence:
Willem Buiter says bank bondholders must be held accountable - CNBC interview. Not sure how he feels now that he works at Citigroup.
And Arthur Levitt says:
So the choice is simple - wait for the inevitable and get another Wall Street bailout jammed down your throat, or prepare wisely by circulating these basic talking points:
- Punish the bondholders, sack managements, turn operations over to the FDIC, investigate fraud, find the balance-sheet bombs, then prosecute.
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More proof that another bailout mind warp is on its way...
Watch this. Clip runs 30 seconds. Seminal quote.
- "We can either have a rational resolution to the foreclosure crisis or we can preserve the capital structure of the banks. We can't do both."
Let me repeat myself from above:
So the choice is simple - wait for the inevitable and get another Wall Street bailout jammed down your throat, or prepare wisely by circulating these basic talking points:
- Punish the bondholders, sack managements, turn operations over to the FDIC, investigate fraud, find the balance-sheet bombs, then prosecute.
Repeat it over and over. It's even kinda catchy.
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