Too Big to Fail and The Gang Who Couldn't Shoot Straight

A year or so ago in the aftermath of the Lehman Bros failure as we stood on the precipice of economic Armageddon, our then Secretary of the Treasury came before the people and said that if we didn’t rescue a group of firms in the next few days huge cracks would open up in the worlds economy and swallow us. These firms, he said, were so important, so crucial, so totally necessary to our economy, that to let them suffer the consequences of their actions was too dangerous to even contemplate.

They were Too Big To Fail.

So upon the balsa wood foundation of toxic derivatives, fronted by the edifice of self aggrandizement not even the most hubris filled crown prince could put forth, we poured the concrete of the American taxpayer. Leaping into action in a manner hitherto unseen in the halls of our government they threw upon this crumbling construct of greed and ego nearly a trillion dollars.
Our Treasury Secretary, our Chairman of the Federal Reserve, Our legislature, and Our President, current and previous, assured us of the necessity of this action. A little bit of partisan politics thrown in so we would be distracted from the nuts and bolts of the plan, if such a bucket brigade can be called a plan, and if in fact the actual plan wasn’t some back room deal of nefarious origin, we the people were out a trillion dollars.

I won’t delve into the little details like the money never went to where it was supposed to go, or where we were told it would go, or where it should have gone. I’ll ignore for the sake of brevity the notion that those who got the money didn’t do what they were supposed to do with it, were happy to take it, made more money with it, gave the profits to themselves, and spit it back at us like it was spoiled milk.

Now in the comforting light of incipient economic recovery, our leaders elected and otherwise, charged with the zeal of the righteous have once more leapt forth to engage these entities with the sword of regulation.

I will refrain from detailing that the regulating agencies in place at the time were asleep at the switch, and when they were roused from their slumber were so unaccustomed to action that they set new standards in incompetence, nor will I elaborate upon the fact that many of the perpetrators of said incompetence remain in their positions, or have been promoted.

Today, Our Secretary of the Treasury, Timothy Geithner addressed the House Financial Services Committee and said the following:
“Over the past few decades, we have seen the significant growth of large, highly leveraged financial firms. These firms benefited from the perception that the government could not afford to let them fail, creating a classic moral hazard problem.
During the recent financial crisis, in order to preserve the stability of the financial system, protect the savings of Americans and prevent greater economic fallout, the government was forced to step in and stand behind almost all of these firms. That cannot happen again.”
I’ll overlook the fact that the firms he mentioned, about whom he states the situation cannot happen again, are all bigger than they were at the time of the crisis, are currently in equally risky or worse positions, and several have announced record pay packages for their top brass, all of whom were around for and signed off on the conditions that brought about the debacle.

Allow me to encapsulate the situation.

The folks who brought about the conditions that permitted the other folks to take the risks and form the products that cost you and I a TRILLION DOLLARS are now forming the solution to the problem by giving more power to the folks that didn’t use the power they had to stop the problem when they could have, and none of the folks involved in the aforementioned have taken any responsibility or suffered any consequences.

As I wrote this, a copy of a book of essays by Thomas Jefferson threw itself into the fireplace.

References:
Written Testimony of Mr. Geithner for the House financial Services Committee