The trouble with assets

Eric Garland Greatest Hits, Uncategorized Leave a Comment

If you look up the word “TARP” online, your first search result will not be an actual “tarp,” but the cleverly named Troubled Asset Relief Program, signed into law by President George W. Bush in October 2008 to purchase worthless financial instruments from private banks in an effort to keep the world banking system from collapsing. Three years later, the world system seems no further away from imminent collapse, with the British Exchequer predicting that the Euro may disappear in six weeks or so if financial engineers cannot design the fiscal equivalent of a jet passenger plane that runs on tap water.

Good luck with Greece, fellas, and remember that the terms hubris and tragedy both come to us from our Hellenic forebears.

One of the plans suggested to save Europe is the adoption of a U.S.-style troubled asset relief programme. You see, their banks and governments also have a bunch of assets that are troubled and need relief. This troubled asset syndrome, as near as I can tell, is like an upset stomach, only it involves billions of dollars and is relieved as soon as you get a check from taxpayers big enough to pay off all of your losses. You see, I’m not sure exactly how it works since the U.S. Federal Reserve and Department of the Treasury have been very tight-lipped about who gets what money, and why. Sure, there have been general lists regarding to whom the $700 billion of TARP was promised, but the government was much quieter about where that money went to – such as offshore, to prop up foreign banks.

Remember, before the system began (quite predictably) destabilizing in 2007, the sum of $700 billion was considered quite a bit of money – enough to double the size of the U.S. Interstate Highway System while giving every homeless person a house and the Baby Boomers free healthcare a decade, that kind of thing. But that’s not what $700 billion got the U.S. for the cost of saddling its future generations with decades of economic torpor. For that we got assets. You see bankers had assets which they listed in the column generally seen as “the good one” on their balance sheets, i.e. not the liability column. But ALL OF THE SUDDEN, HOLY COW, THEY WEREN’T ASSETS ANY MORE!

HALP! WE NEED MORE ASSETS! THESE ARE BAD! CAN’T YOU BUY MY ASSETS SO I CAN GO GET ONES THAT AREN’T TROUBLED?

And so the U.S. Government went and set up this lovely program to purchase – at full price – these assets-that-holy-cow-I-guess-are-liabilities. And the banks are relieved.

BUT OH NOES! EUROPE’S BANKS ALSO HAVE ASSETS THAT AREN’T ASSETS – LIKE A GREECE! So maybe they need a Troubled Asset Relief Programme, too – because when you use British spelling instead of American, things get 43% more intelligent and 27% more efficient.

I have a question for financiers and government central bankers:

  • Why are you having such difficulty distinguishing between an asset and a liability?
  • If you can’t tell how much something is really worth when it’s on YOUR balance sheets, why do you know exactly what taxpayers should be paying to fix your problems?
  • How many more “asset crises” do you foresee? I ask, since some reports say that there are over one QUADRILLION in unregulated “assets” out there, the vast majority on margin. How can you be sure those won’t continue to destabilize this system?
  • At what point do you quit your jobs or get to work on designing a system that isn’t a giant catastrophe machine? It’s been around four years of emergency crisis looniness,  and you all look like Lucy in that scene from I Love Lucy when she’s at the candy factory and the candy bars keep coming and she freaks out and just starts stuffing candy bars in her face instead of wrapping them. Yeah, you look like that.

Best of luck with your relief program, boys and girls: We the people all hope you feel better fast.