From the TARP Special Inspector General, Neil M. Barofsky’s report to Congress:

• To the extent that huge, interconnected, “too big to fail” institutions contributed to the crisis, those institutions are now even larger, in part because of the substantial subsidies provided by TARP and other bailout programs.
• To the extent that institutions were previously incentivized to take reckless risks through a “heads, I win; tails, the Government will bail me out” mentality, the market is more convinced than ever that the Government will step in as necessary to save systemically significant institutions. This perception was reinforced when TARP was extended until October 3, 2010, thus permitting Treasury to maintain a war chest of potential rescue funding at the same time that banks that have shown questionable ability to return to profitability (and in some cases are posting multi-billion-dollar losses) are exiting TARP programs.
• To the extent that large institutions’ risky behavior resulted from the desire to justify ever-greater bonuses — and indeed, the race appears to be on for TARP recipients to exit the program in order to avoid its pay restrictions — the current bonus season demonstrates that although there have been some improvements in the form that bonus compensation takes for some executives, there has been little fundamental change in the excessive compensation culture on Wall Street.
• To the extent that the crisis was fueled by a “bubble” in the housing market, the Federal Government’s concerted efforts to support home prices — as discussed more fully in Section 3 of this report — risk re-inflating that bubble in light of the Government’s effective takeover of the housing market through purchases and guarantees, either direct or implicit, of nearly all of the residential mortgage market.

The watchdog does not seem to grasp that the whole point is to re-inflate the housing bubble. The administration appears to believe that the housing bubble collapsed as a result of poor regulation. Given that neo-classical economics does not account for debt, there can be no other explanation within the framework of received wisdom. And the idea that the framework may be fundamentally broken does not seem to cross anyone’s mind.

In Washington, the partying is full time. No opportunity is missed to live it up at the taxpayer’s expense.

It reads like a dream order for some wild frat party: Maker’s Mark whiskey, Courvoisier cognac, Johnny Walker Red scotch, Grey Goose vodka, E&J brandy, Bailey’s Irish Crème, Bacardi Light rum, Jim Beam whiskey, Beefeater gin, Dewars scotch, Bombay Sapphire gin, Jack Daniels whiskey … and Corona beer.

But that single receipt makes up just part of the more than $101,000 taxpayers paid for “in-flight services” – including food and liquor, for House Speaker Nancy Pelosi’s trips on Air Force jets over the last two years. That’s almost $1,000 per week.

The money is trivial in the overall scheme of things, I suppose. But the attitude is “let them eat cake.” The same remedy should be applied. These arrogant oligarchs need to be brought back down to earth.

Edit: According to  this blogger, we serfs are paying for Nancy’s relatives as well:

Worse still, she also appears to have requisitioned entire flights for the personal use of her children and grandchildren. That is, unaccompanied by any member of Congress, her kids, in-laws and grandchildren are utilizing entire military passenger jets for their routine travel needs.

It’s good to be royalty, I guess.

No, not about Geithner and Bernanke.  From the NYT:

As of Jan. 1, commercial and recreational fishing for most species of shallow-water grouper, as well as black sea bass, red porgy and red snapper, is closed in North Carolina, South Carolina, eastern Florida and Georgia for four to six months, after which strict catch limits will be imposed. According to the government, these species are in danger of disappearing entirely.

Emphasis mine.

Political theater today features Treasury Secretary Geithner testifying before Congress about his role in the AIG/GS bailout. Apparently he had no role in the decision to pay off Goldman Sachs in full. Neither, according to their public statements, did either of Mr Bernanke or Mr Paulson. Presumably all will then take a walk on what appears to have been a blatant robbery of the U.S. taxpayer to avoid any losses for Goldman Sachs. This is just more evidence of the depth of the rot in government.

Of course, as John Hussman continues to point out, the whole $12.5 trillion plus of guarantees and subsidies has been aimed at avoiding losses for creditors of the banks – the bondholders, principally.

Make no mistake – we are selling off our future and the future of our children to prevent the bondholders of U.S. financial corporations from taking losses. We are using public funds to protect the bondholders of some of the most mismanaged companies in the history of capitalism, instead of allowing them to take losses that should have been their own. All our policy makers have done to date has been to squander public funds to protect the full interests of corporate bondholders. Even Bear Stearns’ bondholders can expect to get 100% of their money back, thanks to the generosity of Bernanke, Geithner and other bureaucrats eager to hand out the money of ordinary Americans.

This provides evidence to those financing the banks that their loans continue to be guaranteed  by the taxpayer, so they then continue lending to the banks at low rates, and permit them to use huge leverage, carrying little capital to support the loans. The net result is that the banks make huge profits, both because of the low rates and extreme leverage, above and beyond the cost advantages already yielded by deposit insurance and so forth, none of which would be possible without the taxpayer’s guarantee. The lion’s share of these profits then flows into the pockets of their employees, making sure that there is as little capital as possible left in the company to be lost in the next collapse.

How the bankers continue to pull the wool over people’s eyes is a triumph of propaganda and fear-mongering – basically threatening to bankrupt the country if they don’t get what they want, while funneling a steady stream of money into the pockets of Congress. Shameful.

Tomorrow’s operetta will be the re-confirmation of Bernanke who, after promising at his confirmation hearings to be “independent of all political influences,” has been shamelessly lobbying for votes, per Bloomberg:

Federal Reserve Chairman Ben S. Bernanke had conversations with 18 of the 23 legislators on the Senate Banking Committee prior to their 16-7 vote this month to recommend that the full Senate confirm him to a second term.

The Fed chief had contact with 24 senators between August 4 and Nov. 30, almost all at congressional office buildings, after his Aug. 25 nomination to another four-year term as chairman by President Barack Obama. The meetings and phone calls were listed in a daybook provided by the Fed yesterday in response to Freedom of Information Act requests by Bloomberg News.

What did he promise these people in exchange for their support?

Looks like Governor Schwarzenegger has decided to go out of office trying to do the right thing. Good for him. His budget plan includes proposals to privatize prisons, curtail teachers’ seniority protections and reduce the number of in-home care workers, all of which would be major blows to powerful labor interests. They’re girding for a fight.

“It’s a continuing jihad against organized labor,” said Steve Maviglio, a Sacramento-based Democratic strategist. “The governor thinks public employee unions are Enemy No. 1.”

He’s right. They are. Other than the Fed, of course. Unfettered union power and self-interested politicians have bankrupted California. These are tiny steps. But they would be a start.