Deep Throat's advice to Bob Woodward to follow the money would also apply to the machinations of the government/financial sector last Fall.

Afterall, the 2nd Gilded Age has seen the richest 1 percent holding wealth valued at $16.8 trillion - $2 trillion more than 90 percent of the world's combined wealth. That's a helluvalot of money to 'follow.'

"But what would have prevented the Fed from subsequently flooding the system with liquidity and the government from boosting the economy and employment with large-scale jobs programs? "

Um, President John McCain? We are playing "what if" here, right?

"We do know how to create demand. It is really very simple - you just have to spend money; most people are willing to work for it. Since Keynes we have known how to create jobs and reduce unemployment in a downturn, even if politicians may lack the courage to act."

You ought to know by now, never, never overestimate the ability of politicians to accomplish anything "simple". And never, never to underestimate their cowardice.

I'm sorry, but this is purely revisionist history. It amounts to asserting that since we didn't get into a 2nd great depression, it follows that nothing really needed to be done to head it off, and further, that anyone who asserts that something did need to be done to head off another depression is simply bullsh*tting us.

"The reality is that we got into this mess because of an overwhelming excess of greed and stupidity on the part of the Wall Street bankers and the people deciding economic policy. We continue to face excessive rates of unemployment because of a continuing reluctance to pursue policies that can restore the economy to health."

This is absolutely true, but it had Nothing to do with whether we had to do the bailout, or whether it was successful.
I find your prescriptions for fixing the joblessness problem compelling, these steps seem to me to be exactly the right steps to take to boost us back to full employment.

"However, the public will be hesitant to demand stronger action if they are convinced that they should be thankful that we have avoided a second Great Depression. So, it is important that the people know that they have nothing to be thankful for: our leaders wrecked the economy, end of story. It's time that they take the measures necessary to set things right, even if it is a bit unsettling to the Wall Street boys and other powerful interests."

This however, has nothing to do with taking those necessary steps. On the contrary, I find that the middling results of an insufficiently large original stimulus argues that it was nonetheless effective, and that a second stimulus is necessary. Hey, it worked last time! And No. "Our" leaders did not wreck the economy, end of story"! REPUBLICAN leaders and their chosen Goldman Sachs henchmen imbedded in our financial regulatory apparatus wrecked the economy. This all has nothing to do with whether we should be grateful to the politicians for "saving" us form another depression.

You don't seem to have addressed these few firms assuring the obligations of every other company and the cascading havoc each company's uninsured and unmet obligations would have created, including AIG's role.

Is that a simple issue too?

I hope you're right overall, because you're reciting a teabagger talking point and I'd hate for you to be careless in denying the president credit for keeping the planetary economy from cataclysmic failure as teabaggers and Republicans do.

As long as an unsophisticated population continues to place its trust in conventional, academic financial theory...

I don't think it's as much that we put our trust in this hocus-pocus as much as these fancy-pants financial theorists are put in our throats - and shoved downward. Because the FED, and its appointive chairmanship, is a generation away from voter accountability, we're mostly helpless bystanders as the next well-connected egghead with the "right" credentials, who's attended the right parties and kissed the right hams, steps up to help take us to economic hell. The unsophisticated out here, who wouldn't know a Gucci from a Goya, have minimal input in looting committed by our betters.

I think that what we avoided was pushing most financial firms into declaring bankruptcy. Once they did that, due to a cascade of failures to meet obligations and/or to settle payments with each other, the electronic payment system would cease to exist. SWIFT would cease to exist. FedWire would still be there, but there would be no computers at the FIs to receive the messages.

At that point, there could be no flooding of a non-existent payment system with liquidity. And client of the FIs could not withdraw deposits, get loans, etc, until the bankruptcy courts had resolved the mess. This would likely take months at least and millions of lawyer-years of litigation.

Bogeyman?

While we should all be thankful that we are not in a second Great Depression, just as we should be thankful that the world has not been destroyed by nuclear war, the "Great Depression" defense is a tool of fools and liars.

Here is the "Fearmongerer in chief" warning that if we don't support his pork spending stimulus we will fall into the abyss forever.

"This recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse,"

He also threatened that if we don't support Obamacare we will go "bankrupt".

We did as he wanted and we now have 5 million jobs lost, Double digit unemployment, and have sunk deeper into the crisis, and he pocketed our money and won't answer our phone calls.

...a tool of fools and liars. Indeed.

As this is seemingly another formidable TPM Article and similar formidable replies and with room for speculation, I humbly thank you all and humbly and briefly re-package and re-mention some of my previous concerns and continue to suggest the following approach and applications towards proper and forthright solvency endeavors.

As 'In God We Trust' is written on our US Currency and as a I presume a reasonable person would concur that the enactment of the Death Penalty and/or threats thereof is not supported by any proper and forthright Democracy, Law and/or Religion. I therefore suggest that proper and forthright oversight and accountability be applied and then the much needed resolves to the US and World Economic concerns would have a more fair and equal ability to the resolves and solvency concerns and hopefully more fully fullfill the avenue towards the endeavors of a Peace for All.

Thank you.

Re: the "cascading effect" critics (Overreach This, and Merrill for example).

I'm too lazy to re-read Baker, but I think what he is saying is that these guys got us into the mess so they are culpable. Not exactly an endorsement for claiming we should have done otherwise (i.e. bailout). He does say this for example

It is almost certainly true that if we had let the cascade of bank collapses continue in the fall of 2008, taking down not just Lehman, but also Goldman Sachs, Morgan Stanley, Bank of America, Citigroup, along with many smaller banks, that the current downturn would have been more severe

The rest of his piece is in the present tense, meaning that he is prescribing what we should do now.

He does imply that had we not bailed out the banks it would NOT have lead to a Second Great Depression, but I have not heard otherwise from critics of his piece. That things would have gotten worse than they are now he explicitly states. What he is denying is that it would have lead to a "Second Great Depression".

Oh spare me.. had we done nothing, let the bank's collapse, we would actually be in better stead than we are now. People with actually intellectual acumen stated that the government should have gone in, forced total disclosure, and forced the bad banks to go belly up, and performed restructuring, but that's about it. Face it, Credit Suisse, Deutsche Bank, RBS to name a few, were not US owned banks, and AIG and Citibank, not majority US owned any longer. Citi, owned by the Saudis, and AIG, majority owned by Indians all helped create the mortgage crisis, in fact, German owned Deutschebank was the first bank at the trough demanding to be able to sell mortgages to those who were not qualified to acquire them. We bailed out foreign owned banks, and that money went over seas, as it did when we bailed out Goldman Sachs and others like them. The fat bonuses that GS bankers in the UK and Europe are receiving, are paid for by US taxpayers.

If you need to have your lips attached to the HoOTUS's ass, perform the spectacle elsewhere.

The only thing we have to fear is fear itself. Franklin D. Roosevelt.

Dean Baker offers a solution to a problem that NOBODY ELSE has has any solution to offer. Everyone else seems content to let unemployment fester at 10% or so for another couple of years. Along with a few piddling gestures of "concern".

The CBO hasn't bothered to estimate the effectiveness of Dean's proposal. Jared Bernstein, Vice President Biden's chief economic policy advisor says Dean's proposal is "worthy of consideration". But by whom? Is the White House studying Dean's proposal? If so, they're keeping it a deep, deep secret.

Meanwhile, Larry Summers has said it would be better to create jobs from growth (which ain't going to happen) than to simply create jobs. You see, it's a matter of priorities. Growth means bigger profits for corporations and more tax revenues for the Treasury. Employment through work sharing only benefits the poor working schmucks.

Is it my imagination or are people only interested in fixing blame and not in finding solutions? I'm not adverse to fixing blame to the extent that it disqualifies the culprits from being the sole source of policy options. But the next step is more important. Consider and discuss the untainted alternative policy option!

To some general extent, has it and does it continue to appear that the (illegal) corruption and immoral practices and procedures within the policy's, practices and procedures is the primary 'To Big To Fail' Application? (such as Repeal of Glass Stegal, Habeus Corpis, Death, Torture and Cruel and unusual application and punishment Prevention Laws, Representation Obligations, ecetra and the implementation of the 2000 Commodity, Futures Act, Gramm Billings Act, FISA Suppression, Illegal wiretaps, Death and/or coerced threat thereof, Torture, ecetra, ecetra).

Is it not time to well do Something much more meaningful within the seemingly Primary concerns in the correct direction towards 'Oversight and Accountability' and as mandated by our US Constitution, Bill of Rights and Civil Rights? and not continue to apply the seemingly illegal and corrupt practices, policy's and procedures.

This whole mess happened for two reasons...greed and stupidity. Greedy bankers, greedy mortgage brokers, greedy corporations like AIG, greedy politicians, and greedy homeowners, and the stupidity of all of them to think the free ride was just going to go on forever...

There were red flags that were ignored, even when people in the know pointed them out. People that discovered their houses were ATM machines exacerbated the situation. But so many people were getting so rich, they didn't stop to think about what the long term ramifications might be.

To think that we were not on the very brink of a global financial collapse is foolhardy. Whether or not the right things were done to mitigate the damage is for people much smarter than I am to figure out. It is a very bitter pill to swallow that the people who caused this are reaping the benefits of the solutions, but I think those who wish we had just let it happen are seriously underestimating the damage that would have been done, had the government done that.

During the last depression, this was a different country. There were significant numbers of people who lived in rural communities, and were much more self-sufficient than we are today.

Additionally, we did this to the whole world, not just ourselves. We had an obligation to keep the whole world from suffering as a result of our mistakes.

The most frustrating part of it from my perspective is that congress doesn't seem to be in much of a hurry to re-regulate, which makes me crazy. If we have one lesson we should be learning from this, it is that people, especially in the form of corporations, will do whatever they can do to get more money, more money, more money, and need to be regulated. Unfortunately, since we are all people, it requires letting the foxes guard the henhouses, and other foxes guarding the foxes.

As I have mentioned in other comments on other blogs, I fear this is the beginning of the end of this wonderful experiment we call America. The transition into what we will become next is already scary, and I fear it will only get scarier.

President Obama in his Nashua, New Hampshire town hall meeting 2/2/10, approx. 2:10 pm est, on the bailout being something that had to be done, that now:

...nobody's worried about another great depression, like they were just a year ago, the worst of the storm has passed....

Everyone agrees that without TARP there would have been an enormous cascade of failures, defaults, bankruptcies, which would have affected business and government worldwide.

But most posters to this thread, including Baker at its head, think that government could have stepped in and saved the interests of blacks, gays, workers, and white liberals (especially Jewish white liberals) while allowing most everyone else to lose everything, be completely destroyed, and forced to become manual laborers in a newly constituted CCC.

This government is the same one that is constantly vilified by these posters as dysfunctional, corrupt, undemocratic, etc., etc., etc. on multiple other threads. Somehow the catastrophe would magically transform it into an agent of a just God, protected against the forces of evil by armies of guilt-mongering, finger-wagging, anti-war progressives.

Honestly, the lot of you are completely mad.

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