"This is a robbery note. It's saying, guys, you'll have 20% unemployment, and it will go up to these dangerous levels, unless you buy toxic assets -- not for what they're worth, not for what the market price is, but for as much as you can possibly pay.
The key line here is that the taxpayer will pay one way or another. So basically what this note is saying is, look guys, you're going to be hurt either way, so just give us the money and we'll try to make it as easy for you as possible."
Simon Johnson continues: "Upon reading this, my first reaction was that it's a spoof. My second reaction was, Oh My God."
So now let's here from a Deutsche Bank guy, Joe Lavorgna:
"I think the bottom line is simply that someone has to pay for the mess that's been created and there's no escaping that, and ultimately the taxpayer is going to be on the hook, one way or the other."
So Joe Lavorgna is finally coming out and saying something that every other bank and lots of government people have avoided saying. They've been playing this game -- saying there's some magical recipe where the government bails out the banks, the banks do better, and the taxpayers end up making money. Everyone wins. But this note from Deutsche Bank is saying what I keep hearing from economists: that can't happen. Someone is going to lose. And Joe is saying he knows exactly who's going to lose: you, and me, and everybody who pays taxes.
Simon Johnson replies to Joe: "I found the note to be refreshingly honest, but it also kind of took my breath away. And so I asked people on my blog what they thought. I didn't use names. I just put out this key paragraph from Deutsche Bank, discussing that the taxpayer will pay, one way or another. One respondent offered the following interpretation of the note: "That sure is a nice global economy you've got. Be a shame if anything happened to it." So, Joe, do you mind if we call it a ransom note?
Joe Lavorgna's rejoinder: "If I was on my own, I'd say fine. But under the circumstances I wouldn't say ransom note, I would say a reality check. Here's the issue. We're delaying the pain, and you've got to just deal with the problem. What we've done up until this point has just simply not been aggressive enough. Whatever the approach is, let's just get there."
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