The debt ceiling gets raised, and American solvency will be further weakened, as a blame game is played out to the music of inane gibberish over how the debacle affects each party's prospects in the next election.
What will never be written about in the mainstream media is the elephant in the room. The script is carefully designed to keep attention off the real money, the ongoing bail-outs to the bank and financial services industry.
Former Special Inspector General for TARP Programs Neil Barofsky, whom journalist Glenn Greenwald once called "easily...one of the most impressive and courageous political officials in Washington," in congressional hearings in 2010 unveiled a breathtaking possible projected cost to the taxpayers of $23 trillion for the bank and financial services bail-outs, all told, should "worst-case scenarios...come to pass in a variety of federal programs."
Barofsky is a former federal prosecutor and now a professor of law at NYU who famously butted heads with Secretary of the Treasury Timothy Geithner, and the rest of the financial political establishment. Needless to say he was forced out of his job.
"TARP is just the best known program in an array of more than 30 overseen by Treasury Department and Federal Reserve that have paid out or put aside money to bail out financial firms and inject money into the markets," says Mother Jones Magazine, which goes on to list of bewildering array of loans and loan guarantees, most of which will never, and can never, be paid back.
Just as important as the Kabuki theater is the carefully nurtured illusion that the bank bail-outs got paid back. These usually refer only to TARP, and even that didn't get paid back.
Even the low figures for the total cost of the bail-outs, $12 trillion to $14 trillion, are three times the size of an entire US budget. The money gets paid out month after month, well-hidden in the most arcane, inaccessible reaches of the US budget.
It is not easy to find, and it is not meant to be.
Most people associate a figure of $700 billion to the bail-outs, but that is only TARP. Bloomberg News notes: "it turns out that that $700 billion is just a small part of a much larger pool of money that has gone into propping up our nation's financial system. And most of that taxpayer money hasn't had much public scrutiny at all."
How did the US taxpayer get on the hook for such unimaginable amounts, which, in current dollars, is more than all the wars the US has ever fought, the Moon landings, and the New Deal, combined? It's not that hard conceptually. Think of going to Vegas with your grandmother's money and losing it all. Now you are "too big to fail." But, so enormous is your greed, you don't just want back what you rolled into town with in your money belt. You want what you were up for awhile at the roulette table. That could be anything.
These sums mean the US taxpayer will be in hock for generations, and that is the entire point. Since now we owe the bankers' debts, all other programs, from military to welfare, are squeezed against this, and it never disappears. We can pay them today, or we can pay them tomorrow. But we are going to keep paying them, and raising the debt ceiling to do it. If we don't they crash the economy, to show they are "too big to fail."
Worse, if that can be imagined, the bail-outs only made the problem worse.
Barofsky wrote in Bloomberg News:
"The top banks are 23 percent larger than they were before the crisis. They now hold more than $8.5 trillion in assets, the equivalent of 56 percent of gross domestic product, up from 43 percent just five years ago. The risk in our banking system is remarkably concentrated in these banks, which now control 52 percent of all industry assets, up from 17 percent four decades ago. There is broad recognition that Dodd-Frank hasn't solved the problem it was meant to address -- the power and influence of banks deemed too big to fail."
Barofsky told Gawker.com:
"The incentives are all still in place for the TBTF banks to accumulate dangerous amounts of risk in the quest for short-term profits with the assurance that if their bets do not pay off, they (and most importantly from the perspective of market discipline) and their counterparties/creditors) [sic] will be bailed out by the gov't. Combine that with a lack of accountability for bad/fraudulent behavior, and you have a toxic cocktail that will bring about another crisis. Regulatory reform did nothing to change those incentives."
Bloomberg News' Bob Ivrey in fact reports that, as of as late as May of this year, investors were back in Vegas and happily doubling down on the big money tables, and betting on more bail-outs, and the "too big to fail" strategy.
In other words, as Barofsky told an online audience at Gawker.com in a free-wheeling exchange with participants: "We're pretty f*cked."
There is another solution, tried to fortuitous effect in Iceland. The government took ever the banks, minimized the pain, and started arresting the bankers who caused the problem, instead of bailing them out. Recent reports show Iceland outperforming the rest of the EU and its economy buzzing along nicely.
Barofsky wrote in Bloomberg: "The American people should be revolted by a financial system that rewards failure and protects those who drove it to the point of collapse and will undoubtedly do so again."
So cynical is the "budget crisis," manufactured by both parties, that World War II veterans who stormed Normandy have been made into pawns at war memorials.
The choice for America is clear. Either wake up, and knock the politicians of both parties' heads together next year at the ballot box, or consign ourselves to Barosfky's F-bomb analysis.
Neil Barofsky is author of the book "Bailout: How Washington Abandoned Main Street While Rescuing Wall Street."
Cenk Uygur: What We can learn from Iceland
Former Inspector General for TARP Neil Barofsky
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Former Inspector General for TARP Neil Barofsky by Government
Originally published at digitaljournal.com