If It Smells Like a Rat, Give It Cheese" In the case of the U.S. subprime collapse, a similar dynamic was at work. While many investors lost their shirts, the banks making the bad loans actually collected their fees and dividends before collapsing with many of the rest of us in the recession. The result was hundreds of billions of dollars in taxpayer bailout funds for the banks at the expense of ordinary citizens. To me, Goldman Sachs smells like a rat, so I will give it bread, wine and cheese. Of course, the Goldman Sachs "rat" isn't a unique organism. This pattern is at play in all the financial meltdowns of recent years: The housing bubble of 2000 – 2005 was caused by Fannie Mae and Freddie Mac, whose leaders and political and business supporters include Republicans like Dick Cheney and Nancy Pelosi as well as Democrats like Chuck Schumer and Barney Frank. In 2007, Bank of America’s investment in the company at the heart of the housing bubble nearly led to a $45 billion bailout of the bank. In 2008, JP Morgan Chase acquired investment banking firm Bear Stearns on a "friendly" basis, even as Bear Stearns was teetering on the brink of bankruptcy. In 2009, Citigroup sold a series of subprime mortgages and toxic CDOs (collateralized debt obligations) to investors. Citigroup’s CEO was in discussions to get a taxpayer bailout on the very day that Wall Street Journal broke the story. Citigroup’s Chairman, Vikram Pandit, stepped down after the newspaper story was published. In 2010, JPMorgan Chase lost $2 billion in trading due to a London trader’s decision to “shoot the lights out.” The trader, Bruno Iksil, made trades with no conceivable purpose but to make huge profits for himself and for JPMorgan Chase. The trader had told colleagues he was “shorting” the British pound — a bet that the pound will fall in value — which was exactly what he did: He made hundreds of millions of dollars by shorting the British pound. That same year, Goldman Sachs was sued by shareholders for making $1 billion in profits on the sale of $12 billion in mortgage-backed securities when it knew the value of these securities was plummeting. The bank’s CEO at the time, Lloyd Blankfein, received $53 million in compensation. When I hear Republicans complain that President Obama is too liberal or wants to take away Wall Street’s profits, I have to laugh. No one wants to return to the wildcat rampaging speculation that defined the Wild West financial system that dominated the 19th century. But a more honest evaluation of the economy would acknowledge that the political system as it stands in America today rewards and incentivizes the sort of speculative gambling that led to the devastating economic crash of 2008. The way to deal with that is not to blame the government but to break up the big Wall Street banks and move to a reformed financial system that allows for less reckless gambling in the first place. If we allow our elected representatives and regulatory agencies to be fully bought by the financial sector, we can expect more of the same — more speculative gambling, more scandals and more frauds, more crashes and more bailouts. When you look at our modern financial system, the words inscribed on the Statue of Liberty’s pedestal are the perfect summary of our age: “Give me your tired, your poor, your huddled masses yearning to breathe free.” We have to break up the big Wall Street banks, break up the big corporations and start dealing with the basic questions of whether banks should be too big to fail, too big to manage and too big for people to control. The Republicans want to turn things around. But until there’s genuine reform — or there’s a collapse — you can never have faith in the political system to make things right. The big banks continue to take their money in the private market, only, instead of lending it out, they are using the trillions of dollars in reserves they have been using to buy more and more corporate stocks to buy government bonds, thereby driving the cost of borrowing back up to 7% after the 10 year rate had dropped to a 5 year low. That is, they're taking their money, using it to buy government debt, which has now gone up for the last 9 months. Of course, the problem is that those $700 billion will never be repaid in that scenario. All those taxpayer funds will be spent before anything can be paid back. And if there is no recovery, the economy will contract severely, as those bailouts will never be repaid. But in order to keep Wall Street bankers from losing their jobs, the US government will never admit that a collapse is ahead. Instead, the Federal Reserve will just keep interest rates at 0% until the government defaults. But this means that this game will continue to drag on as the Fed lends out money to banks, which then buy Treasury bills (the main buyer being the largest buyer of Treasuries, PIMCO. The other large buyers are Goldman Sachs, UBS, Morgan Stanley, the Carlyle Group, etc... This is also how the housing and stock market bubbles happened. The banks were bought up by people that invested in housing and equities with money that came from the Federal Reserve system. The banks would then start lending out those mortgages and equities. When the music stopped, the investors had lost their money. The problem is that a default would mean the investors don't get their money back. The big banks still hold an incredible amount of money that they will never return. They can't say they lend out all their money, so if someone asks how come they don't loan the money out... Wednesday, March 1, 2017 The House is not expected to vote on the Senate-passed tax cut bill, but it’s still possible the House could have a vote on the separate bill that will keep the U.S. government open. House Majority Leader Kevin McCarthy said he is confident that the House will vote on a bill keeping the government funded beyond Friday and has not given up hope on the Senate-passed tax bill. I like how CNN says the tax cuts have to happen this year. They never said that about Obamacare. The Senate is expected to vote this week on a version of the tax bill that is being touted by Republicans as an important first step towards cutting taxes for millions of Americans. "We have a tax code that has to be reformed," Senate Majority Leader Mitch McConnell said at a press conference Wednesday. "We're gonna do it. I have every expectation that it will pass." CNN's Jake Tapper: