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Intro: "Oh, wow - another bank bailout, this time in Spain. Who could have predicted that? ... unemployment soars, banks get into trouble, governments rush to the rescue - but somehow it's only the banks that get rescued, not the unemployed."

Portrait, New York Times columnist Paul Krugman, 06/15/09. (photo: Fred R. Conrad/NYT)
Portrait, New York Times columnist Paul Krugman, 06/15/09. (photo: Fred R. Conrad/NYT)

Another Bank Bailout

By Paul Krugman, The New York Times

11 June 12


h, wow - another bank bailout, this time in Spain. Who could have predicted that?

The answer, of course, is everybody. In fact, the whole story is starting to feel like a comedy routine: yet again the economy slides, unemployment soars, banks get into trouble, governments rush to the rescue - but somehow it's only the banks that get rescued, not the unemployed.

Just to be clear, Spanish banks did indeed need a bailout. Spain was clearly on the edge of a "doom loop" - a well-understood process in which concern about banks' solvency forces the banks to sell assets, which drives down the prices of those assets, which makes people even more worried about solvency. Governments can stop such doom loops with an infusion of cash; in this case, however, the Spanish government's own solvency is in question, so the cash had to come from a broader European fund.

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+27 # jlohman 2012-06-11 09:21
Nationalization , not bailouts!!!
-24 # Martintfre 2012-06-11 10:05
Quoting jlohman:
Nationalization, not bailouts!!!

And the difference is? ..

Trivial at best.
+24 # globalfamily 2012-06-11 10:17
Nationalization vs. austerity for the poor? At least with nationalization of banks, as Iceland did, no one profits off any repayment, it's an investment in keeping communities stable and the local economies functioning sustainably. Why should any one individual have more than say, $10 million to their name if they can't keep those funds circulating many times over in the economy? Who are these loans be paid to and are they going to add more profit to their mountains of cash?
+22 # globalfamily 2012-06-11 10:21
To continue to hoard such mountains of cash with so many suffering and dying is simply sociopathic and criminal. Such sickness doesn't belong in the 21st century where we have so much ability now to help one another out
+3 # Jerry 2012-06-11 13:24
Some of those loans are from retirement funds, and government cash flow investments.
+31 # Valleyboy 2012-06-11 09:33
Austerity is an attack on the poor by the elite.

It is being used as an excuse to cut the social safety net, reduce wages, deregulate and even privatise.
Straight out of the Shock Doctrine.

The question is, will Europe's people wake up to this or will they scapegoat minorities and people who are different to, and weaker than, them?
-34 # Martintfre 2012-06-11 10:06
Austerity is recognizing that ya have to live whiten ones means not whiten some ones dreams.
+27 # Bruce Gruber 2012-06-11 10:25
Austerity should start with financial institutions selling off real estate and speculative investments, lowering executive pay, banning bonus parachutes, abandoning lobbying expenses and paying for their government bailout insurance.
+3 # jimyoung 2012-06-12 08:45
They pay for their government bailout insurance. The problem is they pay it to the secret source SuperPacs, lobbyists, and politicians. It's much cheaper than paying what an honest actuary would calculate, and they pay much of it with our money, anyway.
+6 # Jerry 2012-06-11 13:17
What does that mean to you, other than a nice rhyme? If debt is allowed in existing within ones means, how much? What does it mean for our country, which has our wealth which it can appropriate, the currency of exchange for the world that it can print, and an infinite life in which to balance its cash flow? Since businesses have found it wise to borrow money to invest in resources, research and development, production facilities and operations in order to profit, living outside their means, isn’t it just as wise for a country to do so in order to create wealth for its citizens and allow them and their businesses to thrive in this world? Doing so increases their productivity, creating greater wealth for everyone to enjoy. Don’t you consider maintaining/exp anding/updating the infrastructure, improving the skills and physical and mental capabilities of our work force, a safe and healthy environment with adequate controls to maintain such – including adequate controls to prevent harm from human predators, a good idea? And since we are a democracy, don’t the citizens need adequate knowledge, time, accurate information, energy, and motivation to evaluate our government’s decisions, including its control of business? If so, then the citizens must support the government generating the above.
+4 # John Locke 2012-06-11 19:59
Martintfre The thumbs down are well deserved, You sound like an idiot. You have no idea how a government works! and what must be done during a depression. Try reading and talk less about subjects you know nothinbg about.
+16 # Martintfre 2012-06-11 10:04
//governments rush to the rescue - but somehow it's only the banks that get rescued, not the unemployed.//

Yes - it is called fascism.

Lots of uninformed people will call it capitalism - but that is false. In capitalism they meet Larry the liquidator - not Bail out Billy with the tax payers check book.
-28 # Robt Eagle 2012-06-11 10:50
So, the freebies from the governments around the world lead to people taking advantage of the freebies and the government increasing the size of those agencies to give away more freebies to more people until they want more for nothing, and then finally it all collapses under its own weight. What a concept, STOP giving away freebies. Those with nothing won't have more nothing and they will have to contribute to the good of all or perish. Guess what, they will survive because they work and struggle and then survive. Now prospering is for those who are smarter, faster, more able...hmm, seems like that is the way it is supposed to be. Although you could have the insane concepts of "sharing" the wealth of the rich to the poor through taxation, but that would be an Obama idea, and we all know now that his policies are complete failures, so why do that?
+13 # carolsj 2012-06-11 11:57
Sharing the wealth of the rich to the poor is not a new idea. It goes back to Jesus. He told the rich man who wanted to get to heaven to sell everything and give it to the poor. "Christian" conservatives seem to have forgotten that. Prospering in our system today is not necessarily for the smarter and more able, but for the cheater, liar and manipulator. And many smart, able people are not prospering, not for any fault of their own, but because the cheaters crashed the economy.
+7 # John Locke 2012-06-11 20:03
carolsj: I have no argument with anything you said. I would add though that there are many smart hard working people who have beed destroyed financially through this needless depression and the confiscation of their wealth. and a Government who has discarded them in favor of their benefactors on Wall Street.
-5 # Robt Eagle 2012-06-12 11:20
carol, that is called charity, not taken through taxation!!!
+3 # m... 2012-06-11 12:47
Riddle me this,
How come the Wealthiest per capita and among the Largest Middle Class per capita Countries in the Democratic World are Northern European so-called 'Welfare State'... 'High Tax'... 'Universal Healthcare'... 'Wealth ReDistribution' ... 'Happiest Population' Countries..?
American Conservatives who spout off about how 'Wealth ReDistribution is Socialism' are doing just that, spouting off into the open air with hot air.
ALL Taxation is a form of Wealth ReDistribution EVERYWHERE in the world.
In America, how it went helped us prosper greatly as a whole from the 1940's until the 1990's when, thanks to the Reagan Conservatives, it began to turn around into Wealth ReDistribution favoring the Wealthy Corporate Class ever since.
We are where we are now because of that turnaround in 'Wealth ReDistribution' from most Americans to fewer and fewer Americans through the Conservative Flim Flam known as 'Smaller Government.'
For instance, BuSh ReDistributed much of America's Wealth into Iraq and Afghanistan through Haliburton and KBR, etc. while preaching Smaller Government. Complete POLICY FAILURES just to mention two.
Maybe I could agree with the whole Conservative 'Socialism' hue and cry if they would stop forgetting to put the 'Corporate' adjective in front of it.., i.e. Corporate Socialism (freebies) and others like, Corporate Welfare (freebies) and Corporate Republicans and Corporate Conservatives.
You know.. like that.
+1 # jimyoung 2012-06-12 08:54
Quoting Robt Eagle:
...and we all know now that his policies are complete failures, so why do that?

You assume far too much with that statement. 450 top economists and Bush's own first Treasury Secretary warned us of hundreds of billions of dollars in problems from reckless tax cuts back in 2003. They were wrong, it has been 10s of trillions.
A little run down on the conservative CBO estimates:
GDP - $2.6 trillion lower than it could have been this year
Unemployment - Peaked at 10.1% in 2009 (lowest percentage of working age adults in decades going back to when far fewer percentages of women were working).
Government Bailouts - $23 trillion (to mostly the people that got us into the mess, and still don't see anything wrong with the changes they lobbied for).
Lost Household Wealth - $7 trillion lost (so far) in the real estate market, $11 trillion decline in the Stock Market (yet the top 1% tripled their take), $3.4 trillion in retirement accounts (mine declined 24% from the type "Blue Chip" 401(k) accounts the Peter G. Peterson Foundation (the big guns behind the 2005 surprise push to privatize Social Secuity) recommended. When are they going to get our "safe" government pensions, too? Those losses nearly equal our GDP
-2 # BVA 2012-06-12 19:01
I urge readers not to click the "thumbs down" button on Mr. Eagle's posts. He adds variety, and a realistic view of the conservative mind set. We need to know more about that mind set so that we can finally understand why conservatives seem so lacking in empathy.

Also the rage that Mr. Eagle's RSN posts vent may have a therapeutic value in his life. Bill Clinton famously said "I feel your pain", and sometimes one can't help but feel Mr. Eagle's subliminal pain. I do hope I am completely wrong in my intuition and that Mr. Eagle's personal life is much more positive than his RSN posts. If his posts prevent either a suicide or a mass murder, then they are worthwhile.

It is easy to get mad about the current economy in general, but if you are still unemployed because of the Republican leadership's obstruction, sophistry, and mendacity, then you have every right to strike-out blindly at a seemingly uncaring world. Even though it is slightly counter-product ive to indiscriminatel y defame innocent and guilty alike, it may also be deservedly therapeutic. We should still post short corrections to all posts we find inaccurate, but we should not discourage therapy, even if it takes the form of mean-spirited rants. After all none of us is an infallible expert, or immune to temporary feelings of reasonable rage at the powers that be.
+14 # mjc 2012-06-11 10:51
Krugman isn't the only economist or the only Nobel prize winner as well who preach about the effect of austerity. Our government and many in Europe and in the Far East as well want to cut back, on hiring, or projects, to save the debt or to save the budget but as Valleyboy indicated it is easier to attack those who don't have wealth...or jobs. In Germany in the 1930s it was easy to blame a group of people...Jews.. .for the so-called concentration of wealth in the hands of the few: you get rid of the boggiemen and gear up for war. Eventually, that solves the problem. We are already involved in two wars, even those winding down, and thinking about a third. Again, military empire is not a solution. Government SPENDING on health care facilities, dams, roads, technical facilities, harbors...facil ities where FEDERAL spending can help create jobs is the answer. But many Republicans tell us that balancing the budget is just like balancing the family budget or...we don't to have debt to hand down to our children. We've been handing down debt to the next generation for a long time in the US and it has done nothing except facilitate economic growth.
+10 # m... 2012-06-11 10:54
Could it be that the Banks are always bailed out and not the 'Unemployed' because Citizens in Europe and America have been reduced to mere 'Consumer' status and no longer 'own' their respective countries, nor are they 'represented' by 'elected' representatives anymore because the Wealthy Global Corporate Class have been busy beavers the last 30 years quietly but steadily co-opting America and the Eurozone and transforming the functions of Governments into wealth and power transfer organizations redesigned to give power, control and dominion over us to the want, need and greed of the Global Corporate top dogs on the planet..?
Yes..? No..? Maybe..?
Has the Western World become a Brave New Orwellian Place while most of us went about our daily lives for decades assuming that 'normal' would simply remain normal because... er... well... that's the way its supposed to be..? And 'LEADERS' were in charge.., Right..?
I mean, isn't America supposed to always just be wonderful America because We are 'special' in the well known history of the world and mankind..?
Has Democracy been lost in the wake of relentless successful Corporate Lobby..?
Perhaps we now live in a Brave New Orwellian World where the East.., a.k.a. China, is a Capitalist Dictatorship and the West.., a.k.a. Europe and America, are becoming Post Coup Corporate Cabal Capitalist Experiments in Illusion-Delusi on-Low-Budget-C orporate-Coopte d-Democracies.. ?
+11 # jwb110 2012-06-11 10:57
I cannot figure out the non-logic of the "austerity lunatic fringe". It clearly has not worked. I would also like to know what measure the Euro Central bank and the US Fed use to measure inflation. It certainly isn't measured against the cost of everything I buy at the grocery store or hardware store or department store. Inflation is very much on the rise when seen thru the len of the deflation of wages.
One thing occurs to me, perhaps this is a manipulation of the 1% to create a war. Germany had these kind of economic conditions prior to WWII. Could this be a war between the new fascist-monetar y state and the last few reasonable real representative countries still on the planet?
Whatever the case it makes no sense.
+5 # pres 2012-06-11 11:16
If your objective is to privatize (i.e. I own) the world then the cheapest way is to buy any asset is out of bankruptcy.

Like "Planet Earth" - a wholly owned subsidiary of Mobil-Exxon!
(whose controlling shares my holding companies own)
+5 # CoyoteMan50 2012-06-11 12:26
I think if you let your mind float free you can see that Wall St. and the banksters are taking over the world.
Just like the man said. This country will fall from within.
The Last Great Empire sinks into the sea just like the Romans.
+3 # JSRaleigh 2012-06-11 12:42
Read the last paragraph of Krugman's article at the NYTimes. Now READ IT AGAIN!
+3 # Hey There 2012-06-11 13:27
Austerity is always put on the backs of the workers, the disabled,the poor, the unemployed. It is touted as the solution to financial solvency for governments.
Yet when banks fail,Wall St fails the US government couldn't move fast enough to bail them out. Presidents couldn't wait to reduce taxes for the rich which have been kept in place.
Walker's attack on the unions & public-employee benefits is NEWS now.
Less well known is that some members of Congress are "working hard" to "improve,sustai n & transform" the USPS by getting rid of 100,000 employees,cutti ng Compensation for injured workers,ending it for those 65 and older,weakening the unions,
and cutting service to the public by closing smaller post offices.
HR2309 and S1789 state that this is the ONLY way to save the Post Office from financial failure when the USPS was set up for failure by the PAEA Congress passed in 2006 mandating that the USPS fund 75 years of retiree health benefits in 10. At 5.5 Billion a year the USPS would no longer be solvent.
3 videos condense what's wrong with these bills.

And the voice of those who will be a affected by this is LIMITED to representatives in their district and their unions both of which which may have a different agenda than theirs.
+2 # cordleycoit 2012-06-11 13:32
What about a 'tanks for banks' program so the bankers can raise more money by robbing the people for a third and fourth time? It would allow the banks to hold onto our money when we get it together to stop putting up with the banksters excuses for robbing us eg "It's for your own good."
+3 # dick 2012-06-11 15:49
Propping up criminal private banksters & Goldman Sachs barely a trickle down cannot be the only possibilities. Public banks? Govt vouchers for groceries & gas? In the US the banksters are the crooked middle men, rigging the game. Why not cut them out? Go around hem? We HAVE ABSOLUTELY NO real need for Goldman Sachs, other than supplying puppy trained Cabinet officers. Probably also true of some "banks" in Spain.
+4 # RMDC 2012-06-12 04:45
Why does Krugman say this -- "Just to be clear, Spanish banks did indeed need a bailout."

Banks are just ordinary businesses. If they get over their heads in debt and bad investments, they should file for bankruptcy. A court will distribute their assets and they will cease to exist. New banks and more responsible banks will replace them in a few seconds. In this way, a society purges itself of the corrupt and poorly managed banks. If governments bail them out, they never change and we always have bad banks.

But this is not even the real problem. Krugman seems unable to say what is really going on. In 2011 the World Economic Forum ruled that the people of the world were going to have to come up with $100 trillion to "re-capitalize" banks. So now every government in the developed world is transferring wealth from people to banks. The people of Spain will pay off the money borrowed, and the banks will get the money. This is just wealth transfers from the poor to the very rich. It is robbery.

We should stop using the term "bailout." It is not descriptive. It is a distraction. Bailout sounds like a good thing, helping someone in need. What's happening is the re-distribution of wealth from the poor to the very rich. All reports show this. The wealthiest of investors have made trillions of dollars in profits since 2008. People are much poorer. This is the looting of the developed world.
+2 # globalfamily 2012-06-12 09:23
Yes, why "bailouts" for the rich but not for the poor?
+1 # fredboy 2012-06-12 15:34
We all need to start banks--we can't lose!

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