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Joseph Stiglitz: We bailed out Citibank and called it a bailout of Mexico

Joseph Stiglitz speaks about the bailouts of Mexico, Argentina and other countries at European Zeitgeist 2011:

Every loan has a lender and a borrower. And the person who’s supposed to be more informed about the criteria of lending should be the guy who manages risk, which is the bank. And these are the guys who consistently did a bad job. Now partly, it’s understandable. They are very politically connected. They were in the White House. They were in every government. And so they know that when they lend badly, their friends in the White House would bail them out. And they were perfectly correct.

I was at the Council of Economic Advisers when the first of these began, in the Mexican bailout. Why were we bailing out American lenders? Why were we using the name “Mexican bailout?” This wasn’t a bailout of Mexico.

Our elected officials have basically set up a political system that legalizes and facilitates bribery. And our failure to deal with that has created the most successful business model of the late 20th and early 21st centuries: maximize your profits by making bigger and badder loans that precipitate a “crisis” when they go belly up (which you fuel with a massive PR campaign), then you squeeze the government to make you whole.

The more unrealistic and dangerous the loans are, the bigger the crisis is, and the higher your profits will be.

In Good Fellas I think they called it a “bust out operation.”

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Joseph Stiglitz: We bailed out Citibank and called it a bailout of Mexico

Joseph Stiglitz speaks about the bailouts of Mexico, Argentina and other countries at European Zeitgeist 2011:

Every loan has a lender and a borrower. And the person who’s supposed to be more informed about the criteria of lending should be the guy who manages risk, which is the bank.  And these are the guys who consistently did a bad job.  Now partly, it’s understandable.  They are very politically connected.  They were in the White House.  They were in every government.  And so they know that when they lend badly, their friends in the White House would bail them out. And they were perfectly correct.

I was at the Council of Economic Advisers when the first of these began, in the Mexican bailout.  Why were we bailing out American lenders?  Why were we using the name “Mexican bailout?”  This wasn’t a bailout of Mexico.

Our elected officials have basically set up a political system that legalizes and facilitates bribery. And our failure to deal with that has created the most successful business model of the late 20th and early 21st centuries:  maximize your profits by making bigger and badder loans that precipitate a “crisis” when they go belly up (which you fuel with a massive PR campaign), then you squeeze the government to make you whole.

The more unrealistic and dangerous the loans are, the bigger the crisis is, and the higher your profits will be.

In Good Fellas I think they called it a “bust out operation.”

h/t BooRadley

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Jane Hamsher

Jane Hamsher

Jane is the founder of Firedoglake.com. Her work has also appeared on the Huffington Post, Alternet and The American Prospect. She’s the author of the best selling book Killer Instinct and has produced such films Natural Born Killers and Permanent Midnight. She lives in Washington DC.
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