Toxic credit cultures produce toxic assets

I added the following over at www.interfluidity.com as a comment regarding the Treasury proposal to offer non-recourse loans to investors in toxic assets:

Toxic credit cultures produce toxic assets.

At some point, to clean up the mess, President Obama is going to have to make character judgments and stop doing business with the same financial tricksters that got us into the mess (Rubin, Summers, and Geithner for starters). But who is his closest advisor? Rahm Emanual, who got rich quick with a hedge fund in between political gigs.

Franklin Roosevelt, in the Depression, confident in his place in the aristocracy yet having his own principles, was content to fire the managements of bad banks and make any number of other judgment calls required to restore some sense of propriety and ethical integrity to the financial system. Many people loved him for it, although not many Republicans.

Does the current President have the judgment, courage and confidence (all three are required) to clean up the financial system? Not so far. He will need to clean his own house before the American people are going to buy into any Treasury plan.

Half of Americans opposed the [extraordinarily ill-conceived] stimulus bill, according to the surveys I've seen. A majority of Americans oppose giving the banks any more money.

My working hypothesis, borrowed from Strauss and Howe, is that the American social contract is broken, and that the crisis gets worse until Americans feel they've got a fair system again.

Geithner's proposals are laughable. They're like a jobs act for unemployed investment bankers, and yet another opportunity for massive wealth extraction from tax-paying Americans by the plutocrats (aka oligarchs) in New York and their friends.

Toxic credit cultures produce toxic assets. The President needs to see this, and do the right thing. Get some fresh blood in to advise him before these guys try to blind us all with [junk] science again.