If a bank is too big to fail...

Doesn't that mean it is too big to be allowed to exist? That is what Matt Yglesias argues in a very smart (and short!) post on banking regulation. I agree with the whole thing.

Meanwhile, according to this article, the Treasury's bailout of Citi (which puts taxpayers on the hook for $300 Billion in potential losses, not just the $20 Billion often mentioned) was announced "five days after Paulson told the House Financial Services Committee that Treasury and the Fed’s actions had resulted in "a significantly more stable banking system where the failure of a systemically relevant institution is no longer a pressing concern rattling the markets.”"

So... five days ago Paulson either: (a) didn't know Citi was on the brink of failing, (b) Paulson lied to congress, or (c) Citi was never on the brink of failing but is only too happy to take the taxpayers' money and Paulson is only too happy to give it to them. Take your pick.

And also meanwhile: as I mentioned two months ago here, Bush and Paulson fully intend to spend the entire $700 Billion in TARP funds prior to scurrying out of office in January. Paulson has already spent half the money. He will now go back to congress to "request" authority to give away the second half. And, as I noted two months ago here, congress is virtually powerless to refuse to give it to him (this "tranching" of the bailout money was a much-touted "safeguard" to ensure congressional "oversight", which, as I noted here has up til now been non-existent and will not be forthcoming). And oh by the way, Paulson said last week that he did not intend to request the rest of the money, but would allow that authority to the incoming administration. Oh well.

Remember a few months ago when the Bushies were crying that the government didn't have enough money to spend $50 Billion over 5 years to fund health care for poor kids? I guess the application of fiscal responsibility depends on whose ox is being gored. Sick kids can't afford a doctor? Fuck 'em. Investment bankers forced to sell their vacation houses and curtail spending on their mistresses? Sheeeeeit! Let's see if we can't afford to funnel a few hundred billion their way.