If you believe that the financial crisis exposed in 2007 and 2008 was just a bad dream, I can understand why you might now believe the financial fantasy….. that the system is healthier.   I’ve heard enough “expert” economists and politicians and finance / investing gurus and big bank CEOs et al say that paying back the TARP is a sign of our improvement.   Even Citi is saying that.   Do you believe all of them?

• Assurances from the same people that repeatedly denied they were in trouble in the fall of 2007.
• Assurances from the same people that misrepresented financial statements.
• Assurances from the same people that said they didn’t need to raise more capital.
• Assurances from the same people that said they didn’t need to cut their dividend for many quarters until they cut it by about a half and then by a half again and then eventually to 1 penny per share.
• Assurances from the same people that said they had written down all of their bad loans and investments each quarter for about a year.
• Assurances from the same people that said the worst was behind us and then really behind us and then really really behind us.
• Assurances from the same people that said they never needed to borrow from the Fed’s discount window.
• Assurances from the same people that said they never needed to borrow from the Fed’s PDCF.
• Assurances from the same people that said the Fed loans were well-collateralized.
• Assurances from the same people that said that they didn’t need to use a bazooka but used it to nationalize Fannie and Freddie.
• Assurances from the same people that said Credit Default Swaps were helpful to our financial system.
• Assurances from the same people that said the PPIP would clean up the balance sheets.
• Assurances from the same people that claimed they needed TARP legislation to buy toxic assets.
• Assurances from the same people that then used the TARP to force government “investments” into the biggest banks in America.
• Assurances from the same people that said they didn’t need the government’s TARP “investments”.

Of course, there are many more examples but I’ll skip them for now.  Maybe that was all just a bad dream.   Maybe it never happened.   Maybe it is just better if we forget all that bad stuff and pretend that all the lies and deceptions were meant to protect us.   The end apparently justifies the means.

Maybe it’s best to come up with an ever-popular, ever-growing financial fantasy.   The kind that says how great it is that our government created “money” out of thin air to give confidence to the world that we would not let our bad dream turn into a reality.

Let’s have fantasies that the money that really doesn’t exist was lent to financial firms that weren’t really in trouble…that was just an unfortunate bad dream.   The fantasy that bank “profits” were generated over the past 3 quarters sufficient to repay the money that the government lent them.   Oh yeah, don’t let me forget the profit we “earned” on those “investments”.   Let’s fantasize that these “profits” weren’t a result of printing money, giving it to the banks at basically zero percent interest rates and then encouraging them to buy a ton of new Treasury notes of varying maturities whereby the government pays them interest at a nice spread.   Then throw in the right to avoid marking assets to market and avoid increasing the provision for loan losses and then abracadabra you have profitable, healthy banks.

Go ahead…believe the fantasy.   Why remember the bad dream of 2007 and 2008 and early 2009?   Just believe that Fannie and Freddie are actually healthier now than they were prior to nationalization.   Believe that the FHLB system is healthy.   Believe that FHA is healthier.   Believe that the underlying mortgages are healthier now than 2007 or 2008.   Believe that the banks that actually survived are healthier because of all those fantastic profits that didn’t come from incremental loans to healthier businesses at increasing interest margins.   Believe that the bank failures are slowing and won’t get worse.  Believe that the FDIC is not bankrupt because it can borrow from the Treasury who can issue more obligations for money that really doesn’t exist.  Believe all that and anything else included in the financial fantasy because dealing with reality is just not very much fun.