Les Jones

Uncollected insurance money isn’t Bezzle. Nothing was embezzled or taken. Just because a regulatory function was done incorrectly or not done at all doesn’t make it the bezzle. Thank Cleetus Cliton and the Republicker Clown Congress for working together to get us done!

Were all American duped into a false sense of security about their money being safe? You betcha.

Is all of our money catastrophically underinsured? You betcha. Is it time for pitchforks and torches? You betcha.

Bring the guns and money. I’ll bring the dictionary.

“Uncollected insurance money isn’t Bezzle.”

Bernie Madoff said he was using client money to buy investments, but he never made the investments. Is that bezzle?

State government are supposed to be setting aside part of their budget to cover retirement benefits, but in many states they aren’t adequately funding the pension. Is that bezzle?

If you define bezzle as money that is supposed to be there but isn’t then the missing FDIC insurance is bezzle.

Galbraith’s own words defining The Bezzle, Les:

“In many ways the effect of the crash on embezzlement was more significant than on suicide. … At any given time there exists an inventory of undisclosed embezzlement. This inventory - it should perhaps be called the bezzle - amounts at any moment to many millions of dollars. In good times people are relaxed, trusting, and money is plentiful. … Under these circumstances the rate of embezzlement grows, the rate of discovery falls off, and the bezzle increases rapidly. In depression all this is reversed. … Just as the (stock market boom) accelerated the rate of growth (of embezzlement), so the crash enormously advanced the rate of discovery.”

A failure of regulatory enforcement/collection is not The Bezzle.

I don’t see anything in that Galbraith quote that supports your argument.

Here’s another analogy. Two clerks work at a hotel. One clerk takes money out of the cash register and sticks it in his pocket. Over the course of a year he steals $10,000.

The other clerk doesn’t steal, but he doesn’t charge sales tax to his favorite customers or to women he’s trying to charm. After a year of this the state revenue department shows up and padlocks the doors because the hotel has failed to pay $10,000 in sales taxes.

In both cases there was a bezzle of $10,000 - money that was supposed to be there but wasn’t. In the first case the person responsible for the missing $10,000 was the beneficiary. In the second case the person responsible for the missing $10,000 made his customers and friends the beneficiary. It makes no difference to the hotel - in both cases the hotel is out $10,000 and that’s the amount of the bezzle.

[...] And of course borrowing “from the U.S. Treasury” means borrowing from taxpayers. So by getting the money from taxpayers they reduce the “special one-time free imposed on banks.” Translation: they’re putting the burden of bailing out failed banks on the taxpayer. Recall that the FDIC collected almost no insurance fees from banks from 1996 to 2006. [...]

[...] And of course borrowing “from the U.S. Treasury” means borrowing from taxpayers. By getting the money from taxpayers they reduce the “special one-time free imposed on banks.” Translation: they’re putting the burden of bailing out failed banks on the taxpayer, rather than the banks. Recall that the FDIC collected almost no insurance fees from banks from 1996 to 2006. [...]

[...] Now the FDIC’s “strong financial position” is wiped out and they’ll have to start dipping into taxpayer funds to rescue depositor’s money at these banks. That’s in no small part because the FDIC collected almost no deposit insurance between 1996 and 2006. [...]

[...] I think that’s right. In addition to regular fees there was a “special assessment” to restore the depleted funds that will be collected September 30. There is talk of other special assessments that may amount to 25% of bank profits for 2010. The FDIC wouldn’t need those special assessments if they hadn’t failed to collect insurance between 1996 and 2006. [...]