Sunday, September 21, 2008

Mr. Hanky's X-mas poo

We're all on the Titanic. And while most of us are too busy to rearrange deck chairs, oblivious to our ongoing conflicts in Afghanistan and Iraq, the wealthy are stealthy as they submit a last order for life boats, using our credit cards!

George Stephanopoulos in introducing Bush's Treasury Secretary, Henry Paulson, summed it up this way:

"It is no stretch to say that after this week, the era of big government is back. To counter the most severe financial crisis since the Great Depression, the federal government has become the world's biggest insurance company, its biggest mortgage lender, and is now asking Congress for $700 billion to buy up the bad assets of American financial institutions. This series of moves has put a stunning number of taxpayer dollars at risk, more than $1.3 trillion - about twice what the government spends on health care each year, double the entire cost so far of the Iraq war."

And with that, Secretary Paulson (who was demoted to the Bush administration after becoming the CEO of Goldman Sachs) explained why he needed to be given $700 Billion - no strings attached - real quick.

"Last week as the credit markets were frozen, the capital markets were frozen, we had a situation where American companies weren't able to borrow money. This could ultimately affect small banks, loans to businesses, loans to farmers, jobs, people's retirement... It began with excesses in the system, irresponsible behavior and practices of financial institutions. It then spread, because there was irresponsible borrowing also, we saw the pain and the suffering in terms of foreclosures. Then the chain reactions to financial institutions, illiquid assets. So we are recommending the government buy illiquid assets in big size from the institutions. These are what's clogging up the system, so that they can play the role they need to play."

Did you catch
that last part? We have a clog in our economy, and the only way to fix it is to flush a TRILLION dollars down the toilet.

"The fact that the tax payer is in this position is painful to me"
Treasury Secretary, Hank Paulson

Stephanopoulos followed up with a question about foreign banks taking advantage of the US taxpayer funded bailout:

"The original legislation we saw said you would be buying up the mortgage related assets from financial institutions having headquarters in the United States. Yet last night the fact sheet put out by the treasury seemed to expand that. It said only that the financial institutions have to have significant holdings in the US and that you cold wave that at your discretion. Will foreign financial institutions be eligible to have their assets bought?"

Can you imagine the Secretary's response?

"Yes and they should... that's a distinction without a difference to the American people... This is about protecting the taxpayers and the American people don't care who owns the financial institution."*

If Americans' Wal-Mart shopping habits are any indication, Paulson's cynicism may be justified. Next Question: "Are you open to [limits on executive compensation]?"

"I believe to make this program work we don't want to make it punitive and make it difficult"

Why should CEOs used to earning millions a year be punished for needing a handout? Hasn't the trauma of the past week been hard enough on them? This plan equates to nothing more than take the money and run. These guys would be laughing all the way to the bank, but they'll probably stash the loot in some sort of off shore tax shelter instead.

And for the trifecta, Stephanopoulos asks finally: "Are you open to [protections for homeowners]?"

"We need this to be clean and quick."

And that my friends is the best way to clear a clog!

Recall that this Bush cabinet member came directly from Goldman Sachs which has applied to become a bank holding company, allowing them to take deposits from investors in order to take advantage of moves made today by the Federal Reserve and its support package designed to alleviate the credit crisis. A year before joining the Bush administration, Paulson's 2005 compensation package from Goldman Sachs was $37 million. I expect they'll be seeing a return on their investment.

[Continued at 'Stephanopoulos']

*Of final note:
Paulson has personally built close relations with China during his career. In July 2008 it was reported by The Daily Telegraph that: "Treasury Secretary Hank Paulson has intimate relations with the Chinese elite, dating from his days at Goldman Sachs when he visited the country over 70 times."
[9] (Wikipedia)

UPDATE: Lo and behold (from Wikipedia):

Government officials overseeing bailout don't know how it's being spent
A December 31, 2008 Associated Press article stated, "Government officials overseeing a $700 billion bailout have acknowledged difficulties tracking the money and assessing the program's effectiveness." [20]
A January 29, 2009 article from stated, "Bloomberg News asked the Treasury Department Jan. 26 to disclose what securities it backed over the past two months in a second round of actions to prop up Bank of America Corp. and Citigroup Inc. Department spokeswoman Stephanie Cutter said Jan. 27 she would seek an answer. None had been provided by the close of business yesterday." [21]

Banks won't say how they are spending bailout money
A December 22, 2008 Associated Press article stated, "The Associated Press contacted 21 banks that received at least $1 billion in government money and asked four questions: How much has been spent? What was it spent on? How much is being held in savings, and what's the plan for the rest? None of the banks provided specific answers... Some banks said they simply didn't know where the money was going." [22]

US Federal government paid $254 billion for assets that were worth only $176 billion
On February 5, 2009, Elizabeth Warren, chairperson of the Congressional Oversight Panel, told the Senate Banking Committee that during 2008, the federal government paid $254 billion for assets that were worth only $176 billion. [23]

Bailout recipients spent $114 million on lobbying and campaign contributions in 2008
On February 4, 2009, it was reported that during 2008, the companies that received bailout money had spent $114 million on lobbying and campaign contributions. These companies received $295 billion in bailout money. Sheila Krumholz, executive director of The Center for Responsive Politics, said of this information, "Even in the best economic times, you won't find an investment with a greater payoff than what these companies have been getting." [24]

Bank of America throws $10 million Super Bowl party
A February 2, 2009 ABC News article titled, "Bailed Out Bank of America Sponsors Super Bowl Fun Fest" stated that Bank of America sponsored a Super Bowl event at a five star resort in Palm Beach, which was described as "... a five day carnival-like affair... 850,000 square feet of sports games and interactive entertainment attractions for football fans..." Although the bank refused to answer ABC News' questions about the cost of the event, a confidential source told ABC that the cost was approximately $10 million. [25]

$1.6 billion in salaries and bonuses for executives
A December 21, 2008 Associated Press article stated, "Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits last year, an Associated Press analysis reveals. The rewards came even at banks where poor results last year foretold the economic crisis that sent them to Washington for a government rescue... Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management, the AP review of federal securities documents found. The total amount given to nearly 600 executives would cover bailout costs for many of the 116 banks that have so far accepted tax dollars to boost their bottom lines." [26]

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