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In for a Penny, In for $2.98 Trillion
The good news on the government's "No Banker Left Behind" program is that according to the special inspector general's report on Tuesday, the total handout to date is still less than 3 trillion dollars. It's only 2.98 trillion to be precise, an amount six times greater than will be spent by federal, state and local governments this year on educating the 50 million American children in elementary and secondary schools.
The bad news is that even greater amounts of money are to be thrown down what has to be the world record for rat holes.
Where did the money go? Almost all of it went to the bankers and stockbrokers who got us into this mess by insisting that the complex-by-design derivatives they trafficked in should not be regulated by government since they were private transactions between consenting professionals. Sort of like a lap dance: If it doesn't work out, that's the problem of the parties involved and no concern of the government.
For the government to intervene would have created "legal uncertainty" in the derivatives market, an argument that a Republican-dominated Congress and President Clinton bought in authorizing the Commodity Futures Modernization Act in December of 2000. That law brought "legal certainty" to the market, a phrase that Lawrence Summers, then Clinton's secretary of the treasury and now Barack Obama's top White House economics adviser, deployed incessantly as a calming mantra as the financial derivatives market swirled out of control.
Now Summers and the other finance gurus who move so easily from Wall Street to Pennsylvania Avenue assure us that those professionals who made the toxic swap deals are too big to fail and must be entrusted with 3 trillion of our dollars to save themselves from disaster. And thanks to the laws they wrote, the bankers are likely to be covered for their socially destructive behavior by a get-out-of-jail-free card.
Well, maybe not all of them. A shudder must have run through the former Wall Street buddies of Bernie Madoff-once the highly respected chairman of the Nasdaq stock exchange-when Inspector General Neil Barofsky warned on Tuesday that "we are looking at the potential exposure of hundreds of billions of dollars in taxpayer money lost to fraud."
How naive. The fraud no doubt has occurred and will occur again, but the exposure part is more questionable, if by that is meant bringing the criminals to account. As opposed to welfare cheats who end up imprisoned over scams that involve hundreds of dollars, these guys have brilliant lawyers who tell them how to steal legally when it comes to billions in fraud.
But most likely the white-collar criminals, if they are high enough up the food chain, will not even be quizzed about their activities. As the independent Congressional Oversight Panel has reported, there has been no serious accounting of the bailout money. It took major pressure from a Congress reacting to an outraged public to discover that AIG, in addition to handing out hundreds of millions in bonuses to the very hustlers who created the firm's swindles, was a conduit for at least $70 billion in taxpayer money to reimburse the banks and stockbrokers who got us into this crisis with their bad bets.
No surprise there, given the incestuous world of finance, where the revolving doors between the Treasury Department, the Fed and executive offices in the industry have been swinging throughout both Republican and Democratic administrations. As a result, those orchestrating the bailout and those grabbing the money are for the most part friends and former colleagues, with enormous respect for each other but not for the American taxpayer and homeowner. Or for the autoworkers who had nothing to do with creating this problem but stand to lose their retiree health benefits and pensions if the Obama administration goes though with its threat to use bankruptcy to discharge GM and Chrysler from their obligations to their workers. Why float a company like AIG to the tune of $170 billion to keep that massive conglomerate from bankruptcy but balk at a much smaller commitment to keep GM solvent?
The money involved in the auto bailout is chump change compared with what Wall Street got, and it is far better spent. As opposed to the financial high rollers richly rewarded for crawling in and out of balance sheets, the folks who crawl in and out of cars along an assembly line are left with permanent aching backs and hard-won health care and retirement plans about to disappear through their company's bankruptcy. Where's their bonus package?
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23 Comments so far
Show AllHow does banker taste?
Since the US government is choosing to throw citizens in the street and refusing to provide food, housing or medical care for destitute citizens they'll have to eat something.
Right now, it looks like the bankers and stockbrockers are about as fat as corn-fed beef and a LOT more likely to be found close to the unfed masses. I hear now you can also get up to 3 gallons of diesel by rendering a particularly fat banker and the bone meal is good for the garden.
Hungry? Eat the Rich!
Mike Whitney at ICH has a funny article up regarding Eliot Spitzer. It's a must-read.
Here's a brief snippet:
It's a bird...It's a plane...No, it's Spitzer to the Rescue!
...If Spitzer was running the SEC, the Pinkertons would be swarming the investments houses right now, thumbing through the off-balance sheet paperwork, overturning filing cabinets and tasering bloated banksters as they scuttle away clutching their Armani briefcases stuffed with taxpayer loot.
The public is not in the mood for any more lame excuses or windy oratory from President Inspiration. Just get on with it. Governing is more than just gliding from one teleprompter to the next pointing at rainbows and promising Utopia. There has to be action, accountability, and justice.
What people want is to see a truncheon-wielding cop on every corner of lower Manhattan. They want regulators snooping through e mails and digging through trash cans to uncover any scrap of evidence that will build a case for investor fraud or criminal malfeasance. They want Spitzer-clones--armed with bullwhips and billy-clubs--posted in every boardroom, in every penthouse, on every private jet; breathing down the necks of every CEO, every CFO, and every dodgy, derivatives-peddling scam-artist until the financial typhoon subsides and the culprits, cutthroats and carpetbaggers are dragged in leg-irons to Guantanamo for a few brief dunks on Dick Cheney's waterboard.
Unedited at:
http://informationclearinghouse.info/article22312.htm
Well worth reading. And funny, too, as much as any of this is. Thanks.
If you watch teevee they keep blaming AIG's demise on Joe Cassano and the AIG Financial Products division. Poor Hank Greenberg didn't know what that rogue trader was up to! So, I found this little history interesting:
In 1987 Greenberg decided to diversify AIG by expanding the company from commercial insurance into financial services, creating AIG Financial Products. Despite Greenberg's successful track record, proving that the business would work took time, and many shareholders booed Greenberg in a 1990 meeting at which the diversification gamble was discussed. Analysts as well questioned Greenberg's move, noting that most investors owned AIG stock purely for its renown in the insurance business and that the financial market typically went through violent earnings swings. In response to the many questions about AIG management's decisions, Greenberg, as quoted by Caren Chesler-Marsh in Euromoney, explained the strategy this way: "We've been very focused in what we want to do. We're not going into every area of financial services. We've chosen the areas where we think we can have the best leverage and the best results" (February 1991).
Although AIG's stock fell 7 percent in 1990, it began to rebound in 1991; Greenberg had once again proven himself to be on target. AIG Financial Products had an operating income of $127 million and became a major force in swaps and derivatives. The move turned out to be extremely profitable for the company and its shareholders. Financial industry analysts once again placed the kudos squarely on Greenberg's shoulders, noting that he had been the first to appreciate the value of a triple-A balance sheet in the swap market and that he had successfully forged joint ventures with some of the elite swap technicians.
http://www.answers.com/topic/hank-greenberg
That U.S. taxpayers are being held liable for settlement of credit default swaps enrages me. I lack the vocabulary to express the degree of my rage. These are nothing more than bets on whether a bond backed by a bundle of mortgages will make or lose money. One need not even be the bond holder to purchase a credit default swap "insurance policy" on a particular bond. This is like me betting with my friend on whether or not you will default on your mortgage and if you do the taxpayers are required to pay off the "insurance" subscriber. Total fraud. Total. And we have to pay off on these so called "toxic assets"? They are laughing at us, people. Laughing and smirking and sneering at our total ignorance and stupidity.
Now shut up and pay up, peasant.
ekaton
Sioux Rose
EKATON: The full criminal nature of this demand that citizens pay for gamblers' unsound risks is yet to fully evidence itself. Our era is a time wherein the chance of regional conflict escalating to grave proportions is intense. This due to enormous sums spent on horrific weapons trafficked internationally, instead of seeing efforts at building bridges of peace through wisdom and negotiation. Ours, too, is a time when climate change will inevitably place more persons at risk. And so to see these sums THROWN at the most unconscionable--the rich using Wall ST as their private casino--is a TREASON against the spirit of mankind. In the face of such pressing problems the kind of reckless disregard we are seeing when SO MUCH is at stake, when the world (and our own nation) has suffered 8 long years under Bush and had a reasonable expectation that SOME intelligent, just changes would indeed come with a change of parties as the election dictated, well, celebrity won't cut it when genuine hunger, homelessness, and a loss of social services directly impact more and more persons. We are living in an era where travesty ought to be government's middle name given the soulless types who manage to rise to the highest levels of power. Words really fail to encompass the levels of depravity passing for leadership in the U.S. today. I find it hard to believe what this nation has become, and where its leaders have directed the phenomenal wealth of our land... the waste upon war after war, and now the theft of promise, of children's futures, of surgeries for those in need, of repairs of infrastructure so that the next bridge won't collapse... all eclipsed. When we begin to imagine all the GOOD and WORTHY items that will not be covered due to choices on the part of those that have turned our labors into their private right to gamble away.. it seems to me the WORST of history's examples are now coalesced in America, the fallen land.
Good one!
It is like if corruption is "Systemic" it is too big to fail.
One of the problems with the Republican form of Government is that as appointees , members of the Presidents Cabinet are simply appointed by the President.
Under the Parliamentary system the cabinet is selected from elected members of the house . They either end up facing the voter in due course ot have to step down and resign if they lose the confidence of the House to lead.
The US system thus invites cronyism. It does not matter which party in power, the cronies from Private Industry will be appointed to Cabinet. Not in any way answering to the people their IMMEDIATE constituency will be that group from which they are selected.
Thus in the first days of any new Presidency one can easily garner what direction the new administration will take. If members of the Banking and Financial industry are appointed to Cabinet by the President, then it clear they will try and enact policies favorable to the same.
(The same happens in any of the cabinet positions. Ie appoint one of the owners of the mining industry to mine safety and mine safety measures will erode)
It this reality that allows the critics of any new administration to make reasonable assessments of what direction a given President will take. In the case of barack Obama and his appointment to the same people who created the mess to clean up the mess, it is abundantly clear he has chosen bankers over the people.
The people do not have to wait a year or two to "Give the President a chance".
Obama selected his cabinet based upon his belief that the Bankers and system of Capitalism as it exists in the United States today, must be protected and he deserves every criticism for doing so by the people who feel this the wrong course to take.
Sioux Rose
GWNORTH: As usual excellent insights, well-said.
"As opposed to welfare cheats who end up imprisoned over scams that involve hundreds of dollars, these guys have brilliant lawyers who tell them how to steal legally when it comes to billions in fraud."
The fraud is going to escalate into the TRILLIONS before this over.
As economist Henry C.K. Liu said: "Wealth in market fundamentalism had not been created by honest work in recent decades, but by systemic manipulation of credit to turn risks into safety and debt into assets. From the central bank down to the average home owner, every participant in the market economy was abusing the false effect of unearned wealth as the miracle of finance capitalism. Many are now realizing that the Federal Reserve has been the biggest Ponzi scheme operator, not Bernie Madoff."
Some of you people voted for Mr. Obama claiming that he was the least of two evils.
But, you hired a House Negro of Wall Street, not a honest man who looks out for the welfare of the country.
You got snookered again.
I think I'm beginning to understand the definition of "free market".
$2.8 trillion to you and your progeny, but free to them. Cool deal for the nobility.
"They will continue to use the military as a private army for their own further enrichment."
This is what has always been meant by "American overseas interests". In an earlier age it was called "gunboat diplomacy" and "opening overseas markets".
"The bailout is the final nail in the coffin. It makes the tyranny permanent & irrevocable."
And so blatantly "in your face" and "whattya gonna do about it, peasant, just shut up and pay up".
"To understand what is happening, one must see that it is none other than Mr "Hope and Change" Obama who is delivering this final blow to the country we once knew. This is literally the coup de grâce."
Read "Confessions of an Economic Hit Man" by John Perkins. Then you will see that exactly the same tactics used to rape third world countries by the IMF are now being used inside the U.S.
-- ekaton
More fun with math:
1 billion divided by 130,000 taxpayers = $7500 per taxpayer (rounded down.)
So, 1 trillion divided 130K TPs = 7,500,000 per taxpayer.
X 3 = 22,000,000 per taxpayer.
Wait - I must be screwing up the zero count or something. It can't be that We The Taxpayers just gave the Wall Street robbers and Ponzi kings $22M apiece, can it?
And the average yearly salary in the U.S. is $30K, of which the fed takes $9K?
Meanwhile, why aren't "we" demanding that "our" government just cough up a measly $500M to buy the rest of AIG? How f-ing stupid are we? Can you imagine "buying" 80% of a car from your neighbor, and then allowing your neighbor to hide the car and only letting you drive it when he felt like it... which, it turned out, was never?
Hey, look - the Brittany Circus Tour is in town!
OMG. You really had me going there for a minute. I mean like if what you said was true that would be like, man, the biggest rip-off in history. It would be like treason at the highest levels of government or like organized crime was running it. Then I realized it is April Fools Day. What a relief! Say, doesn't Brittany have a new boy friend?
It was just a partial joke. Of course, the real numbers are much easier to accept - $3 trillion divided by 130M taxpayers is only $23K apiece.
And, if most taxpayers feel like I do, the first people I want to give that extra $23K I got stashed under the mattress to are, in order: Goldman, BoA, and, of course, anyone Turbo Tax Tim tells me to...
I want to give mine to Tim Geithner so he can use it if he remembers to pay his taxes.
What a relief. Here's a fun fact for you: When Peter Peterson (Blackstone fame) appointed your good friend Timmy to run the NY Fed in 2003, Maurice "Hank" Greenberg of AIG was on the advisory committee. Inquiring minds might want to know why, but would have to waste hours googling to find out that Hank Greenberg, AIG CEO from 1968 to 2005, was a director at the New York Federal Reserve from 1988 to 1995. I understand that Timmy comes highly recommended, so I want my $23K to go to Hank and all his offshore friends.
The Sherman Anti-Trust Act, 1890, prohibits monopolies or unreasonable combinations of companies to restrict or in any way control interstate commerce. It was amended in 1914 by the Clayton Act, which outlaws interlocking directorates and deals with acquisitions that aim to restrain or eliminate competition.
Yet, today, interlocking boards of directors are commonplace as well as "Mergers and Acquisitions" departments and strategies which do result in restraint of trade and monopolistic/oligarchic business structures.
We never learn.
-- ekaton
Conservative capitalist oligarchies and conservative communist hegemonies will do anything to stay in power.
Its the conservatives stupid!
Is there not an IMF audit in our immediate future? I'm waiting for the usual IMF recommendations, the "austerity programs" that have destroyed the lives of so many.