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?