Rule by 'Hedge Fund Democrats'

NOMI PRINS Prins
just wrote the piece "Geithner's Plan: Pure Plunder" for Mother Jones
magazine. Prins is a senior fellow at Demos and is the author of two
books: "Other People's Money: The Corporate Mugging of America" and
"Jacked: How Conservatives Are Picking Your Pocket." She is a former
investment banker turned journalist. She used to run the European
analytics group at Bear Stearns and has also worked at Lehman Brothers
and Goldman Sachs.

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JOHN SAKOWICZ
Sakowicz is a 30-year veteran of Wall Street. He is currently a general
partner at Templar Advisors, an offshore investment advisory group.
Sakowicz also hosts "The Truth About Money" at KZYX in Northern
California and he writes for alternative weeklies as a contributing
editor at the North Bay Bohemian.
He said today: "Bank stocks have soared, but their bonds haven't
budged. In some cases, they've actually fallen. When that happens, the
market is telling us something. It's telling us to come back to
reality. It's telling us these toxic assets may be more toxic than we
think. ... In Geithner's plan, the leverage is about five or six
federal dollars to every one dollar invested by the private sector.
That's like saying, 'Let's drive a truck full of money directly at a
freight train full of money to prevent a train wreck.'"

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TIMOTHY CANOVA
Canova is a professor of international economic law at the Chapman
University School of Law in Orange, California. He is the author of
numerous articles and book chapters forewarning of financial crisis, in
addition to such short essays as "Greenspan's Grip" and "Legacy of the
Clinton Bubble."

Canova said today: "The latest Treasury plan by Timothy Geithner
is befitting an administration run by 'hedge fund Democrats.' Such is
the nature of bankster capitalism, the zombie banks are propped up by
public subsidies and their losses are socialized. Under the plan, the
Federal Reserve and Treasury as the 'public partners' would provide
enormous subsidies to the 'private partners,' the unregulated and
unregistered hedge funds that have been overleveraged and facing
mounting losses of their own. The subsidies would go to hedge funds for
taking near worthless assets off the books of the ailing banks.

"There's been much criticism of the American Insurance Group for
paying out $165 million in excessive bonuses to executives in its
financial products division, the now notorious AIG unit that sold more
credit default swaps than the firm could cover. Lost in the outrage was
news that AIG had paid out $40 billion in taxpayer bailout money to
some of the world's largest banks and hedge funds. Most of that went to
ten U.S. and foreign banks, with Goldman Sachs leading the list. This
is the same Goldman Sachs that has owned the Treasury Department for
two decades. Its former CEOs, Robert Rubin and Henry Paulson, became
Treasury secretary. Its chief lobbyist, Mark Patterson, recently became
chief of staff to Geithner, one of the few vacancies filled in the
department, and one that required an immediate waiver to Obama's
supposedly tough ethics rules.

"Within the academy, there's a recognition that the sanctity of
private contract requires striking down sham contracts. Bert Ely, a
Cato Institute banking analyst, now argues that credit default swaps
should be considered unenforceable contracts since the counterparties
lack any insurable interest in the underlying assets. Lucian Bebchuk, a
Harvard Law professor and centrist, now proposes Chapter 11 bankruptcy
for AIG to stop the bleeding on its $1.2 trillion in credit default
swaps. Paul Krugman, Nobel economist, argues for nationalizing the
zombie banks to get them to shed their toxic assets and jump-start
their lending activities for productive investment in real economic
activity.

"The subsidies to Wall Street hedge funds and banks are not
without enormous costs. Last week the Federal Reserve announced that it
would double the size of its balance sheet to $3 trillion by doubling
its purchases of asset-backed securities from its favored clientele,
which now includes foreign banks and central banks. Three trillion
dollars that could be spent on real needs, like jobs and education, the
kinds of large public spending programs that raised the economy out of
the Great Depression, created the last great middle class boom for the
Greatest Generation, and left future generations with tangible assets
instead of worthless paper."

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