By Charles Bogle
1 June 2011
Directed by Curtis Hanson, written by Peter Gould and Andrew Ross Sorkin, from a book by Andrew Ross Sorkin
http://wsws.org/articles/2011/jun2011/toob-j01.shtml
In an interview, the Wall Street Journal asked Paula Weinstein, executive producer of HBO’s Too Big to Fail, about the problem she faced in creating a suspenseful drama about the 2008 financial crisis that “wasn’t too esoteric” for a general audience.
Her reply indicates some of the problems with this production: “Everyone in the country suffered from it [the financial crisis], so we treated it like a thriller, like it was a regular movie.”
The movie features a fine cast, and a few of the actors have been given characters with a degree of dimensionality. However, the filmmakers’ decision to make a “regular movie,” i.e., a formulaic one, results in the type of stale story of a valiant individual saving the US from an evil power (in this case, certain predatory elements on Wall Street) so prevalent in American political movies. Not only is the story stale in this case, it is also untrue.
Most damaging to the television film’s credibility and ability to grapple critically with the epochal 2008 crisis was the choice of former US Treasury Secretary Henry Paulson as the individual in question. In sum, Too Big to Fail is propaganda for the population presented from an upper-middle class liberal perspective.
Too Big to Fail focuses on Paulson (William Hurt) as he and other top financial figures (both within and without the Bush administration) respond to the September 2008 crash. Initially, they are certain the problem will be contained within the subprime mortgage market, but as stocks plummet and rumors spread of major investment firms failing, the White House and Wall Street clash over who should save the banking system: the government or the private sector.
Paulson’s efforts to maneuver Wall Street into saving investment bank Lehman Brothers fail, and the threatened collapses of Freddie Mac and Fannie Mae and the insurance firm AIG result in credit lines freezing. At the same time, in this version of events, Paulson experiences an internal conflict between his belief that government should not interfere with the private sector and the need to go to Congress for bailout money.
The conflict appears to be resolved when Paulson and Federal Reserve Board Chairman Ben Bernanke (Paul Giamatti) convince the major investment banks to buy 20 percent of AIG assets (the Fed will buy the other 80 percent) and successfully push the $700 billion cash injection, or TARP (Troubled Asset Relief Program), through Congress and into the banks. However, the film’s conclusion makes that resolution problematic.
As Lehman Brothers CEO Dick Fuld, James Woods portrays an individual transformed from an arrogant, self-centered tyrant into someone painfully aware that he is being “played” by much larger social forces. Three close-ups, the last one just before Fuld agrees to Lehman’s bankruptcy filing, express this transformation most convincingly.
Hurt’s Henry Paulson in the HBO production is basically a decent man faced with navigating America (and the world) through a crisis of catastrophic proportions. To those outside his immediate circle, he presents a resolute, no-nonsense persona; but to those closest to him, Bernanke and especially his wife, Wendy (Kathy Baker), Paulson expresses self-doubt and even feelings of helplessness. Hurt avoids the theatrics often found in such characters, and his Paulson is the more human for that.
The other main characters are largely one-dimensional, sometimes to the point of becoming invisible. Giamatti’s Bernanke displays none of the haughty, smartest-guy-in-the-room demeanor seen and heard at congressional hearings and on Sunday news programs. Instead, he is invariably deferential, wise but humble, and always concerned with preserving democracy.
Warren Buffet (Ed Asner) is a grandfatherly figure in one brief scene, he answers a call from Paulson while entertaining his grandchildren at an ice cream parlor. Billy Crudup’s Timothy Geithner is hardly a presence, mostly attached as he is to cellphones and MacBooks.
Making Paulson the heroic center of Too Big to Fail reveals a great deal. First of all, the filmmakers (director Curtis Hanson and writer Peter Gould) demonstrate a willingness to overlook a considerable amount of “anti-heroic” behavior in the Paulson biography before 2008. Throughout the movie, Paulson is played as a stand-up guy virtually incapable of backing away from a problem or opponent. At one point, his wife pleads, “You can’t take all this on by yourself.” “It’s my job,” he reminds her stoically.
Were it not for Hurt’s understated characterization, this scene would be almost comical. The real Paulson used connections to both leave the Nixon White House during the Watergate scandal unscathed (Paulson was an office assistant to John Ehrlichman, who spent 10 months in prison for his role in the crime) and gain a position at Goldman Sachs in 1974. Then, after being named chief operating officer at Goldman Sachs, Paulson orchestrated what amounted to a coup, according to the New York Times, to force out his co-chairman, Jon Corzine, and take the position of CEO.
Paulson, one of the most powerful figures in banking in the US, acted in the 2008 crisis and beyond exclusively from the point of view of rescuing the financial system on behalf of the American ruling elite. The central concern of both the Bush and Obama administrations has been saving the bankers whose practices led the world economy to the edge of the abyss and making sure the working population paid for this process. (That HBO’s Too Big to Fail ultimately originates with the New York Times’ Andrew Ross Sorkin, an apologist for the financial aristocracy and defender of social inequality, comes as no surprise.)
Too Big to Fail’s depiction of Paulson as a selfless government official strains credulity, to say the least. A brief reference to the enormous amounts of money he made while Goldman Sachs CEO is countered by a Paulson assistant with, “He sold all of his shares before becoming Secretary of the Treasury”! In fact, Paulson was required by law to sell his shares but was allowed to do so tax-free. He made $200 million in the bargain.
Ignored entirely is the role played by Goldman Sachs and Paulson in triggering a crisis that continues to devastate millions globally.
Of course, artists interpret historical figures, but the interpretation must begin with an objective, critical reckoning of the whole person. How much more interesting and valuable would Too Big to Fail have been had its makers done so and explored the social forces driving Paulson’s machinations?
The filmmakers’ upper middle class perspective ensures that no such exploration will occur. Turning the real Paulson into a courageous figure directs the viewer’s attention away from the White House’s complicity in the crisis and toward the secretary of the Treasury as a savior.
The movie portrays Paulson’s (and the White House’s) decision to bail out the banks as unavoidable. At the conclusion, Bernanke and Paulson have one of their frequent meetings. The Fed chairman turns plaintively to Paulson and says, “I just hope that they [the banks] do what we ask them to. I hope they lend it [the money] out.” Paulson replies assuredly, “Of course they will.”
We are asked to believe that without the intervention of Paulson and the godlike Bernanke, a few greedy individuals would have caused unimaginable consequences. We are further asked to believe that what has followed has been solely the result of these individuals not keeping their promise. We deserve a good deal more than this piece of shallow propaganda.
Showing posts with label Timothy Geithner. Show all posts
Showing posts with label Timothy Geithner. Show all posts
Wednesday, June 22, 2011
Tuesday, May 31, 2011
Regime Change at the IMF: The Frame-Up of Dominique Strauss-Kahn?
Prof. Michel Chossudovsky
Global Research, May 19, 2011
http://www.globalresearch.ca/index.php?context=va&aid=24866
The arrest of IMF Managing Director Dominique Strauss-Kahn has all the appearances of a frame-up ordered by powerful members of the financial establishment, in liaison with France's Nicolas Sarkozy, whose presidency has served the interests of the US at the expense of those of France and the European Union. While there is for the moment no proof of a plot, the unusual circumstances of his arrest and imprisonment require careful examination.
Immediately following Strauss Kahn's arrest, pressures were exerted by Washington to speed up his replacement as Managing Director of the IMF preferably by a non-European, an American or a handpicked candidate from an "emerging market economy" or a developing country.
Since the founding of the Bretton Woods institutions in 1945, the World Bank has been headed by an American whereas the IMF has been under the helm of a (Western) European.
Strauss-Kahn is a member of elite groups who meet behind closed doors. He belongs to the Bildeberger. Categorized as one of the world's most influential persons, he is an academic and politician rather than a banker. In contrast to his predecessors at the IMF, he has no direct affiliation to a banking or financial institution.
But at the same time he is the fall guy. His "gaffe" was to confront the Washington-Wall Street Consensus and push for reforms within the IMF, which challenged America's overriding role within the organization.
The demise of Strauss-Kahn potentially serves to strengthen the hegemony of the US and its control over the IMF at the expense of what former Defense Secretary Donald Rumsfeld called "Old Europe".
Blocking Strauss-Kahn, the Presidential Candidate
In recent years, a major shift has occurred in Europe's political landscape. Pro-American governments have been elected in both France and Germany. Social Democracy has been weakened.
Franco-American relations have been redefined, with Washington playing a significant role in grooming a new generation of European politicians.
The presidency of Nicolas Sarkozy has, in many regards, become a de facto US "client regime", broadly supportive of US corporate interests in the EU and closely aligned with US foreign policy.
There are two overlapping and interrelated issues in the DSK frame-up hypothesis.
The first pertains to regime change at the IMF, the second to Strauss-Kahn as a candidate in France's forthcoming presidential elections.
Both these processes are tied into the clash between competing US and European economic interests including control over the euro-currency system.
Strauss-Khan as a favorite of the Socialist Party, would have won the presidential elections leading to the demise of "Our Man in Paris" Nicolas Sarkozy. As documented by Thierry Meyssan, the CIA played a central undercover role in destabilizing the Gaullist party and supporting the election of Nicolas Sarkozy (See Operation Sarkozy: How the CIA placed one of its agents at the presidency of the French Republic, Reseau Voltaire, September 4, 2008)
A Strauss-Kahn presidency and a "Socialist" government would have been a serious setback for Washington, contributing to a major shift in Franco-American relations.
It would have contributed to weakening Washington's role on the European political chessboard, leading to a shift in the balance of power between America and "Old Europe" (namely the Franco-German alliance).
It would have had repercussions on the internal structure of the Atlantic Alliance and the hegemonic role of the US within NATO.
The Eurozone monetary system as well as Wall Street's resolve to exert a decisive influence on the European monetary architecture are also at stake.
The Frame-Up?
Fifty-seven percent of France's population, according to a May 17 poll, believe that Strauss-Kahn was framed, victim of a set-up. He was detained on alleged sexual assault and rape charges based on scanty evidence. He was detained based on a complaint filed by the Sofitel hotel where he was staying, on behalf of the alleged victim, an unnamed hotel chamber-maid:
The 32-year-old maid told authorities that she entered his suite early Saturday afternoon and he attacked her, New York Police Department spokesman Paul J. Browne. She said she had been told to clean the spacious $3,000-a-night suite, which she thought was empty.
According to an account the woman provided to police, Strauss-Kahn emerged from the bathroom naked, chased her down a hallway and pulled her into a bedroom, where he began to sexually assault her. She said she fought him off, then he dragged her into the bathroom, where he forced her to perform oral sex on him and tried to remove her underwear. The woman was able to break free again and escaped the room and told hotel staff what had happened, authorities said. They called police.
http://www.chron.com/disp/story.mpl/business/7565485.html#ixzz1MfFWFlnY
Challenging the Washington Consensus
What is at stake in the immediate wake of Strauss Kahn's demise is "regime change" at the IMF.
The Obama administration has demanded his replacement by a more compliant individual. U.S. Treasury Secretary Timothy Geithner, former CEO of the New York Federal Reserve Bank is pushing for the replacement of Dominique Strauss-Kahn, "suggesting he can no longer perform his duties" as IMF Managing director.
"Geithner called for greater formal recognition by the IMF board that John Lipsky, the fund's second-in-command, will continue serving as temporary managing director for an interim period. Although Strauss-Kahn has yet to resign, sources say the IMF is in touch with his legal counsel to discuss his future at the organization."
What lies behind the frame-up scenario? What powerful interests are involved? Geithner had a close personal relationship with Strauss-Kahn.
On the floor of the US Senate (May 18), Senator Mark Kirk of Illinois, called for the resignation of DSK while calling upon the IMF's deputy managing director John Lipsky to "assume full responsibility of the IMF" as interim managing director. The process of "permanent replacement should "commence at once," he said. John Lipsky is a well connected Wall Street banker, a former Vice Chairman at JPMorgan Investment Bank.
While the IMF is in theory an intergovernmental organization, it has historically been controlled by Wall Street and the US Treasury. The IMF's "bitter economic medicine", the so-called Structural Adjustment Program (SAP), imposed on countless developing countries, essentially serves the interests of creditor banks and multinational corporations.
The IMF is not the main architect of these devastating economic reforms which have served to impoverish millions of people, while creating a "favorable environment" for foreign investors in Third World low wage economies.
The creditor banks call the shots. The IMF is a bureaucratic entity. Its role is to implement and enforce those economic policies on behalf of dominant economic interests.
Strauss Kahn's proposed reforms while providing a "human face" to the IMF did not constitute a shift in direction. They were formulated within the realm of neoliberalism. They modified but they did not undermine the central role of IMF "economic medicine". The socially devastating impacts of IMF "shock treatment" under Strauss-Kahn's leadership have largely prevailed.
Dominique Strauss Kahn arrived at the helm of the IMF in November 2007, less than a year prior to September-October 2008 financial meltdown on Wall Street. The structural adjustment program (SAP) was not modified. Under DSK, IMF "shock treatment" which historically had been limited to developing countries was imposed on Greece, Ireland and Portugal.
Under the helm of DSK as Managing Director, the IMF demanded that developing countries remove food and fuel subsidies at a time of rising commodity prices on the New York and Chicago Mercantile exchanges.
The hikes in food and fuel prices, which preceded the September-October 2008 Wall Street crash, were in large part the result of market manipulation. Grain prices were boosted artificially by large scale speculative operations. Instead of taming the speculators and containing the rise in food and fuel prices, the IMF's role was to ensure that the governments of indebted developing countries would not in any way interfere in the "free market", by preventing these prices from going up.
These hikes in food prices, which are the result of outright manipulation (rather than scarcity) have served to impoverish people Worldwide. The surge in food prices constitutes a new phase of the process of global impoverishment.
DSK was complicit in this process of market manipulation. The removal of food and fuel subsidies in Tunisia and Egypt had been demanded by the IMF. Food and fuel prices skyrocketed, people were impoverished, paving the way towards the January 2011 social protest movement:
Fiscal prudence remains an overarching priority for the [Tunisian] authorities, who also see the need for maintaining a supportive fiscal policy in 2010 in the current international environment. Efforts in the last decade to bring down the public debt ratio significantly should not be jeopardized by a too lax fiscal policy. The authorities are committed to firmly control current expenditure, including subsidies,... (IMF Tunisia: 2010 Article IV Consultation - Staff Report; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Tunisia)
"[The IMF] encouraged the [Egyptian] authorities to press further with food and fuel subsidy reforms, and welcomed their intention to improve the efficiency and targeting of food subsidy programs. [meaning the selective elimination of food subsidies].
"Consideration should be given to introducing automatic adjustment mechanisms for domestic fuel prices to minimize distortions [meaning dramatic increases in fuel prices without State interference], while strengthening cash-based social programs to protect vulnerable groups. (IMF Executive Board Concludes 2008 Article IV Consultation with the Arab Republic of Egypt Public Information Notice, PIN No. 09/04, January 15, 2009)
Under the helm of DSK, the IMF also imposed sweeping austerity measures on Egypt in 2008, while supporting Hosni Mubarak's "efforts to broaden the privatization program".(Ibid)
The Frank G. Wisner Nicolas Sarkozy Connection
Strauss-Kahn was refused bail by Judge Melissa Jackson, an appointee and protégé of Michael Bloomberg, who in addition to his role as Mayor is a powerful figure on Wall Street.
Manhattan District Attorney Cyrus Vance Jr. charged (using scanty evidence) Strauss-Kahn "with seven crimes, including attempted rape, sexual abuse, forcible touching and unlawful imprisonment".
Who is Cyrus Vance Jr.?
He is the son of the late Cyrus Vance who served as Secretary of State in the Carter administration.
But there is more than meets the eye. Nicolas Sarkozy's step father Frank G. Wisner II, a prominent CIA official who married his step mother Christine de Ganay in 1977 served as Deputy Executive Secretary of State under the helm of Cyrus Vance Senior, father of District Attorney Cyrus Vance Junior.
Is it relevant?
The Vance and Wisner families had close personal ties. In turn Nicolas Sarkozy had close family ties with his step father Frank Wisner (and his half brothers and sisters in the US and one member of the Wisner family was involved in Sarkozy's election campaign).
It is also worth noting that Frank G. Wisner II was the son of one of America's most notorious spies, the late Frank Gardiner Wisner (1909- 1965), the mastermind behind the CIA sponsored coup which toppled the government of Mohammed Mossadegh in Iran in 1953. Wisner Jr. is also trustee of the Rockefeller Brothers Trust.
While these various personal ties do not prove that Strauss-Kahn was the object of a set-up, the matter of Sarkozy's ties to the CIA via his step father, not to mention the ties of Frank G. Wisner II to the Cyrus Vance family are certainly worth investigating. Frank G, Wisner also played a key role as Obama's special intelligence envoy to Egypt at the height of the January 2011 protest movement.
Did the CIA play a role?
Was Strauss-Kahn framed by people in his immediate political entourage including President Obama and Secretary of the Treasury Tim Geithner?
Fair Trial?
Innocent before proven guilty? The US media has already cast its verdict. Will the court procedures be manipulated?
One would expect that Strauss-Kahn be granted a fair trial, namely the same treatment as that granted to thousands of arrests on alleged sexual aggression charges in New York City.
How many similar or comparable alleged sexual aggressions occur on a monthly basis in New York City? What is the underlying pattern? How many of these are reported to the police? How many are the object of police follow-up once a complaint has been filed?
What is the percent of complaints submitted to police which are the object of police arrest? How many of these arrests lead to a judicial procedure? What are the delays in court procedures?
How many of these arrests lead to release without a judicial procedure?
How many of the cases submitted to a judicial procedure are dismissed by the presiding judge?
How many of the cases which are not dismissed are refused bail outright by the presiding judge? What is the basis for refusing bail?
How many are granted bail? What is the average amount of bail?
How many are imprisoned without bail based on scanty and incomplete evidence?
How many of those who are refused bail are sent to an infamous maximum security prison on Rikers Island on the orders of Michael Bloomberg.
Diplomatic Immunity
Press reports state that full diplomatic immunity does not apply to officials of the United Nations and the Bretton Woods institutions, namely that the US did not ratify the protocol.
"U.N. convention on privileges and immunities for international agencies that most countries have ratified. It gives the heads of U.N. agencies broad immunity in the countries where they are based. But the U.S. government never became a party to that treaty. Employees of international agencies are covered by a U.S. statute that gives only limited immunity."
The relevant question is how has this limited immunity provision been applied in practice? Namely how many people with limited immunity (UN officials, officials of the Bretton Woods institutions) have been arrested and sent to a high security prison?
Has Strauss Kahn been given the same treatment as those arrested under the provisions of "limited immunity"?
Does the Strauss Kahn arrest fit the pattern? Or is Strauss Kahn being treated in a way which does not correspond to the normal (average) pattern of police and judicial procedures applied in the numerous cases of persons arrested on alleged sexual assault charges?
Without a frame-up instrumented by very powerful people acting in the background, the head of the IMF would have been treated in an entirely different way. The mayor of New York Michael Bloomberg and Timothy Geithner would have come to his rescue. The matter would have been hushed up with a view to protecting the reputation of a powerful public figure. But that did not happen.
Global Research, May 19, 2011
http://www.globalresearch.ca/index.php?context=va&aid=24866
The arrest of IMF Managing Director Dominique Strauss-Kahn has all the appearances of a frame-up ordered by powerful members of the financial establishment, in liaison with France's Nicolas Sarkozy, whose presidency has served the interests of the US at the expense of those of France and the European Union. While there is for the moment no proof of a plot, the unusual circumstances of his arrest and imprisonment require careful examination.
Immediately following Strauss Kahn's arrest, pressures were exerted by Washington to speed up his replacement as Managing Director of the IMF preferably by a non-European, an American or a handpicked candidate from an "emerging market economy" or a developing country.
Since the founding of the Bretton Woods institutions in 1945, the World Bank has been headed by an American whereas the IMF has been under the helm of a (Western) European.
Strauss-Kahn is a member of elite groups who meet behind closed doors. He belongs to the Bildeberger. Categorized as one of the world's most influential persons, he is an academic and politician rather than a banker. In contrast to his predecessors at the IMF, he has no direct affiliation to a banking or financial institution.
But at the same time he is the fall guy. His "gaffe" was to confront the Washington-Wall Street Consensus and push for reforms within the IMF, which challenged America's overriding role within the organization.
The demise of Strauss-Kahn potentially serves to strengthen the hegemony of the US and its control over the IMF at the expense of what former Defense Secretary Donald Rumsfeld called "Old Europe".
Blocking Strauss-Kahn, the Presidential Candidate
In recent years, a major shift has occurred in Europe's political landscape. Pro-American governments have been elected in both France and Germany. Social Democracy has been weakened.
Franco-American relations have been redefined, with Washington playing a significant role in grooming a new generation of European politicians.
The presidency of Nicolas Sarkozy has, in many regards, become a de facto US "client regime", broadly supportive of US corporate interests in the EU and closely aligned with US foreign policy.
There are two overlapping and interrelated issues in the DSK frame-up hypothesis.
The first pertains to regime change at the IMF, the second to Strauss-Kahn as a candidate in France's forthcoming presidential elections.
Both these processes are tied into the clash between competing US and European economic interests including control over the euro-currency system.
Strauss-Khan as a favorite of the Socialist Party, would have won the presidential elections leading to the demise of "Our Man in Paris" Nicolas Sarkozy. As documented by Thierry Meyssan, the CIA played a central undercover role in destabilizing the Gaullist party and supporting the election of Nicolas Sarkozy (See Operation Sarkozy: How the CIA placed one of its agents at the presidency of the French Republic, Reseau Voltaire, September 4, 2008)
A Strauss-Kahn presidency and a "Socialist" government would have been a serious setback for Washington, contributing to a major shift in Franco-American relations.
It would have contributed to weakening Washington's role on the European political chessboard, leading to a shift in the balance of power between America and "Old Europe" (namely the Franco-German alliance).
It would have had repercussions on the internal structure of the Atlantic Alliance and the hegemonic role of the US within NATO.
The Eurozone monetary system as well as Wall Street's resolve to exert a decisive influence on the European monetary architecture are also at stake.
The Frame-Up?
Fifty-seven percent of France's population, according to a May 17 poll, believe that Strauss-Kahn was framed, victim of a set-up. He was detained on alleged sexual assault and rape charges based on scanty evidence. He was detained based on a complaint filed by the Sofitel hotel where he was staying, on behalf of the alleged victim, an unnamed hotel chamber-maid:
The 32-year-old maid told authorities that she entered his suite early Saturday afternoon and he attacked her, New York Police Department spokesman Paul J. Browne. She said she had been told to clean the spacious $3,000-a-night suite, which she thought was empty.
According to an account the woman provided to police, Strauss-Kahn emerged from the bathroom naked, chased her down a hallway and pulled her into a bedroom, where he began to sexually assault her. She said she fought him off, then he dragged her into the bathroom, where he forced her to perform oral sex on him and tried to remove her underwear. The woman was able to break free again and escaped the room and told hotel staff what had happened, authorities said. They called police.
http://www.chron.com/disp/story.mpl/business/7565485.html#ixzz1MfFWFlnY
Challenging the Washington Consensus
What is at stake in the immediate wake of Strauss Kahn's demise is "regime change" at the IMF.
The Obama administration has demanded his replacement by a more compliant individual. U.S. Treasury Secretary Timothy Geithner, former CEO of the New York Federal Reserve Bank is pushing for the replacement of Dominique Strauss-Kahn, "suggesting he can no longer perform his duties" as IMF Managing director.
"Geithner called for greater formal recognition by the IMF board that John Lipsky, the fund's second-in-command, will continue serving as temporary managing director for an interim period. Although Strauss-Kahn has yet to resign, sources say the IMF is in touch with his legal counsel to discuss his future at the organization."
What lies behind the frame-up scenario? What powerful interests are involved? Geithner had a close personal relationship with Strauss-Kahn.
On the floor of the US Senate (May 18), Senator Mark Kirk of Illinois, called for the resignation of DSK while calling upon the IMF's deputy managing director John Lipsky to "assume full responsibility of the IMF" as interim managing director. The process of "permanent replacement should "commence at once," he said. John Lipsky is a well connected Wall Street banker, a former Vice Chairman at JPMorgan Investment Bank.
While the IMF is in theory an intergovernmental organization, it has historically been controlled by Wall Street and the US Treasury. The IMF's "bitter economic medicine", the so-called Structural Adjustment Program (SAP), imposed on countless developing countries, essentially serves the interests of creditor banks and multinational corporations.
The IMF is not the main architect of these devastating economic reforms which have served to impoverish millions of people, while creating a "favorable environment" for foreign investors in Third World low wage economies.
The creditor banks call the shots. The IMF is a bureaucratic entity. Its role is to implement and enforce those economic policies on behalf of dominant economic interests.
Strauss Kahn's proposed reforms while providing a "human face" to the IMF did not constitute a shift in direction. They were formulated within the realm of neoliberalism. They modified but they did not undermine the central role of IMF "economic medicine". The socially devastating impacts of IMF "shock treatment" under Strauss-Kahn's leadership have largely prevailed.
Dominique Strauss Kahn arrived at the helm of the IMF in November 2007, less than a year prior to September-October 2008 financial meltdown on Wall Street. The structural adjustment program (SAP) was not modified. Under DSK, IMF "shock treatment" which historically had been limited to developing countries was imposed on Greece, Ireland and Portugal.
Under the helm of DSK as Managing Director, the IMF demanded that developing countries remove food and fuel subsidies at a time of rising commodity prices on the New York and Chicago Mercantile exchanges.
The hikes in food and fuel prices, which preceded the September-October 2008 Wall Street crash, were in large part the result of market manipulation. Grain prices were boosted artificially by large scale speculative operations. Instead of taming the speculators and containing the rise in food and fuel prices, the IMF's role was to ensure that the governments of indebted developing countries would not in any way interfere in the "free market", by preventing these prices from going up.
These hikes in food prices, which are the result of outright manipulation (rather than scarcity) have served to impoverish people Worldwide. The surge in food prices constitutes a new phase of the process of global impoverishment.
DSK was complicit in this process of market manipulation. The removal of food and fuel subsidies in Tunisia and Egypt had been demanded by the IMF. Food and fuel prices skyrocketed, people were impoverished, paving the way towards the January 2011 social protest movement:
Fiscal prudence remains an overarching priority for the [Tunisian] authorities, who also see the need for maintaining a supportive fiscal policy in 2010 in the current international environment. Efforts in the last decade to bring down the public debt ratio significantly should not be jeopardized by a too lax fiscal policy. The authorities are committed to firmly control current expenditure, including subsidies,... (IMF Tunisia: 2010 Article IV Consultation - Staff Report; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Tunisia)
"[The IMF] encouraged the [Egyptian] authorities to press further with food and fuel subsidy reforms, and welcomed their intention to improve the efficiency and targeting of food subsidy programs. [meaning the selective elimination of food subsidies].
"Consideration should be given to introducing automatic adjustment mechanisms for domestic fuel prices to minimize distortions [meaning dramatic increases in fuel prices without State interference], while strengthening cash-based social programs to protect vulnerable groups. (IMF Executive Board Concludes 2008 Article IV Consultation with the Arab Republic of Egypt Public Information Notice, PIN No. 09/04, January 15, 2009)
Under the helm of DSK, the IMF also imposed sweeping austerity measures on Egypt in 2008, while supporting Hosni Mubarak's "efforts to broaden the privatization program".(Ibid)
The Frank G. Wisner Nicolas Sarkozy Connection
Strauss-Kahn was refused bail by Judge Melissa Jackson, an appointee and protégé of Michael Bloomberg, who in addition to his role as Mayor is a powerful figure on Wall Street.
Manhattan District Attorney Cyrus Vance Jr. charged (using scanty evidence) Strauss-Kahn "with seven crimes, including attempted rape, sexual abuse, forcible touching and unlawful imprisonment".
Who is Cyrus Vance Jr.?
He is the son of the late Cyrus Vance who served as Secretary of State in the Carter administration.
But there is more than meets the eye. Nicolas Sarkozy's step father Frank G. Wisner II, a prominent CIA official who married his step mother Christine de Ganay in 1977 served as Deputy Executive Secretary of State under the helm of Cyrus Vance Senior, father of District Attorney Cyrus Vance Junior.
Is it relevant?
The Vance and Wisner families had close personal ties. In turn Nicolas Sarkozy had close family ties with his step father Frank Wisner (and his half brothers and sisters in the US and one member of the Wisner family was involved in Sarkozy's election campaign).
It is also worth noting that Frank G. Wisner II was the son of one of America's most notorious spies, the late Frank Gardiner Wisner (1909- 1965), the mastermind behind the CIA sponsored coup which toppled the government of Mohammed Mossadegh in Iran in 1953. Wisner Jr. is also trustee of the Rockefeller Brothers Trust.
While these various personal ties do not prove that Strauss-Kahn was the object of a set-up, the matter of Sarkozy's ties to the CIA via his step father, not to mention the ties of Frank G. Wisner II to the Cyrus Vance family are certainly worth investigating. Frank G, Wisner also played a key role as Obama's special intelligence envoy to Egypt at the height of the January 2011 protest movement.
Did the CIA play a role?
Was Strauss-Kahn framed by people in his immediate political entourage including President Obama and Secretary of the Treasury Tim Geithner?
Fair Trial?
Innocent before proven guilty? The US media has already cast its verdict. Will the court procedures be manipulated?
One would expect that Strauss-Kahn be granted a fair trial, namely the same treatment as that granted to thousands of arrests on alleged sexual aggression charges in New York City.
How many similar or comparable alleged sexual aggressions occur on a monthly basis in New York City? What is the underlying pattern? How many of these are reported to the police? How many are the object of police follow-up once a complaint has been filed?
What is the percent of complaints submitted to police which are the object of police arrest? How many of these arrests lead to a judicial procedure? What are the delays in court procedures?
How many of these arrests lead to release without a judicial procedure?
How many of the cases submitted to a judicial procedure are dismissed by the presiding judge?
How many of the cases which are not dismissed are refused bail outright by the presiding judge? What is the basis for refusing bail?
How many are granted bail? What is the average amount of bail?
How many are imprisoned without bail based on scanty and incomplete evidence?
How many of those who are refused bail are sent to an infamous maximum security prison on Rikers Island on the orders of Michael Bloomberg.
Diplomatic Immunity
Press reports state that full diplomatic immunity does not apply to officials of the United Nations and the Bretton Woods institutions, namely that the US did not ratify the protocol.
"U.N. convention on privileges and immunities for international agencies that most countries have ratified. It gives the heads of U.N. agencies broad immunity in the countries where they are based. But the U.S. government never became a party to that treaty. Employees of international agencies are covered by a U.S. statute that gives only limited immunity."
The relevant question is how has this limited immunity provision been applied in practice? Namely how many people with limited immunity (UN officials, officials of the Bretton Woods institutions) have been arrested and sent to a high security prison?
Has Strauss Kahn been given the same treatment as those arrested under the provisions of "limited immunity"?
Does the Strauss Kahn arrest fit the pattern? Or is Strauss Kahn being treated in a way which does not correspond to the normal (average) pattern of police and judicial procedures applied in the numerous cases of persons arrested on alleged sexual assault charges?
Without a frame-up instrumented by very powerful people acting in the background, the head of the IMF would have been treated in an entirely different way. The mayor of New York Michael Bloomberg and Timothy Geithner would have come to his rescue. The matter would have been hushed up with a view to protecting the reputation of a powerful public figure. But that did not happen.
Sunday, September 20, 2009
Beast of the Month - May 2009
Beast of the Month - May 2009
Timothy Geithner
Obamanomics Mastermind
"I yam an anti-Christ..."
John Lydon (aka Johnny Rotten) of The Sex Pistols, "Anarchy in the UK"
"While the boss man takes his bonus pay and jets on out of town
And DC's bailing out them bankers as the farmers auction ground
Yeah while they're living it up on Wall Street in that New York City town
Here in the real world they're shuttin' Detroit down"
John Rich, "Shuttin' Detroit Down"
Well, it's been 100 days into the Obama Administration, and already a picture of the next four years is becoming pretty evident. True, he isn't the combo of Hitler, Stalin and Chairman Mao that the "teabaggers" (quit snickering!) of the Beck-Hannity-Limbaugh crowd try to make him out as. On the other hand, he clearly isn't the perfect mixture of JFK, MLK & Jesus Christ that the so-called "progressive" cultists fantasize he is either.
Say what you will about the teabaggers, but their anger at Barack Hussein Obama, however misdirected, at least seems like the logical response to the looting of America that has continued under his reign. Indeed, it seems that the left is far more delusional about what Barack Obama is than the Fox News watchers could ever be as they continue to wave pom-poms for the dude. For the general direction of the Obama Administration is exactly what The Konformist warned it would be: a sniveling betrayal of the duped progressives who supported his election victory as he bootlicks Wall Street and the Pentagon.
To be fair, Prez Obama hasn't been as terrible as some predicted he'd be. (And he certainly isn't as bad as George W. Bush, though that's hardly an amazing feat.) The good news: he has yet to launch World War III against Russia and/or China. Of course, the main reason is because there's no money left to finance WWIII after the massive swindling by the banksters and Wall Street under his reign, and that of his Treasury Secretary Timothy Geithner, The Konformist Beast of the Month.
Under Geithner and Team Obama, the siphoning of bucks to prop up the Wall Street monoliths has continued unabated. And though the Obama Administration pushed through a $787 billion "stimulus" program as well as a $75 billion plan to help homeowners facing foreclosure, the general direction of the Obama years is definitely still slanted towards funneling money to the powerful few. Indeed, though the $787 billion was more than the Wall Street Bailout - no doubt done to convince the public they've received more help than the bankers have - the vast majority of these dollars will only come to the poor, working class and middle class indirectly, if at all. Likewise, the foreclosure plan appears to be just enough to help only the subprime debtors who the financial system can profit off via the aid. Tellingly, it is the stimulus program and the homeowner plan that became the focus of the rage ranted over the airwaves by reactionary blowhards like Glenn Beck, Sean Hannity and Rick Santelli rather than the Wall Street Bailout. This appears to be a calculated obfuscation by these loathsome pundits. The end result is threefold: one, to channel the legitimate anger of the masses at the economic crisis towards those who are the victims rather than the perpetrators; two, to make it seem that it is only right-wing nut jobs and racists who oppose Obamanomics; and three, to frame the Obama economic policies as far left via distortion and shift the entire debate even farther to the right than before.
After the stimulus plan was pushed through, the Obama Administration offered up a trillion dollar "toxic assets" bailout for Wall Street. (In fact, it appears the push to get the stimulus program passed so quickly was because another round of obscene Wall Street handouts without a penny to the public would've been too in-your-face class warfare.) The plan puts federal funds to back 97 percent of the money used to buy away these bad assets, with the loans and three quarters of all losses backed by Uncle Sam. The investors in this scam will thus have their losses pretty much covered with a big upside for any financial rewards. All in all, the plan seems to be born from the big business philosophy of "socialize the costs, privatize the profits."
While the Obama team has been warm and snuggly to Wall Street, they have been equally ruthless to anyone with a United Auto Workers union card. While they coddle the bankers with trillions in bailouts, the pocket change handed to the Detroit Big Three was conditional on UAW workers accepting massive layoffs, pay cuts and reductions in retiree benefits. This shouldn't be too surprising, as the head of Obama's Auto Task Force is a real life Gordon Gekko in Steve Rattner, a corporate raider who has made a living crushing worker benefits for personal profits.
All this seems to follow the reactionary pattern that's been in place since the Wall Street Bailout of last October. Which leads to a logical question: just who was behind the bailout in the first place? As it turns out, a key player in creating the TARP program was the president of the New York Federal Reserve Bank at the time. This was none other than (drum roll please) Timothy Geithner himself.
The appointments of guys like Rattner and Geithner shouldn't be too surprising either: as has been noted on The Konformist, Obama has long surrounded himself with the most right-wing elements economically tied to the Democratic Party. This includes Austan Goolsbee, the University of Chicago professor who is on the "left" side of the far-right economic program made famous thanks to Milton Friedman. Goolsbee was named staff director and chief economist for the Economic Recovery Advisory Board, whose chairman, also appointed by Obama, is former Federal Reserve chairman Paul Volcker, the man whose ruthless monetary policies (also inspired by Milton Friedman) led to a nasty recession that nearly destroyed Ronald Reagan's presidency in its first term.
Beyond just surrounding himself with right-wingers, Obama's positions, even before his election, were decidedly to the right of Edwards and Clinton. Indeed, though it is almost never acknowledged, by the end of the 2008 campaign, John McCain had offered a far more generous solution to foreclosure victims than any Obama proposal. Of course, Obama may have been too busy raising a record $650 million dollars to show any concern for these bitter financial victims. And though the sales job of Obama feigns his campaign was fueled by small donors, the Campaign Finance Institute concluded Obama "raised significantly more large-donor money in absolute terms than any of his rivals or predecessors." (It should be mentioned as almost an afterthought that Obama's VP pick, Joe Biden of Delaware, is so tied to the banking industry he has earned the nickname of "Credit Card Joe" for his efforts.)
The punch line in this rightward tilt in Obamanomics: after repeatedly being accused of being a far-left socialist by the Beck-Hannity-Limbaugh crowd, the left will be blamed for any failures in his economic programs. The general suspicion of The Konformist staff is the stimulus program will be enough to stop a major depression, but not enough to stop a lingering recession. Meanwhile, in January, economist Paul Craig Roberts warned the deficit would be $3 trillion in 2009, and his projection looks more accurate by the day than the predictions of others. With the unemployment rate looking to hit double digits soon, it appears there's a lot of failure ready to be pinned on the left in the coming years.
In any case, we salute Timothy Geithner as Beast of the Month. Congratulations, and keep up the great work, Timmy!!!
Sources:
Allen, Mike. "Volcker Will Head New Obama Board." Yahoo News 26 November 2008 <http://news.yahoo.com/s/politico/20081126/pl_politico/15997>.
"Credit Card Joe." The Real Joe Biden. 24 August 2008 <http://therealjoebiden.wordpress.com/2008/08/24/credit-card-joe>.
Eley, Tom. "Buyer Beware! Obama Named 'Marketer of the Year'." World Socialist Web Site 6 December 2008 <http://www.wsws.org/articles/2008/dec2008/obad-d06.shtml>.
Grey, Barry. "Wall Street Celebrates Government Windfall for Banks and Big Investors." World Socialist Web Site 24 March 2009 <http://wsws.org/articles/2009/mar2009/toxi-m24.shtml>.
Marshall, Bruce. "Barack 'Hoover' Obama." Rense.com 11 March 2009 <http://rense.com/general85/hoov.htm>.
"Obama: 'Everybody Thinks They’re Economists'." Infowars 6 February 2009 <http://www.infowars.com/obama-everybody-thinks-theyre-economists>.
"Reality Check: Obama Received About the Same Percentage from Small Donors in 2008 as Bush in 2004." The Campaign Finance Institute 24 November 2008 <http://www.cfinst.org/pr/prRelease.aspx?ReleaseID=216>.
Roberts, Paul Craig. "Another Real Estate Crisis Is About to Hit." Online Journal 23 January 2009 <http://onlinejournal.com/artman/publish/article_4274.shtml>.
Sirota, David. "Obama's Gordon Gekko Targets Union Workers." OurFuture.org 31 March 2009 <http://www.ourfuture.org/blog-entry/2009031431/obamas-gordon-gekko-targets-union-workers-0>.
Tarpley, Webster G. "Defeat Obama - Advice For Voters." Rense.com 3 November 2008 <http://www.rense.com/general83/advi.htm>.
Tarpley, Webster G. "Motormouth Joe Biden - Warmonger, Wordmonger And Political Hit Man." Rense.com 25 August 2008 <http://rense.com/general83/biden.htm>.
Timothy Geithner
Obamanomics Mastermind
"I yam an anti-Christ..."
John Lydon (aka Johnny Rotten) of The Sex Pistols, "Anarchy in the UK"
"While the boss man takes his bonus pay and jets on out of town
And DC's bailing out them bankers as the farmers auction ground
Yeah while they're living it up on Wall Street in that New York City town
Here in the real world they're shuttin' Detroit down"
John Rich, "Shuttin' Detroit Down"
Well, it's been 100 days into the Obama Administration, and already a picture of the next four years is becoming pretty evident. True, he isn't the combo of Hitler, Stalin and Chairman Mao that the "teabaggers" (quit snickering!) of the Beck-Hannity-Limbaugh crowd try to make him out as. On the other hand, he clearly isn't the perfect mixture of JFK, MLK & Jesus Christ that the so-called "progressive" cultists fantasize he is either.
Say what you will about the teabaggers, but their anger at Barack Hussein Obama, however misdirected, at least seems like the logical response to the looting of America that has continued under his reign. Indeed, it seems that the left is far more delusional about what Barack Obama is than the Fox News watchers could ever be as they continue to wave pom-poms for the dude. For the general direction of the Obama Administration is exactly what The Konformist warned it would be: a sniveling betrayal of the duped progressives who supported his election victory as he bootlicks Wall Street and the Pentagon.
To be fair, Prez Obama hasn't been as terrible as some predicted he'd be. (And he certainly isn't as bad as George W. Bush, though that's hardly an amazing feat.) The good news: he has yet to launch World War III against Russia and/or China. Of course, the main reason is because there's no money left to finance WWIII after the massive swindling by the banksters and Wall Street under his reign, and that of his Treasury Secretary Timothy Geithner, The Konformist Beast of the Month.
Under Geithner and Team Obama, the siphoning of bucks to prop up the Wall Street monoliths has continued unabated. And though the Obama Administration pushed through a $787 billion "stimulus" program as well as a $75 billion plan to help homeowners facing foreclosure, the general direction of the Obama years is definitely still slanted towards funneling money to the powerful few. Indeed, though the $787 billion was more than the Wall Street Bailout - no doubt done to convince the public they've received more help than the bankers have - the vast majority of these dollars will only come to the poor, working class and middle class indirectly, if at all. Likewise, the foreclosure plan appears to be just enough to help only the subprime debtors who the financial system can profit off via the aid. Tellingly, it is the stimulus program and the homeowner plan that became the focus of the rage ranted over the airwaves by reactionary blowhards like Glenn Beck, Sean Hannity and Rick Santelli rather than the Wall Street Bailout. This appears to be a calculated obfuscation by these loathsome pundits. The end result is threefold: one, to channel the legitimate anger of the masses at the economic crisis towards those who are the victims rather than the perpetrators; two, to make it seem that it is only right-wing nut jobs and racists who oppose Obamanomics; and three, to frame the Obama economic policies as far left via distortion and shift the entire debate even farther to the right than before.
After the stimulus plan was pushed through, the Obama Administration offered up a trillion dollar "toxic assets" bailout for Wall Street. (In fact, it appears the push to get the stimulus program passed so quickly was because another round of obscene Wall Street handouts without a penny to the public would've been too in-your-face class warfare.) The plan puts federal funds to back 97 percent of the money used to buy away these bad assets, with the loans and three quarters of all losses backed by Uncle Sam. The investors in this scam will thus have their losses pretty much covered with a big upside for any financial rewards. All in all, the plan seems to be born from the big business philosophy of "socialize the costs, privatize the profits."
While the Obama team has been warm and snuggly to Wall Street, they have been equally ruthless to anyone with a United Auto Workers union card. While they coddle the bankers with trillions in bailouts, the pocket change handed to the Detroit Big Three was conditional on UAW workers accepting massive layoffs, pay cuts and reductions in retiree benefits. This shouldn't be too surprising, as the head of Obama's Auto Task Force is a real life Gordon Gekko in Steve Rattner, a corporate raider who has made a living crushing worker benefits for personal profits.
All this seems to follow the reactionary pattern that's been in place since the Wall Street Bailout of last October. Which leads to a logical question: just who was behind the bailout in the first place? As it turns out, a key player in creating the TARP program was the president of the New York Federal Reserve Bank at the time. This was none other than (drum roll please) Timothy Geithner himself.
The appointments of guys like Rattner and Geithner shouldn't be too surprising either: as has been noted on The Konformist, Obama has long surrounded himself with the most right-wing elements economically tied to the Democratic Party. This includes Austan Goolsbee, the University of Chicago professor who is on the "left" side of the far-right economic program made famous thanks to Milton Friedman. Goolsbee was named staff director and chief economist for the Economic Recovery Advisory Board, whose chairman, also appointed by Obama, is former Federal Reserve chairman Paul Volcker, the man whose ruthless monetary policies (also inspired by Milton Friedman) led to a nasty recession that nearly destroyed Ronald Reagan's presidency in its first term.
Beyond just surrounding himself with right-wingers, Obama's positions, even before his election, were decidedly to the right of Edwards and Clinton. Indeed, though it is almost never acknowledged, by the end of the 2008 campaign, John McCain had offered a far more generous solution to foreclosure victims than any Obama proposal. Of course, Obama may have been too busy raising a record $650 million dollars to show any concern for these bitter financial victims. And though the sales job of Obama feigns his campaign was fueled by small donors, the Campaign Finance Institute concluded Obama "raised significantly more large-donor money in absolute terms than any of his rivals or predecessors." (It should be mentioned as almost an afterthought that Obama's VP pick, Joe Biden of Delaware, is so tied to the banking industry he has earned the nickname of "Credit Card Joe" for his efforts.)
The punch line in this rightward tilt in Obamanomics: after repeatedly being accused of being a far-left socialist by the Beck-Hannity-Limbaugh crowd, the left will be blamed for any failures in his economic programs. The general suspicion of The Konformist staff is the stimulus program will be enough to stop a major depression, but not enough to stop a lingering recession. Meanwhile, in January, economist Paul Craig Roberts warned the deficit would be $3 trillion in 2009, and his projection looks more accurate by the day than the predictions of others. With the unemployment rate looking to hit double digits soon, it appears there's a lot of failure ready to be pinned on the left in the coming years.
In any case, we salute Timothy Geithner as Beast of the Month. Congratulations, and keep up the great work, Timmy!!!
Sources:
Allen, Mike. "Volcker Will Head New Obama Board." Yahoo News 26 November 2008 <http://news.yahoo.com/s/politico/20081126/pl_politico/15997>.
"Credit Card Joe." The Real Joe Biden. 24 August 2008 <http://therealjoebiden.wordpress.com/2008/08/24/credit-card-joe>.
Eley, Tom. "Buyer Beware! Obama Named 'Marketer of the Year'." World Socialist Web Site 6 December 2008 <http://www.wsws.org/articles/2008/dec2008/obad-d06.shtml>.
Grey, Barry. "Wall Street Celebrates Government Windfall for Banks and Big Investors." World Socialist Web Site 24 March 2009 <http://wsws.org/articles/2009/mar2009/toxi-m24.shtml>.
Marshall, Bruce. "Barack 'Hoover' Obama." Rense.com 11 March 2009 <http://rense.com/general85/hoov.htm>.
"Obama: 'Everybody Thinks They’re Economists'." Infowars 6 February 2009 <http://www.infowars.com/obama-everybody-thinks-theyre-economists>.
"Reality Check: Obama Received About the Same Percentage from Small Donors in 2008 as Bush in 2004." The Campaign Finance Institute 24 November 2008 <http://www.cfinst.org/pr/prRelease.aspx?ReleaseID=216>.
Roberts, Paul Craig. "Another Real Estate Crisis Is About to Hit." Online Journal 23 January 2009 <http://onlinejournal.com/artman/publish/article_4274.shtml>.
Sirota, David. "Obama's Gordon Gekko Targets Union Workers." OurFuture.org 31 March 2009 <http://www.ourfuture.org/blog-entry/2009031431/obamas-gordon-gekko-targets-union-workers-0>.
Tarpley, Webster G. "Defeat Obama - Advice For Voters." Rense.com 3 November 2008 <http://www.rense.com/general83/advi.htm>.
Tarpley, Webster G. "Motormouth Joe Biden - Warmonger, Wordmonger And Political Hit Man." Rense.com 25 August 2008 <http://rense.com/general83/biden.htm>.
Tuesday, August 11, 2009
The expiring economy
http://onlinejournal.com/artman/publish/article_4992.shtml
The expiring economy
By Paul Craig Roberts
Online Journal Contributing Writer
Aug 7, 2009
Tent cities springing up all over America are filling with the homeless unemployed from the worst economy since the 1930s. While Americans live in tents, the Obama government has embarked on a $1 billion crash program to build a mega-embassy in Islamabad, Pakistan, to rival the one the Bush government built in Baghdad, Iraq.
Hard times have now afflicted Americans for so long that even the extension of unemployment benefits from six months to 18 months for 24 high unemployment states, and to 46-72 weeks in other states, is beginning to run out. By Christmas 1.5 million Americans will have exhausted unemployment benefits while unemployment rolls continue to rise.
Amidst this worsening economic crisis, the House of Representatives just passed a $636 billion “defense” bill.
Who is the United States defending against? Americans have no enemies except those that the US government goes out of its way to create by bombing and invading countries that comprise no threat whatsoever to the US and by encircling others -- Russia for example -- with threatening military bases.
America’s wars are contrived affairs to serve the money-laundering machine: from the taxpayers and money borrowed from foreign creditors to the armaments industry to the political contributions that ensure $636 billion “defense” bills.
President George W. Bush gave us wars in Iraq and Afghanistan that are entirely based on lies and misrepresentations. But Obama has done Bush one better. Obama has started a war in Pakistan with no explanation whatsoever.
If the armaments industry and the neoconservative brownshirts have their way, the US will also be at war with Iran, Russia, Sudan and North Korea.
Meanwhile, America continues to be overrun, as it has been for decades, not by armed foreign enemies but by illegal immigrants across America’s porous and undefended borders.
It is more proof of the Orwellian time in which we live that $636 billion appropriated for wars of aggression is called a “defense bill.”
Who is going to pay for all of this? When foreign countries have spent their trade surpluses and have no more dollars to recycle into the purchase of Treasury bonds, when US banks have used up their “bailout” money by purchasing Treasury bonds, and when the Federal Reserve cannot print any more money to keep the government going without pushing up inflation and interest rates, the taxpayer will be all that is left. Already Obama’s two top economic advisors, Treasury Secretary Timothy Geithner and director of the National Economic Council Larry Summers, are floating the prospect of a middle class tax increase. Will Obama be maneuvered away from his promise just as Bush Sr. was?
Will Americans see the disconnect between their interests and the interests of “their” government? In the small town of Vassalboro, Maine, a few topless waitress jobs in a coffee house drew 150 applicants. Women in this small town are so desperate for jobs that they are reduced to undressing for their neighbors’ amusement.
Meanwhile, the Obama government is going to straighten out Afghanistan and Pakistan and build marble palaces to awe the locals half way around the world.
The US government keeps hyping “recovery” the way Bush hyped “terrorist threat” and “weapons of mass destruction.” The recovery is no more real than the threats. Indeed, it is possible that the economic collapse has hardly begun. Let’s look at what might await us here at home while the US government pursues hegemony abroad.
The real estate crisis is not over. More home foreclosures await as unemployment rises and unemployment benefits are exhausted. The commercial real estate crisis is yet to hit. More bailouts are coming, and they will have to be financed by more debt or money creation. If there are not sufficient purchasers for the Treasury bonds, the Federal Reserve will have to purchase them by creating checking accounts for the Treasury, that is, by debt monetization or the printing of money.
More debt and money creation will put more pressure on the US dollar’s exchange value. At some point import prices, which include offshored goods and services of US corporations, will rise, adding to the inflation fueled by domestic money creation. The Federal Reserve will be unable to hold down interest rates by buying bonds.
No part of US economic policy addresses the systemic crisis in American incomes. For most Americans real income ceased to grow some years ago. Americans have substituted second jobs and debt accumulation for the missing growth in real wages. With most households maxed out on debt and jobs disappearing, these substitutes for real income growth no longer exist.
The Bush-Obama economic policy actually worsens the systemic crisis that the US dollar faces as reserve currency. The fact that there might be no alternative to the dollar as reserve currency does not guarantee that the dollar will continue in this role. Countries might find it less risky to settle trade transactions in their own currencies.
How does an economy based heavily on consumer spending recover when so many high-value-added jobs, and the GDP and payroll tax revenues associated with them, have been moved offshore and when consumers have no more assets to leverage in order to increase their spending?
How does the US pay for its imports if the dollar is no longer used as reserve currency?
These are the unanswered questions.
Paul Craig Roberts was Assistant Secretary of the Treasury during President Reagan’s first term. He was Associate Editor of the Wall Street Journal. He has held numerous academic appointments, including the William E. Simon Chair, Center for Strategic and International Studies, Georgetown University, and Senior Research Fellow, Hoover Institution, Stanford University. He was awarded the Legion of Honor by French President Francois Mitterrand. He is the author of Supply-Side Revolution : An Insider’s Account of Policymaking in Washington; Alienation and the Soviet Economy and Meltdown: Inside the Soviet Economy, and is the co-author with Lawrence M. Stratton of The Tyranny of Good Intentions : How Prosecutors and Bureaucrats Are Trampling the Constitution in the Name of Justice.
The expiring economy
By Paul Craig Roberts
Online Journal Contributing Writer
Aug 7, 2009
Tent cities springing up all over America are filling with the homeless unemployed from the worst economy since the 1930s. While Americans live in tents, the Obama government has embarked on a $1 billion crash program to build a mega-embassy in Islamabad, Pakistan, to rival the one the Bush government built in Baghdad, Iraq.
Hard times have now afflicted Americans for so long that even the extension of unemployment benefits from six months to 18 months for 24 high unemployment states, and to 46-72 weeks in other states, is beginning to run out. By Christmas 1.5 million Americans will have exhausted unemployment benefits while unemployment rolls continue to rise.
Amidst this worsening economic crisis, the House of Representatives just passed a $636 billion “defense” bill.
Who is the United States defending against? Americans have no enemies except those that the US government goes out of its way to create by bombing and invading countries that comprise no threat whatsoever to the US and by encircling others -- Russia for example -- with threatening military bases.
America’s wars are contrived affairs to serve the money-laundering machine: from the taxpayers and money borrowed from foreign creditors to the armaments industry to the political contributions that ensure $636 billion “defense” bills.
President George W. Bush gave us wars in Iraq and Afghanistan that are entirely based on lies and misrepresentations. But Obama has done Bush one better. Obama has started a war in Pakistan with no explanation whatsoever.
If the armaments industry and the neoconservative brownshirts have their way, the US will also be at war with Iran, Russia, Sudan and North Korea.
Meanwhile, America continues to be overrun, as it has been for decades, not by armed foreign enemies but by illegal immigrants across America’s porous and undefended borders.
It is more proof of the Orwellian time in which we live that $636 billion appropriated for wars of aggression is called a “defense bill.”
Who is going to pay for all of this? When foreign countries have spent their trade surpluses and have no more dollars to recycle into the purchase of Treasury bonds, when US banks have used up their “bailout” money by purchasing Treasury bonds, and when the Federal Reserve cannot print any more money to keep the government going without pushing up inflation and interest rates, the taxpayer will be all that is left. Already Obama’s two top economic advisors, Treasury Secretary Timothy Geithner and director of the National Economic Council Larry Summers, are floating the prospect of a middle class tax increase. Will Obama be maneuvered away from his promise just as Bush Sr. was?
Will Americans see the disconnect between their interests and the interests of “their” government? In the small town of Vassalboro, Maine, a few topless waitress jobs in a coffee house drew 150 applicants. Women in this small town are so desperate for jobs that they are reduced to undressing for their neighbors’ amusement.
Meanwhile, the Obama government is going to straighten out Afghanistan and Pakistan and build marble palaces to awe the locals half way around the world.
The US government keeps hyping “recovery” the way Bush hyped “terrorist threat” and “weapons of mass destruction.” The recovery is no more real than the threats. Indeed, it is possible that the economic collapse has hardly begun. Let’s look at what might await us here at home while the US government pursues hegemony abroad.
The real estate crisis is not over. More home foreclosures await as unemployment rises and unemployment benefits are exhausted. The commercial real estate crisis is yet to hit. More bailouts are coming, and they will have to be financed by more debt or money creation. If there are not sufficient purchasers for the Treasury bonds, the Federal Reserve will have to purchase them by creating checking accounts for the Treasury, that is, by debt monetization or the printing of money.
More debt and money creation will put more pressure on the US dollar’s exchange value. At some point import prices, which include offshored goods and services of US corporations, will rise, adding to the inflation fueled by domestic money creation. The Federal Reserve will be unable to hold down interest rates by buying bonds.
No part of US economic policy addresses the systemic crisis in American incomes. For most Americans real income ceased to grow some years ago. Americans have substituted second jobs and debt accumulation for the missing growth in real wages. With most households maxed out on debt and jobs disappearing, these substitutes for real income growth no longer exist.
The Bush-Obama economic policy actually worsens the systemic crisis that the US dollar faces as reserve currency. The fact that there might be no alternative to the dollar as reserve currency does not guarantee that the dollar will continue in this role. Countries might find it less risky to settle trade transactions in their own currencies.
How does an economy based heavily on consumer spending recover when so many high-value-added jobs, and the GDP and payroll tax revenues associated with them, have been moved offshore and when consumers have no more assets to leverage in order to increase their spending?
How does the US pay for its imports if the dollar is no longer used as reserve currency?
These are the unanswered questions.
Paul Craig Roberts was Assistant Secretary of the Treasury during President Reagan’s first term. He was Associate Editor of the Wall Street Journal. He has held numerous academic appointments, including the William E. Simon Chair, Center for Strategic and International Studies, Georgetown University, and Senior Research Fellow, Hoover Institution, Stanford University. He was awarded the Legion of Honor by French President Francois Mitterrand. He is the author of Supply-Side Revolution : An Insider’s Account of Policymaking in Washington; Alienation and the Soviet Economy and Meltdown: Inside the Soviet Economy, and is the co-author with Lawrence M. Stratton of The Tyranny of Good Intentions : How Prosecutors and Bureaucrats Are Trampling the Constitution in the Name of Justice.
Wednesday, August 5, 2009
Citigroup’s $100 million banker
http://wsws.org/articles/2009/jul2009/pers-j29.shtml
Citigroup’s $100 million banker
29 July 2009
The Wall Street Journal reported Saturday that a top Citigroup trader is demanding that the bank follow through on a 2009 pay package estimated at $100 million. Andrew J. Hall, who runs Citigroup’s energy trading division, has threatened to quit should the bank fail to honor his pay deal in full.
According to the Journal, Hall, an energy speculator and top money-maker for the bank, received more than $100 million last year. Such nine-digit salaries exemplify the plundering of social resources that has become a hallmark of American capitalism and the American financial elite.
The crash of 2008 and Great Recession of 2009 have had no impact on the obscene levels of wealth that flow to a parasitic elite at the top of the economic ladder. On the contrary, the power of the aristocracy has, if anything, been enhanced as a result of the policies of the Obama administration, which has made the bailout of Wall Street at public expense its number one priority.
It would take a minimum wage worker, working full-time without vacations, 6,269 years to earn $100 million. Hall’s yearly pay is roughly equivalent to the annual wage of 2,000 workers in the US. He makes in an hour about the same amount most American workers earn in a year.
Hall’s two-year take of $200 million will be greater than the budget deficits confronting a large number of US cities and their public school systems.
Hall heads Citigroup’s energy-trading unit, Phibro LLC, which the Journal describes as “a secretive operation, run from the site of a former Connecticut dairy farm [that] occasionally accounts for a disproportionate chunk of Citigroup’s income.”
The federal government has plowed $45 billion in cash into Citigroup and guaranteed over $300 billion of the bank’s assets. It will soon own 34 percent of the bank’s common stock, making it Citigroup’s largest shareholder.
Yet the Obama administration is tied up in knots over the demands of a single Citigroup energy speculator. Nothing could more clearly demonstrate the complete subordination of the government and the entire political system to the financial mafia.
The Journal writes that the payout would set “the stage for a potential showdown between Citigroup and the government’s new pay czar,” Kenneth Feinberg. President Obama recently appointed Feinberg to the Treasury Department to oversee executive compensation at seven corporations holding outstanding TARP (Trouble Asset Relief Program) funds—Citigroup, Bank of America, American International Group, General Motors, Chrysler, and the two automakers’ finance arms.
Far from a “showdown,” a chummy discussion among Wall Street insiders is underway over how to pay Hall. The Journal reports that Citigroup officials have been lobbying Feinberg to approve Hall’s pay package, especially Citigroup Vice Chairman Lewis Kaden, “who has been handling most of the discussions with the pay czar, trying to capitalize on the two men’s longtime friendship.” The newspaper indicates that Citigroup might finesse the TARP pay limits by formally spinning off Phibro.
In a statement on the controversy over Hall’s pay, Citigroup declared, “Retaining and attracting the best talent is very important to the success of Citigroup and all its stakeholders.”
The type of talent so prized on Wall Street is indicated in a separate Journal article, “Traders Blamed for Oil Spike,” published on Tuesday. The article points to the socially destructive nature of Hall’s line of work. It states that the Commodity Futures Trading Commission will issue a report next month attributing the wild swings in oil prices from 2007 to the present largely to the role of energy traders.
Hall’s enormous personal income is bound up with the manipulation of energy markets, which has contributed to the broken finances of millions of American households through higher gas and home heating bills and a run-up in food prices that has dramatically increased hunger in many parts of the world. The volatility on energy markets has played a significant role in the global economic crisis, driving up unemployment to levels not seen since the Great Depression.
Hall’s case only highlights Wall Street’s resumption of multimillion-dollar salaries and bonuses for executives and traders. In recent weeks, other major bailed-out banks, including Goldman Sachs, JPMorgan Chase and Morgan Stanley, have set aside sharply higher—in the case of Goldman Sachs, record—sums for bonuses and salaries. Last week, Morgan Stanley issued its second quarter financial results, revealing that it set aside 72 percent of revenues for salaries and bonuses, even though it reported a loss for the period.
The Obama administration has worked to block any real restrictions on Wall Street pay. Treasury Secretary Timothy Geithner and top economic adviser Lawrence Summers publicly opposed modest limits on executive pay at firms receiving TARP funds that were included in the $787 billion economic stimulus bill passed last February.
The following month, Obama intervened to block executive pay limits passed by the House of Representatives and set for a vote in the Senate following public outrage over reports that the bailed-out insurance giant American International Group (AIG) was about to dispense hundreds of millions of dollars in bonuses.
Obama’s July 22 prime time press conference provided a graphic demonstration of the utter servility of the president and the entire government to the barons of Wall Street. Asked by a reporter if new revelations about bank profits did not indicate that the White House should take “a harder line with Wall Street,” Obama acknowledged that the banks’ reckless speculation and profiteering had precipitated the global economic crisis.
“Wall Street,” he said, “took extraordinary risks with other people’s money, they were peddling loans that they knew could never be paid back, they were flipping those loans and leveraging those loans and higher and higher mountains of debt were being built on loans that were fundamentally unsound. And all of us now are paying the price.”
Far from suggesting that there should be any consequences for such crimes against society, Obama hastened to declare that “it’s a good thing that they’re profitable again, because if they’re profitable that means that they have reserves in place and they can lend.” (In fact, the banks have refused to significantly expand their lending to businesses and consumers). Obama added, “And this is America, so if you’re profitable in the free market system, then you benefit.”
As for the bankers’ use of taxpayer money to reward themselves with colossal salaries and bonuses, the president could do no more than make a lame appeal for greater restraint. “With respect to compensation, I’d like to think that people would feel a little remorse and feel embarrassed and would not get million-dollar or multimillion-dollar bonuses,” Obama said.
The same White House that dictates wage cuts, layoffs and poverty for auto workers dares not infringe on the wealth or prerogatives of the financial aristocracy. Such are the class realities of America and the dictatorial power exerted by the financial elite behind the trappings of American democracy.
Tom Eley and Barry Grey
Citigroup’s $100 million banker
29 July 2009
The Wall Street Journal reported Saturday that a top Citigroup trader is demanding that the bank follow through on a 2009 pay package estimated at $100 million. Andrew J. Hall, who runs Citigroup’s energy trading division, has threatened to quit should the bank fail to honor his pay deal in full.
According to the Journal, Hall, an energy speculator and top money-maker for the bank, received more than $100 million last year. Such nine-digit salaries exemplify the plundering of social resources that has become a hallmark of American capitalism and the American financial elite.
The crash of 2008 and Great Recession of 2009 have had no impact on the obscene levels of wealth that flow to a parasitic elite at the top of the economic ladder. On the contrary, the power of the aristocracy has, if anything, been enhanced as a result of the policies of the Obama administration, which has made the bailout of Wall Street at public expense its number one priority.
It would take a minimum wage worker, working full-time without vacations, 6,269 years to earn $100 million. Hall’s yearly pay is roughly equivalent to the annual wage of 2,000 workers in the US. He makes in an hour about the same amount most American workers earn in a year.
Hall’s two-year take of $200 million will be greater than the budget deficits confronting a large number of US cities and their public school systems.
Hall heads Citigroup’s energy-trading unit, Phibro LLC, which the Journal describes as “a secretive operation, run from the site of a former Connecticut dairy farm [that] occasionally accounts for a disproportionate chunk of Citigroup’s income.”
The federal government has plowed $45 billion in cash into Citigroup and guaranteed over $300 billion of the bank’s assets. It will soon own 34 percent of the bank’s common stock, making it Citigroup’s largest shareholder.
Yet the Obama administration is tied up in knots over the demands of a single Citigroup energy speculator. Nothing could more clearly demonstrate the complete subordination of the government and the entire political system to the financial mafia.
The Journal writes that the payout would set “the stage for a potential showdown between Citigroup and the government’s new pay czar,” Kenneth Feinberg. President Obama recently appointed Feinberg to the Treasury Department to oversee executive compensation at seven corporations holding outstanding TARP (Trouble Asset Relief Program) funds—Citigroup, Bank of America, American International Group, General Motors, Chrysler, and the two automakers’ finance arms.
Far from a “showdown,” a chummy discussion among Wall Street insiders is underway over how to pay Hall. The Journal reports that Citigroup officials have been lobbying Feinberg to approve Hall’s pay package, especially Citigroup Vice Chairman Lewis Kaden, “who has been handling most of the discussions with the pay czar, trying to capitalize on the two men’s longtime friendship.” The newspaper indicates that Citigroup might finesse the TARP pay limits by formally spinning off Phibro.
In a statement on the controversy over Hall’s pay, Citigroup declared, “Retaining and attracting the best talent is very important to the success of Citigroup and all its stakeholders.”
The type of talent so prized on Wall Street is indicated in a separate Journal article, “Traders Blamed for Oil Spike,” published on Tuesday. The article points to the socially destructive nature of Hall’s line of work. It states that the Commodity Futures Trading Commission will issue a report next month attributing the wild swings in oil prices from 2007 to the present largely to the role of energy traders.
Hall’s enormous personal income is bound up with the manipulation of energy markets, which has contributed to the broken finances of millions of American households through higher gas and home heating bills and a run-up in food prices that has dramatically increased hunger in many parts of the world. The volatility on energy markets has played a significant role in the global economic crisis, driving up unemployment to levels not seen since the Great Depression.
Hall’s case only highlights Wall Street’s resumption of multimillion-dollar salaries and bonuses for executives and traders. In recent weeks, other major bailed-out banks, including Goldman Sachs, JPMorgan Chase and Morgan Stanley, have set aside sharply higher—in the case of Goldman Sachs, record—sums for bonuses and salaries. Last week, Morgan Stanley issued its second quarter financial results, revealing that it set aside 72 percent of revenues for salaries and bonuses, even though it reported a loss for the period.
The Obama administration has worked to block any real restrictions on Wall Street pay. Treasury Secretary Timothy Geithner and top economic adviser Lawrence Summers publicly opposed modest limits on executive pay at firms receiving TARP funds that were included in the $787 billion economic stimulus bill passed last February.
The following month, Obama intervened to block executive pay limits passed by the House of Representatives and set for a vote in the Senate following public outrage over reports that the bailed-out insurance giant American International Group (AIG) was about to dispense hundreds of millions of dollars in bonuses.
Obama’s July 22 prime time press conference provided a graphic demonstration of the utter servility of the president and the entire government to the barons of Wall Street. Asked by a reporter if new revelations about bank profits did not indicate that the White House should take “a harder line with Wall Street,” Obama acknowledged that the banks’ reckless speculation and profiteering had precipitated the global economic crisis.
“Wall Street,” he said, “took extraordinary risks with other people’s money, they were peddling loans that they knew could never be paid back, they were flipping those loans and leveraging those loans and higher and higher mountains of debt were being built on loans that were fundamentally unsound. And all of us now are paying the price.”
Far from suggesting that there should be any consequences for such crimes against society, Obama hastened to declare that “it’s a good thing that they’re profitable again, because if they’re profitable that means that they have reserves in place and they can lend.” (In fact, the banks have refused to significantly expand their lending to businesses and consumers). Obama added, “And this is America, so if you’re profitable in the free market system, then you benefit.”
As for the bankers’ use of taxpayer money to reward themselves with colossal salaries and bonuses, the president could do no more than make a lame appeal for greater restraint. “With respect to compensation, I’d like to think that people would feel a little remorse and feel embarrassed and would not get million-dollar or multimillion-dollar bonuses,” Obama said.
The same White House that dictates wage cuts, layoffs and poverty for auto workers dares not infringe on the wealth or prerogatives of the financial aristocracy. Such are the class realities of America and the dictatorial power exerted by the financial elite behind the trappings of American democracy.
Tom Eley and Barry Grey
Tuesday, May 19, 2009
Cuts in Social Security, Medicare
http://wsws.org/articles/2009/may2009/ssmd-m14.shtml
US: Cuts in Social Security, Medicare to pay for bank bailouts
By Tom Eley
14 May 2009
A government report made public Tuesday indicates that Social Security and Medicare will deplete their trust funds more quickly than previously forecast. This has sparked new demands from within the US financial elite for substantial cuts in the two entitlement programs, which pay retirement and medical benefits for tens of millions of working class Americans.
The report was issued by the programs’ trustees, a group of four Obama administration officials headed by Treasury Secretary Timothy Geithner. Because regressive payroll taxes on workers’ earnings fund the two programs, mounting unemployment has worsened the projections. Since December 2007, 5.7 million jobs have been lost, and the official unemployment rate now approaches 9 percent.
The slump has slowed the rate of inflation to below the level required by law to trigger a cost-of-living raise for Social Security recipients. As a result, the trustees project that in 2010 and 2011, for the first time since automatic cost-of-living raises were incorporated into Social Security in the 1970s, there will be no increase in retirement benefits, and only a minuscule 1.4 percent rise in 2012.
Since the trustees base their projections of the fiscal state of both programs by estimating future economic growth, the current slump has moved forward the projected point at which each program will begin to run a deficit. Social Security currently operates at a surplus, which the report anticipates will end in 2016, when the program would finally have to begin withdrawing from its own fund—potentially cutting into the other areas where the federal government currently funnels the money. The effective freeze in retirement benefits will be combined with substantially higher monthly premiums for many Medicare recipients.
Even by its alarmist critics’ own admission, Social Security is not about to collapse under its own weight. It would deplete its funds by 2045, thirty years from now, according to the trustees’ report. For years, Social Security funds have been used to pay directly or indirectly for reactionary federal budget priorities—including tax cuts for the rich, bank bailouts, and the wars in Iraq and Afghanistan.
The Obama administration has shelled out hundreds of billions, no strings attached, to the biggest financial institutions, under the false rationale that this would “kick-start” lending and generate jobs. All told, between direct cash infusions, loans, and guarantees on debt, Washington has handed over around $10 trillion to Wall Street in less than a year. In comparison, Medicare would need $13 trillion and Social Security $5 trillion over the next 75 years to remain solvent, according to the report. In other words, retirement benefits and healthcare benefits for several generations of the elderly could be secured at the cost of one year’s bailout of the financial aristocracy.
But the vast payouts to Wall Street and the imperialist wars abroad require the plundering of Social Security and Medicare. After giving hundreds of billions to the banks and setting a new record for military spending, Obama has no other credible target for “fiscal discipline.” Yesterday the White House revised upwards its budget deficit estimate by 5 percent from February to $1.84 trillion.
Secretary Geithner’s dual role as Wall Street frontman and “trustee” of the retirement and health care for the working class underscores the duplicitous nature of the Obama administration. Disregarding the trillions he has handed over to the banks, Geithner claimed yesterday that “there is no more important long-term fiscal measure than gaining control of the growth of Medicare costs.”
The first target for cuts will be Medicare, followed by Social Security. Geithner explained: “After we have passed health-care reform that puts our nation on a path to lower growth in health-care costs and expanded affordable coverage, this president will work to build a bipartisan consensus to ensure the long-term solvency of Social Security.”
Geithner’s reference to “bipartisan consensus” is Washington code for the sort of reform that can bring the most far-right, pro-market forces aboard. To make sure the significance of this was not lost, Geithner reiterated that Obama “explicitly rejects the notion that Social Security is untouchable politically.” Republican lawmakers reacted favorably.
Thus, after only four months, the historical significance of the Obama administration’s “domestic agenda” has come into focus. As it took a Democratic president, Bill Clinton to undo welfare, it will be a Democrat in the White House who takes the axe to Medicare and that last vestige of Franklin Roosevelt’s New Deal, Social Security.
The freeze in cost of living increases for Social Security and increased user payments for Medicare are only the beginning. The Obama administration used the release of the new data to amp up its demands for what it calls a “major overhaul” of health care in the US.
Health and Human Services Secretary Kathleen Sebelius, also a trustee of the two programs, called the report “a wake-up call for anyone concerned about Medicare. ... it’s another sign that we can’t wait for real, comprehensive health care reform.”
In fact, the revelations on Social Security and Medicare only served to underline that Obama’s health care “reform” will be predicated on a sharp curtailment of the provision of medical services to the working class. The entire effort will take as its starting and ending point the defense of the profit margins of the various “players” in the health care industry—the insurance corporations, the HMOs and the pharmaceuticals.
Earlier this week, Obama gained pledges from representatives of five health industry trade groups and the Service Employees International Union that they would “try” to rein in costs by 1.5 percent per year for the coming decade. There will be no penalties for non-compliance and Congress is likely to authorize generous tax incentives to pay for cooperation. Obama claims that the voluntary pledges could result in an increase in annual health care costs of 5.5 percent compared to the currently forecast 7 percent for the coming years. In other words, even in the best-case scenario, the health care burden on workers would increase only slightly less rapidly.
The industry players have been tempted to cooperate with potentially lucrative promises from the Obama administration. “Groups like the insurance industry hope that cuts to their payments would be offset by new rules that would require all Americans” to pay for private insurance plans, the Wall Street Journal reports. Other groups “want to head off regulations that could pose new burdens or curb their profits.” (“Health-Care Providers Pledge to Try to Curb Costs.”)
Frozen out of Obama’s discussion on health care reform are advocates of government-run or “single-payer” health insurance schemes, such as those that prevail—and are being rolled back—in Canada and Western Europe.
On Tuesday, police removed about thirty nurses and doctors from Senate Finance Committee hearings convened to consider financing changes to the health care system. The health care workers had launched a protest against the exclusion of single-payer advocates from the discussion.
Any new health care bill will be funded by cuts in other social programs and taxes on workers. On Wednesday, House Speaker Nancy Pelosi said that a health reform bill would be on the House floor by July 31. According to an analysis by the Associated Press, “the final financing package is likely to include a mix of tax increases and spending cuts in federal health programs. Among the possibilities are tax increases on alcoholic beverages, tobacco products and sugary soft drinks, and restrictions on other health care-related tax breaks, such as flexible spending accounts.”
An article in Wednesday’s Wall Street Journal, “Idea on Hill: Taxing Health Benefits,” pointed to a growing consensus among lawmakers and Obama administration officials that workers’ health care benefits should be taxed to pay for any reform.
Ensuring the best health care and a secure retirement for all is not a technical, but a political question. The looming attack on Social Security and the transparent bankruptcy of Obama’s health care “reform” are dictated by powerful financial interests who believe that workers should work until they can work no longer, and that thereafter they should expect little or nothing in the way of public assistance or medical care to maintain themselves. That is considered too costly.
There is no resolution outside of a struggle against this financial aristocracy. The medical industry must be wrested from the hands of the insurers, pharmaceuticals and for-profit hospital chains and placed under the democratic control of its doctors, nurses and health care workers, who will determine how medicine’s enormous potential can be best deployed to meet human needs, ensuring long and healthy retirements.
US: Cuts in Social Security, Medicare to pay for bank bailouts
By Tom Eley
14 May 2009
A government report made public Tuesday indicates that Social Security and Medicare will deplete their trust funds more quickly than previously forecast. This has sparked new demands from within the US financial elite for substantial cuts in the two entitlement programs, which pay retirement and medical benefits for tens of millions of working class Americans.
The report was issued by the programs’ trustees, a group of four Obama administration officials headed by Treasury Secretary Timothy Geithner. Because regressive payroll taxes on workers’ earnings fund the two programs, mounting unemployment has worsened the projections. Since December 2007, 5.7 million jobs have been lost, and the official unemployment rate now approaches 9 percent.
The slump has slowed the rate of inflation to below the level required by law to trigger a cost-of-living raise for Social Security recipients. As a result, the trustees project that in 2010 and 2011, for the first time since automatic cost-of-living raises were incorporated into Social Security in the 1970s, there will be no increase in retirement benefits, and only a minuscule 1.4 percent rise in 2012.
Since the trustees base their projections of the fiscal state of both programs by estimating future economic growth, the current slump has moved forward the projected point at which each program will begin to run a deficit. Social Security currently operates at a surplus, which the report anticipates will end in 2016, when the program would finally have to begin withdrawing from its own fund—potentially cutting into the other areas where the federal government currently funnels the money. The effective freeze in retirement benefits will be combined with substantially higher monthly premiums for many Medicare recipients.
Even by its alarmist critics’ own admission, Social Security is not about to collapse under its own weight. It would deplete its funds by 2045, thirty years from now, according to the trustees’ report. For years, Social Security funds have been used to pay directly or indirectly for reactionary federal budget priorities—including tax cuts for the rich, bank bailouts, and the wars in Iraq and Afghanistan.
The Obama administration has shelled out hundreds of billions, no strings attached, to the biggest financial institutions, under the false rationale that this would “kick-start” lending and generate jobs. All told, between direct cash infusions, loans, and guarantees on debt, Washington has handed over around $10 trillion to Wall Street in less than a year. In comparison, Medicare would need $13 trillion and Social Security $5 trillion over the next 75 years to remain solvent, according to the report. In other words, retirement benefits and healthcare benefits for several generations of the elderly could be secured at the cost of one year’s bailout of the financial aristocracy.
But the vast payouts to Wall Street and the imperialist wars abroad require the plundering of Social Security and Medicare. After giving hundreds of billions to the banks and setting a new record for military spending, Obama has no other credible target for “fiscal discipline.” Yesterday the White House revised upwards its budget deficit estimate by 5 percent from February to $1.84 trillion.
Secretary Geithner’s dual role as Wall Street frontman and “trustee” of the retirement and health care for the working class underscores the duplicitous nature of the Obama administration. Disregarding the trillions he has handed over to the banks, Geithner claimed yesterday that “there is no more important long-term fiscal measure than gaining control of the growth of Medicare costs.”
The first target for cuts will be Medicare, followed by Social Security. Geithner explained: “After we have passed health-care reform that puts our nation on a path to lower growth in health-care costs and expanded affordable coverage, this president will work to build a bipartisan consensus to ensure the long-term solvency of Social Security.”
Geithner’s reference to “bipartisan consensus” is Washington code for the sort of reform that can bring the most far-right, pro-market forces aboard. To make sure the significance of this was not lost, Geithner reiterated that Obama “explicitly rejects the notion that Social Security is untouchable politically.” Republican lawmakers reacted favorably.
Thus, after only four months, the historical significance of the Obama administration’s “domestic agenda” has come into focus. As it took a Democratic president, Bill Clinton to undo welfare, it will be a Democrat in the White House who takes the axe to Medicare and that last vestige of Franklin Roosevelt’s New Deal, Social Security.
The freeze in cost of living increases for Social Security and increased user payments for Medicare are only the beginning. The Obama administration used the release of the new data to amp up its demands for what it calls a “major overhaul” of health care in the US.
Health and Human Services Secretary Kathleen Sebelius, also a trustee of the two programs, called the report “a wake-up call for anyone concerned about Medicare. ... it’s another sign that we can’t wait for real, comprehensive health care reform.”
In fact, the revelations on Social Security and Medicare only served to underline that Obama’s health care “reform” will be predicated on a sharp curtailment of the provision of medical services to the working class. The entire effort will take as its starting and ending point the defense of the profit margins of the various “players” in the health care industry—the insurance corporations, the HMOs and the pharmaceuticals.
Earlier this week, Obama gained pledges from representatives of five health industry trade groups and the Service Employees International Union that they would “try” to rein in costs by 1.5 percent per year for the coming decade. There will be no penalties for non-compliance and Congress is likely to authorize generous tax incentives to pay for cooperation. Obama claims that the voluntary pledges could result in an increase in annual health care costs of 5.5 percent compared to the currently forecast 7 percent for the coming years. In other words, even in the best-case scenario, the health care burden on workers would increase only slightly less rapidly.
The industry players have been tempted to cooperate with potentially lucrative promises from the Obama administration. “Groups like the insurance industry hope that cuts to their payments would be offset by new rules that would require all Americans” to pay for private insurance plans, the Wall Street Journal reports. Other groups “want to head off regulations that could pose new burdens or curb their profits.” (“Health-Care Providers Pledge to Try to Curb Costs.”)
Frozen out of Obama’s discussion on health care reform are advocates of government-run or “single-payer” health insurance schemes, such as those that prevail—and are being rolled back—in Canada and Western Europe.
On Tuesday, police removed about thirty nurses and doctors from Senate Finance Committee hearings convened to consider financing changes to the health care system. The health care workers had launched a protest against the exclusion of single-payer advocates from the discussion.
Any new health care bill will be funded by cuts in other social programs and taxes on workers. On Wednesday, House Speaker Nancy Pelosi said that a health reform bill would be on the House floor by July 31. According to an analysis by the Associated Press, “the final financing package is likely to include a mix of tax increases and spending cuts in federal health programs. Among the possibilities are tax increases on alcoholic beverages, tobacco products and sugary soft drinks, and restrictions on other health care-related tax breaks, such as flexible spending accounts.”
An article in Wednesday’s Wall Street Journal, “Idea on Hill: Taxing Health Benefits,” pointed to a growing consensus among lawmakers and Obama administration officials that workers’ health care benefits should be taxed to pay for any reform.
Ensuring the best health care and a secure retirement for all is not a technical, but a political question. The looming attack on Social Security and the transparent bankruptcy of Obama’s health care “reform” are dictated by powerful financial interests who believe that workers should work until they can work no longer, and that thereafter they should expect little or nothing in the way of public assistance or medical care to maintain themselves. That is considered too costly.
There is no resolution outside of a struggle against this financial aristocracy. The medical industry must be wrested from the hands of the insurers, pharmaceuticals and for-profit hospital chains and placed under the democratic control of its doctors, nurses and health care workers, who will determine how medicine’s enormous potential can be best deployed to meet human needs, ensuring long and healthy retirements.
Thursday, April 30, 2009
As watchdog warns of bailout fraud
http://wsws.org/articles/2009/apr2009/obam-a24.shtml
As watchdog warns of bailout fraud
Obama meets with bank, credit card executives
By Barry Grey
24 April 2009
President Barack Obama met Thursday at the White House with executives of major banks and credit card companies amidst growing public anger over sudden increases in interest rates and fees, in many cases by companies that have received billions of dollars in taxpayer bailout money.
Obama, who pledged during his presidential campaign to curb abuses by credit card firms, was silent on the issue until last week, when media reports emerged detailing how firms were doubling and tripling their charges to customers, including those with good credit who had remained current on their payments.
These reports coincide with others showing that banks that have received cash, cheap loans and debt guarantees from the $700 billion Troubled Asset Relief Program (TARP) and other government programs are ramping up home foreclosures while continuing to reduce lending. First the Bush and now the Obama administration have defended the transfer of public funds to Wall Street as the only means of ending the credit crunch and resulting recession.
Trillions have been pumped into the banks, but the recession has deepened, unemployment has soared and millions of people have been thrown into poverty and homelessness. The banks have used the bailout money to bolster their balance sheets and generate profits by speculating on turbulent financial markets and by finding ways to cash in on the collapse in home prices. They have intensified their assault on the working class, slashing hundreds of thousands of jobs, driving people out of their homes and raising the cost of credit upon which most Americans depend to pay their bills.
They adamantly oppose even the most modest restrictions on their activities, including certain limits on executive compensation, enhanced power of bankruptcy courts to alter mortgage terms for distressed homeowners, and laws that would restrict their ability to arbitrarily increase charges on credit card holders.
Obama’s White House meeting was typical of his public relations efforts to placate public opposition while taking no serious measures to rein in the banks. Participants, besides Obama and his top economic aides, included executives from Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, US Bancorp, Visa, Mastercard, Capitol One Financial, American Express, Discover Financial Services and several other firms. Also present was the president of the American Bankers Association, which is lobbying against congressional bills that would curb abuses by credit card issuers.
Following the closed-door meeting, Obama told reporters, “We’re confident we can arrive at something that is commonsensical.” Seeking to reassure the bankers, he added, “We want to preserve the credit card market but we also want to do so in a way that eliminates some of the abuses and some of the problems that a lot of people are familiar with.” He did not say which abuses would be allowed to continue.
One indication of the seriousness of the administration’s effort was provided by Lawrence Summers, the director of the White House’s National Economic Council. According to reporters, he dozed off during Obama’s brief remarks to the press.
Executives leaving the meeting said it was “constructive.” They are confident that they will succeed in blocking passage of a bill, dubbed the “Credit Cardholders’ Bill of Rights,” that is moving through Congress. On Wednesday the bill was approved by the House Financial Services Committee, but a Senate version is opposed by Republicans on a party-line basis and by some Democrats, all but insuring its defeat.
The banks and credit card companies maintain that legislation is not necessary since the Federal Reserve has already announced restrictions on interest charges and fees. However, those regulations are not slated to take effect until July of 2010, giving the banks ample time to ramp up charges in advance of the new rules.
Earlier on Thursday, the special inspector general appointed to monitor the TARP program testified before the Joint Economic Committee of Congress and indicated that the bailout program is rife with conflicts of interest and fraud.
Neil Barofsky, a former prosecutor, told the panel that he had already initiated 20 criminal investigations into securities fraud, insider trading, collusion, price-fixing, money laundering and other illegal activities in relation to the government bailout. He suggested that there would be many more probes.
On Monday, Barofsky released a 250-page report to Congress on the TARP program in which he decried the refusal of the Treasury Department, despite his repeated urgings, to require firms that receive taxpayer handouts to report on how they are using the government money. He noted that the Obama administration has signed off on another $30 billion for the insurance giant American International Group (AIG), which had already received some $150 billion, without any requirement that the company explain what it has done with its bailout money.
The TARP program, he wrote, which began as a $700 billion plan to purchase toxic assets from the banks, has morphed into twelve separate programs involving more than $3 trillion in government cash, loans and loan guarantees—an amount roughly equal to the annual federal budget.
In his report and in his congressional testimony, Barofsky focused on the new bailout program detailed on March 24 by Treasury Secretary Timothy Geithner. He warned that the “Public-Private Investment Program” (PPIP), under which Wall Street investment firms will be given low-cost government loans and guarantees against losses to purchase toxic assets from the banks at inflated prices, was “inherently vulnerable to fraud, waste and abuse.”
He said that the program, which is to be run by the private firms, with between two-thirds and 92.5 percent of the funding provided by the government, had “significant issues relating to conflicts of interest facing fund managers, collusion between participants, and vulnerabilities to money laundering.” He urged that the program not go forward without the addition of serious safeguards against fraud.
In his testimony before the Joint Economic Committee, Barofsky said that the program was designed so as to allow the private fund managers to set the price for the securities purchased from the banks. “This is a lot of economic power given to a small number of fund managers,” he said. He pointed out that fund managers would likely be buying the same mortgage-backed securities they had in other accounts, giving them an incentive to pay inflated prices and thereby increase the value of their previous investments, which they could subsequently unload at a huge profit.
“The banks will also make a huge profit,” he said. “And when the securities go back to their real market price, the taxpayer will pay the loss.”
He also warned that the incorporation of the Federal Reserve’s Term Asset-Backed Securities Loan Facility (TALF) into the Public-Private Investment Program added another level of potential fraud. Investment firms running Public-Private funds would be able to borrow additional money under the TALF program.
That program, using $80 billion in TARP funds to leverage $1 trillion in Fed loans, was initially designed to subsidize the issuing of new securities backed by consumer loans. Now it is to be used to subsidize the purchase of existing toxic asset-backed securities on the banks’ books.
He decried the fact that the Federal Reserve was relying on credit rating agencies to rate the toxic assets to be purchased under TALF and the PPIP, noting that the same agencies had contributed to the financial collapse by giving dubious mortgage-backed securities their highest rating.
In effect, he suggested, the program would enable the banks to offload the worst of their bad debts, generating massive profits for Wall Street and huge taxpayer losses.
Asked at the hearing whether there were any provisions in the TARP bill passed last October that required banks to report on their use of bailout money, he said, “No.” Without fundamental changes in the structure and management of the bailout programs, he said, there would be “potentially catastrophic taxpayer losses.”
Barofsky was asked about a report published that morning by the Wall Street Journal citing testimony by Bank of America CEO Kenneth Lewis that Federal Reserve Chairman Ben Bernanke and then-Treasury Secretary Henry Paulson pressured him to conceal the dire financial position of Merrill Lynch last September, when the Bush administration engineered the takeover of the investment bank by Bank of America. Merrill Lynch lost more than $15 billion in the fourth quarter of 2008, liabilities that led to a government bailout of Bank of America last December.
Barofsky said that his office was investigating the Bank of America takeover of Merrill. He listed six audits he was conducting, including, besides the Bank of America deal, the use of bailout funds, compliance with executive compensation limits, external influences, AIG executive bonuses, and AIG counterparty payments.
The latter concerns the fact that AIG has used its government bailout funds to pay off banks and other firms that had entered into credit default swaps with the insurance giant at 100 percent of the face value of the deals, rather than forcing its counterparties to accept reduced payments.
One such deal that is ripe for criminal investigation involves Goldman Sachs, former Treasury Secretary Paulson and the current CEO of AIG, Edward Liddy. It has emerged that Paulson, who was CEO of Goldman before becoming treasury secretary under Bush, designed the AIG rescue so as to allow AIG to funnel $13 billion in bailout money to his former bank. He picked Liddy, a former board member of Goldman, to become the new CEO of AIG. Liddy, meanwhile, retains an investment of more than $3 million in Goldman Sachs.
Obama’s treasury secretary, Geithner, was president of the Federal Reserve Bank of New York at the time and played a critical role in designing and implementing the TARP program and the bailout of AIG. That neither he, nor Obama, nor the Democratic-controlled Congress has any intention of implementing the changes proposed by Barofsky was underscored by Geithner’s testimony Tuesday before the Congressional Oversight Committee for TARP.
Although Geithner’s appearance occurred the day after Barofsky released his report to Congress and the day it was released to the public, none of the committee members raised it. Geithner, for his part, announced that the “vast majority” of banks were more than adequately capitalized, stressed that banks shown to need more capital by government “stress tests” would have many options for raising money, in addition to government purchases of their stock, and warned Congress against placing new requirements on bailed out firms.
His testimony was taken as a pledge that the Obama administration would continue to run interference for Wall Street and shield the wealth of the financial elite. It sparked a 127.8 point rise in the Dow, with bank stocks recording double-digit gains for the day.
As watchdog warns of bailout fraud
Obama meets with bank, credit card executives
By Barry Grey
24 April 2009
President Barack Obama met Thursday at the White House with executives of major banks and credit card companies amidst growing public anger over sudden increases in interest rates and fees, in many cases by companies that have received billions of dollars in taxpayer bailout money.
Obama, who pledged during his presidential campaign to curb abuses by credit card firms, was silent on the issue until last week, when media reports emerged detailing how firms were doubling and tripling their charges to customers, including those with good credit who had remained current on their payments.
These reports coincide with others showing that banks that have received cash, cheap loans and debt guarantees from the $700 billion Troubled Asset Relief Program (TARP) and other government programs are ramping up home foreclosures while continuing to reduce lending. First the Bush and now the Obama administration have defended the transfer of public funds to Wall Street as the only means of ending the credit crunch and resulting recession.
Trillions have been pumped into the banks, but the recession has deepened, unemployment has soared and millions of people have been thrown into poverty and homelessness. The banks have used the bailout money to bolster their balance sheets and generate profits by speculating on turbulent financial markets and by finding ways to cash in on the collapse in home prices. They have intensified their assault on the working class, slashing hundreds of thousands of jobs, driving people out of their homes and raising the cost of credit upon which most Americans depend to pay their bills.
They adamantly oppose even the most modest restrictions on their activities, including certain limits on executive compensation, enhanced power of bankruptcy courts to alter mortgage terms for distressed homeowners, and laws that would restrict their ability to arbitrarily increase charges on credit card holders.
Obama’s White House meeting was typical of his public relations efforts to placate public opposition while taking no serious measures to rein in the banks. Participants, besides Obama and his top economic aides, included executives from Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, US Bancorp, Visa, Mastercard, Capitol One Financial, American Express, Discover Financial Services and several other firms. Also present was the president of the American Bankers Association, which is lobbying against congressional bills that would curb abuses by credit card issuers.
Following the closed-door meeting, Obama told reporters, “We’re confident we can arrive at something that is commonsensical.” Seeking to reassure the bankers, he added, “We want to preserve the credit card market but we also want to do so in a way that eliminates some of the abuses and some of the problems that a lot of people are familiar with.” He did not say which abuses would be allowed to continue.
One indication of the seriousness of the administration’s effort was provided by Lawrence Summers, the director of the White House’s National Economic Council. According to reporters, he dozed off during Obama’s brief remarks to the press.
Executives leaving the meeting said it was “constructive.” They are confident that they will succeed in blocking passage of a bill, dubbed the “Credit Cardholders’ Bill of Rights,” that is moving through Congress. On Wednesday the bill was approved by the House Financial Services Committee, but a Senate version is opposed by Republicans on a party-line basis and by some Democrats, all but insuring its defeat.
The banks and credit card companies maintain that legislation is not necessary since the Federal Reserve has already announced restrictions on interest charges and fees. However, those regulations are not slated to take effect until July of 2010, giving the banks ample time to ramp up charges in advance of the new rules.
Earlier on Thursday, the special inspector general appointed to monitor the TARP program testified before the Joint Economic Committee of Congress and indicated that the bailout program is rife with conflicts of interest and fraud.
Neil Barofsky, a former prosecutor, told the panel that he had already initiated 20 criminal investigations into securities fraud, insider trading, collusion, price-fixing, money laundering and other illegal activities in relation to the government bailout. He suggested that there would be many more probes.
On Monday, Barofsky released a 250-page report to Congress on the TARP program in which he decried the refusal of the Treasury Department, despite his repeated urgings, to require firms that receive taxpayer handouts to report on how they are using the government money. He noted that the Obama administration has signed off on another $30 billion for the insurance giant American International Group (AIG), which had already received some $150 billion, without any requirement that the company explain what it has done with its bailout money.
The TARP program, he wrote, which began as a $700 billion plan to purchase toxic assets from the banks, has morphed into twelve separate programs involving more than $3 trillion in government cash, loans and loan guarantees—an amount roughly equal to the annual federal budget.
In his report and in his congressional testimony, Barofsky focused on the new bailout program detailed on March 24 by Treasury Secretary Timothy Geithner. He warned that the “Public-Private Investment Program” (PPIP), under which Wall Street investment firms will be given low-cost government loans and guarantees against losses to purchase toxic assets from the banks at inflated prices, was “inherently vulnerable to fraud, waste and abuse.”
He said that the program, which is to be run by the private firms, with between two-thirds and 92.5 percent of the funding provided by the government, had “significant issues relating to conflicts of interest facing fund managers, collusion between participants, and vulnerabilities to money laundering.” He urged that the program not go forward without the addition of serious safeguards against fraud.
In his testimony before the Joint Economic Committee, Barofsky said that the program was designed so as to allow the private fund managers to set the price for the securities purchased from the banks. “This is a lot of economic power given to a small number of fund managers,” he said. He pointed out that fund managers would likely be buying the same mortgage-backed securities they had in other accounts, giving them an incentive to pay inflated prices and thereby increase the value of their previous investments, which they could subsequently unload at a huge profit.
“The banks will also make a huge profit,” he said. “And when the securities go back to their real market price, the taxpayer will pay the loss.”
He also warned that the incorporation of the Federal Reserve’s Term Asset-Backed Securities Loan Facility (TALF) into the Public-Private Investment Program added another level of potential fraud. Investment firms running Public-Private funds would be able to borrow additional money under the TALF program.
That program, using $80 billion in TARP funds to leverage $1 trillion in Fed loans, was initially designed to subsidize the issuing of new securities backed by consumer loans. Now it is to be used to subsidize the purchase of existing toxic asset-backed securities on the banks’ books.
He decried the fact that the Federal Reserve was relying on credit rating agencies to rate the toxic assets to be purchased under TALF and the PPIP, noting that the same agencies had contributed to the financial collapse by giving dubious mortgage-backed securities their highest rating.
In effect, he suggested, the program would enable the banks to offload the worst of their bad debts, generating massive profits for Wall Street and huge taxpayer losses.
Asked at the hearing whether there were any provisions in the TARP bill passed last October that required banks to report on their use of bailout money, he said, “No.” Without fundamental changes in the structure and management of the bailout programs, he said, there would be “potentially catastrophic taxpayer losses.”
Barofsky was asked about a report published that morning by the Wall Street Journal citing testimony by Bank of America CEO Kenneth Lewis that Federal Reserve Chairman Ben Bernanke and then-Treasury Secretary Henry Paulson pressured him to conceal the dire financial position of Merrill Lynch last September, when the Bush administration engineered the takeover of the investment bank by Bank of America. Merrill Lynch lost more than $15 billion in the fourth quarter of 2008, liabilities that led to a government bailout of Bank of America last December.
Barofsky said that his office was investigating the Bank of America takeover of Merrill. He listed six audits he was conducting, including, besides the Bank of America deal, the use of bailout funds, compliance with executive compensation limits, external influences, AIG executive bonuses, and AIG counterparty payments.
The latter concerns the fact that AIG has used its government bailout funds to pay off banks and other firms that had entered into credit default swaps with the insurance giant at 100 percent of the face value of the deals, rather than forcing its counterparties to accept reduced payments.
One such deal that is ripe for criminal investigation involves Goldman Sachs, former Treasury Secretary Paulson and the current CEO of AIG, Edward Liddy. It has emerged that Paulson, who was CEO of Goldman before becoming treasury secretary under Bush, designed the AIG rescue so as to allow AIG to funnel $13 billion in bailout money to his former bank. He picked Liddy, a former board member of Goldman, to become the new CEO of AIG. Liddy, meanwhile, retains an investment of more than $3 million in Goldman Sachs.
Obama’s treasury secretary, Geithner, was president of the Federal Reserve Bank of New York at the time and played a critical role in designing and implementing the TARP program and the bailout of AIG. That neither he, nor Obama, nor the Democratic-controlled Congress has any intention of implementing the changes proposed by Barofsky was underscored by Geithner’s testimony Tuesday before the Congressional Oversight Committee for TARP.
Although Geithner’s appearance occurred the day after Barofsky released his report to Congress and the day it was released to the public, none of the committee members raised it. Geithner, for his part, announced that the “vast majority” of banks were more than adequately capitalized, stressed that banks shown to need more capital by government “stress tests” would have many options for raising money, in addition to government purchases of their stock, and warned Congress against placing new requirements on bailed out firms.
His testimony was taken as a pledge that the Obama administration would continue to run interference for Wall Street and shield the wealth of the financial elite. It sparked a 127.8 point rise in the Dow, with bank stocks recording double-digit gains for the day.
Tuesday, April 28, 2009
Freddie Mac acting CFO found dead
http://www.marketwatch.com/news/story/Freddie-Mac-acting-CFO-dead/story.aspx
Freddie Mac acting CFO found dead in apparent suicide
U.S. officials express condolences to Kellermann's family and colleagues
By Sam Mamudi & Ronald D. Orol, MarketWatch
April 22, 2009
NEW YORK (MarketWatch) -- The acting chief financial officer of Freddie Mac was found dead at his home Wednesday morning in an apparent suicide.
David Kellermann, acting chief financial officer at the government-controlled mortgage company, was found dead at his home in Fairfax County, Va.
Kellermann was named acting CFO in late September, three weeks after the government took charge of Freddie Mac. He had previously been senior vice president and corporate controller there.
His death came as staff from the Securities and Exchange Commission and Justice Department were probing the home-finance company about issues including possible accounting violations.
Freddie disclosed the investigation in a March 11 filing, and the firm said it was "cooperating fully in these matters."
According to the SEC filing, Freddie said it received a federal grand jury subpoena Sept. 26 from the U.S. attorney's office for the southern district of New York. The subpoena sought documents related to accounting, disclosure and corporate-governance matters, according to the filing.
But that subpoena was later withdrawn and the investigation was taken over by the U.S. attorney for the eastern district of Virginia.
According to the filing, on Oct. 21, Freddie said the SEC had begun its own investigation, asking Freddie for documents. Specifically, on Jan. 23, Jan. 30 and Feb. 25, the SEC issued subpoenas for documents. The agency also began its own interviews of company employees, Freddie said in the filing.
In addition to the investigation, Freddie Mac received a request from the House Committee on Oversight and Investigations on Oct. 20 seeking documents for a hearing it held on Dec. 9.
Freddie Mac has received more than $30 billion in government support as the mortgage and credit crisis intensified.
Kellermann's apparent suicide surprised some key regulators in Washington, who expressed their condolences.
"On behalf of the Treasury family, we are deeply saddened by the news this morning of David Kellermann's death," said Treasury Secretary Timothy Geithner in a statement. "Our deepest sympathies are with his family and his colleagues at Freddie Mac during this difficult time."
The Federal Housing Finance Agency issued this statement: "For many years, we have known David as a person of the utmost ethical standards who was hardworking and knowledgeable in his field. As the Acting Chief Financial Officer of Freddie Mac during particularly challenging times, David was an inspiration to his staff and many others who were privileged to work with him. We extend our condolences to his family, friends and colleagues."
Kellermann's apparent suicide would be the latest of several putatively motivated by the financial crisis. French financier Rene-Thierry Magon de la Villehuchet killed himself in December after losing roughly $1 billion of his own and clients' money to the Ponzi scheme orchestrated by Bernard Madoff.
Seventy-four-year-old German billionaire Adolf Merckle in January committed suicide after the conglomerate he controlled, with investments in pharmaceuticals, cement and other sectors, experienced problems related to the global financial crisis.
In 2002, J. Clifford Baxter, a former Enron Corp. vice chairman, was found dead in his car in Houston, in an apparent suicide, after the company collapsed in a massive corruption scandal and bankruptcy filing.
Ronald D. Orol is a MarketWatch reporter, based in Washington.
Freddie Mac acting CFO found dead in apparent suicide
U.S. officials express condolences to Kellermann's family and colleagues
By Sam Mamudi & Ronald D. Orol, MarketWatch
April 22, 2009
NEW YORK (MarketWatch) -- The acting chief financial officer of Freddie Mac was found dead at his home Wednesday morning in an apparent suicide.
David Kellermann, acting chief financial officer at the government-controlled mortgage company, was found dead at his home in Fairfax County, Va.
Kellermann was named acting CFO in late September, three weeks after the government took charge of Freddie Mac. He had previously been senior vice president and corporate controller there.
His death came as staff from the Securities and Exchange Commission and Justice Department were probing the home-finance company about issues including possible accounting violations.
Freddie disclosed the investigation in a March 11 filing, and the firm said it was "cooperating fully in these matters."
According to the SEC filing, Freddie said it received a federal grand jury subpoena Sept. 26 from the U.S. attorney's office for the southern district of New York. The subpoena sought documents related to accounting, disclosure and corporate-governance matters, according to the filing.
But that subpoena was later withdrawn and the investigation was taken over by the U.S. attorney for the eastern district of Virginia.
According to the filing, on Oct. 21, Freddie said the SEC had begun its own investigation, asking Freddie for documents. Specifically, on Jan. 23, Jan. 30 and Feb. 25, the SEC issued subpoenas for documents. The agency also began its own interviews of company employees, Freddie said in the filing.
In addition to the investigation, Freddie Mac received a request from the House Committee on Oversight and Investigations on Oct. 20 seeking documents for a hearing it held on Dec. 9.
Freddie Mac has received more than $30 billion in government support as the mortgage and credit crisis intensified.
Kellermann's apparent suicide surprised some key regulators in Washington, who expressed their condolences.
"On behalf of the Treasury family, we are deeply saddened by the news this morning of David Kellermann's death," said Treasury Secretary Timothy Geithner in a statement. "Our deepest sympathies are with his family and his colleagues at Freddie Mac during this difficult time."
The Federal Housing Finance Agency issued this statement: "For many years, we have known David as a person of the utmost ethical standards who was hardworking and knowledgeable in his field. As the Acting Chief Financial Officer of Freddie Mac during particularly challenging times, David was an inspiration to his staff and many others who were privileged to work with him. We extend our condolences to his family, friends and colleagues."
Kellermann's apparent suicide would be the latest of several putatively motivated by the financial crisis. French financier Rene-Thierry Magon de la Villehuchet killed himself in December after losing roughly $1 billion of his own and clients' money to the Ponzi scheme orchestrated by Bernard Madoff.
Seventy-four-year-old German billionaire Adolf Merckle in January committed suicide after the conglomerate he controlled, with investments in pharmaceuticals, cement and other sectors, experienced problems related to the global financial crisis.
In 2002, J. Clifford Baxter, a former Enron Corp. vice chairman, was found dead in his car in Houston, in an apparent suicide, after the company collapsed in a massive corruption scandal and bankruptcy filing.
Ronald D. Orol is a MarketWatch reporter, based in Washington.
Saturday, April 4, 2009
Automaker Aid Hinges on Restructuring
Robalini's Note: This past week Obama has really shown his hand. After handing Wall Street bankers a massive looting opportunity with the toxic asset program, he demands yet more layoffs for auto workers at the Big Three...
http://online.wsj.com/article/SB123834886343966829.html
MARCH 29, 2009
Automaker Aid Hinges on Restructuring, Obama Says
By NEIL KING JR.
WASHINGTON -- President Barack Obama is prepared to give struggling U.S. automakers billions more in aid, but only if all sides show that they are ready to make sacrifices to assure the companies have a viable future.
Speaking the day before he announces his first assessment of the fates of General Motors Corp. and Chrysler LLC, Mr. Obama said on CBS's "Face the Nation" Sunday that he intends to lay out "a set of sacrifices from all parties involved -- management, labor, shareholders, creditors, suppliers, dealers."
The industry, he said, must "take serious restructuring steps now in order to preserve a brighter future down the road." The two companies "are not there yet," he added.
The president's auto task force has spent more than a month digging into the restructuring plans of GM and Chrysler while trying to assess when the steep plunge in car sales might end. The two companies received a total of $17.4 billion in government loans in December, and have requested another $22 billion to keep them going through this year. Of that, GM is seeking $16.6 billion more, while Chrysler has asked for $5 billion more.
On Monday, President Obama will lay out the administration's interim conclusions on the companies' viability and the many steps that need to be taken to return the companies to health. The president is likely to hold off on granting new loans to preserve leverage in ongoing negotiations, particularly with the thousands of bondholders who hold a total of about $28 billion in GM debt.
The government is pressuring the bondholders to agree to an equity swap that would reduce GM's debt load by two-thirds.
Analysts said GM likely has enough cash on hand to weather at least another month before its need for more government aid becomes urgent. Chrysler, which is owned by Cerberus Capital Management, may need another infusion of cash sooner. Ford Motor Co. has not sought federal assistance.
Both GM and Chrysler are negotiating with the United Autoworkers union to accept a range of cost-cutting measures, including a greatly reduced workforce, lower wages, and a revamped health-care fund for retirees.
The U.S. auto industry, hardly robust to start with, has been reeling from a plunge in car sales over the last six months. Sales in February were down about 40% over the same month last year. The drop has sent shock waves through the hundreds of smaller parts companies that supply the big auto makers. To keep the sector afloat, the administration recently announced a $5 billion financing facility to help suppliers cover their expenses.
`We think we can have a successful U.S. auto industry," President Obama said on Sunday. "But it's got to be one that's realistically designed to weather this storm and to emerge—at the other end—much more lean, mean, and competitive than it currently is.''
Treasury Secretary Timothy Geithner, who is nominally in charge of overseeing the auto bailout, on Sunday said the government was prepared to lend more money "if we believe it's going to provide the basis for a stronger industry in the future that's not going to rely on government support."
The administration is not expected on Monday to deliver a comprehensive blueprint for where the industry needs to go in the months and years ahead. Instead, administration officials said, the announcement will lay out the parameters of an overall deal, including some firm deadlines. The administration is expected to hold out the threat of having the companies enter into Chapter 11 bankruptcy restructuring if certain tough compromises are not made over the next month.
The original December loans were given under the agreement that all sides would strike a compromise deal by March 31, but the administration is taking advantage of a clause allowing all sides another month to negotiate.
"It was unrealistic to renegotiate a new labor agreement and the unsecured debt in so short a time," said Sean McAlinden, chief economist with the Ann Arbor, Mich.-based Center for Automotive Research. "That has never happened before."
GM and Chrysler are meant to submit by Tuesday assessments of where their restructuring efforts are heading. In February, both companies put forward plans for paring back their operations, reducing their workforces and eliminating vehicle models. Chrysler is mulling a potential alliance with Italy's Fiat SpA.
Write to Neil King Jr. at neil.king@wsj.com
http://online.wsj.com/article/SB123834886343966829.html
MARCH 29, 2009
Automaker Aid Hinges on Restructuring, Obama Says
By NEIL KING JR.
WASHINGTON -- President Barack Obama is prepared to give struggling U.S. automakers billions more in aid, but only if all sides show that they are ready to make sacrifices to assure the companies have a viable future.
Speaking the day before he announces his first assessment of the fates of General Motors Corp. and Chrysler LLC, Mr. Obama said on CBS's "Face the Nation" Sunday that he intends to lay out "a set of sacrifices from all parties involved -- management, labor, shareholders, creditors, suppliers, dealers."
The industry, he said, must "take serious restructuring steps now in order to preserve a brighter future down the road." The two companies "are not there yet," he added.
The president's auto task force has spent more than a month digging into the restructuring plans of GM and Chrysler while trying to assess when the steep plunge in car sales might end. The two companies received a total of $17.4 billion in government loans in December, and have requested another $22 billion to keep them going through this year. Of that, GM is seeking $16.6 billion more, while Chrysler has asked for $5 billion more.
On Monday, President Obama will lay out the administration's interim conclusions on the companies' viability and the many steps that need to be taken to return the companies to health. The president is likely to hold off on granting new loans to preserve leverage in ongoing negotiations, particularly with the thousands of bondholders who hold a total of about $28 billion in GM debt.
The government is pressuring the bondholders to agree to an equity swap that would reduce GM's debt load by two-thirds.
Analysts said GM likely has enough cash on hand to weather at least another month before its need for more government aid becomes urgent. Chrysler, which is owned by Cerberus Capital Management, may need another infusion of cash sooner. Ford Motor Co. has not sought federal assistance.
Both GM and Chrysler are negotiating with the United Autoworkers union to accept a range of cost-cutting measures, including a greatly reduced workforce, lower wages, and a revamped health-care fund for retirees.
The U.S. auto industry, hardly robust to start with, has been reeling from a plunge in car sales over the last six months. Sales in February were down about 40% over the same month last year. The drop has sent shock waves through the hundreds of smaller parts companies that supply the big auto makers. To keep the sector afloat, the administration recently announced a $5 billion financing facility to help suppliers cover their expenses.
`We think we can have a successful U.S. auto industry," President Obama said on Sunday. "But it's got to be one that's realistically designed to weather this storm and to emerge—at the other end—much more lean, mean, and competitive than it currently is.''
Treasury Secretary Timothy Geithner, who is nominally in charge of overseeing the auto bailout, on Sunday said the government was prepared to lend more money "if we believe it's going to provide the basis for a stronger industry in the future that's not going to rely on government support."
The administration is not expected on Monday to deliver a comprehensive blueprint for where the industry needs to go in the months and years ahead. Instead, administration officials said, the announcement will lay out the parameters of an overall deal, including some firm deadlines. The administration is expected to hold out the threat of having the companies enter into Chapter 11 bankruptcy restructuring if certain tough compromises are not made over the next month.
The original December loans were given under the agreement that all sides would strike a compromise deal by March 31, but the administration is taking advantage of a clause allowing all sides another month to negotiate.
"It was unrealistic to renegotiate a new labor agreement and the unsecured debt in so short a time," said Sean McAlinden, chief economist with the Ann Arbor, Mich.-based Center for Automotive Research. "That has never happened before."
GM and Chrysler are meant to submit by Tuesday assessments of where their restructuring efforts are heading. In February, both companies put forward plans for paring back their operations, reducing their workforces and eliminating vehicle models. Chrysler is mulling a potential alliance with Italy's Fiat SpA.
Write to Neil King Jr. at neil.king@wsj.com
Friday, March 27, 2009
So President Obama Is Finally Pissed Off?
http://www.blackagendareport.com/?q=content/so-president-obama-finally-pissed-so-what
So President Obama Is Finally Pissed Off? So What?
Wed, 03/18/2009
A Black Agenda Radio commentary by Glen Ford
The President's public display of anger at AIG is a cover for well-deserved political embarrassment. He and his bankster advisors have dedicated trillions to rescuing the criminal corporations of Wall Street from the consequences of their actions. He acts disappointed that they're still gangsters. "The logic of bankster capitalist enterprise, which AIG was created to protect and serve, is take the money and run - every chance you get."
Obama is Finally Pissed Off. So What?
A Black Agenda Radio commentary by Glen Ford
"Did Obama think these guys became financial gangsters as a public service?"
President Obama wants everybody to know that he's angry, really angry, at the zombie insurance giant AIG. Obama gave the impression that AIG pulled a fast one when it awarded its employees $165 million in bonuses for consummating derivative deals that have wrecked the global financial system. The President theatrically pounded the podium in righteous indignation. "How do they justify this outrage to the taxpayers who are keeping the company afloat?" said the usually super-cool chief executive.
Obama's question is misdirected. He should instead be asking himself and his own economic advisors how he and they allowed the racketeers at AIG to divvy up the people's bailout money among themselves. By the time Obama staged his big public blowout over the bonuses, most of the money was already gone, paid out to the foot soldiers of the AIG financial mafia. Treasury Secretary Timothy Geithner didn't stop the checks from going out. Neither did Larry Summers, head of the National Economic Council at the White House. Robert Rubin, who is guru to Summers and Geithner and to Obama himself, didn't alert his protégés to the likelihood that AIG would reserve a big cut of the bailout for distribution among its own gang. Did Obama think these guys became financial gangsters as a public service?
And why shouldn't they get a cut? The logic of bankster capitalist enterprise, which AIG was created to protect and serve, is take the money and run - every chance you get. AIG covered hundreds of billions - maybe trillions - of dollars in bets placed by the Wall Street mafia in the derivatives casino. But that was a scam, since AIG didn't really have the cash. If AIG went down, then many of the gamblers on Wall Street would go down with it. Therefore, in a bipartisan, help out your favorite gangster agreement, Bush Republicans and Obama Democrats gave AIG $170 billion dollars of the people's money to rescue AIG's clients, the gambling banksters of Wall Street. And why shouldn't the guys who covered the bets in the first place get a piece of the public bailout, themselves? The logic of criminal financial enterprise dictates that they are no more morally reprehensible than their clients.
"It is the public that should be angry with Obama."
The biggest client was none other than Goldman Sachs. AIG's bailout included cash to cover at least $12.9 billion in Goldman Sach's casino bets. As it turns out, the two Godfathers of the Wall Street bailout are Robert Rubin, Obama's personal economics guru, and Henry Paulson, George Bush's Treasury Secretary - both former CEOs of Goldman Sachs. Goldman Sachs had a consigliere in both administrations, ensuring that the logic of bankster capitalism prevailed across party lines.
Barack Obama has no right to be angry at AIG's diversion of bailout money. It is the public that should be angry with Obama, for keeping the zombies of AIG and Goldman Sachs alive, so they can steal again. As of last month, according to the New York Times, Washington has committed around $9 trillion to the bankster bailout. Obama pretends to be angry about a measly $165 million ripoff by AIG's employees. Actually, he's politically embarrassed. That's what happens when you run with gangsters.
BAR executive editor Glen Ford can be contacted at Glen.Ford@BlackAgendaReport.com.
So President Obama Is Finally Pissed Off? So What?
Wed, 03/18/2009
A Black Agenda Radio commentary by Glen Ford
The President's public display of anger at AIG is a cover for well-deserved political embarrassment. He and his bankster advisors have dedicated trillions to rescuing the criminal corporations of Wall Street from the consequences of their actions. He acts disappointed that they're still gangsters. "The logic of bankster capitalist enterprise, which AIG was created to protect and serve, is take the money and run - every chance you get."
Obama is Finally Pissed Off. So What?
A Black Agenda Radio commentary by Glen Ford
"Did Obama think these guys became financial gangsters as a public service?"
President Obama wants everybody to know that he's angry, really angry, at the zombie insurance giant AIG. Obama gave the impression that AIG pulled a fast one when it awarded its employees $165 million in bonuses for consummating derivative deals that have wrecked the global financial system. The President theatrically pounded the podium in righteous indignation. "How do they justify this outrage to the taxpayers who are keeping the company afloat?" said the usually super-cool chief executive.
Obama's question is misdirected. He should instead be asking himself and his own economic advisors how he and they allowed the racketeers at AIG to divvy up the people's bailout money among themselves. By the time Obama staged his big public blowout over the bonuses, most of the money was already gone, paid out to the foot soldiers of the AIG financial mafia. Treasury Secretary Timothy Geithner didn't stop the checks from going out. Neither did Larry Summers, head of the National Economic Council at the White House. Robert Rubin, who is guru to Summers and Geithner and to Obama himself, didn't alert his protégés to the likelihood that AIG would reserve a big cut of the bailout for distribution among its own gang. Did Obama think these guys became financial gangsters as a public service?
And why shouldn't they get a cut? The logic of bankster capitalist enterprise, which AIG was created to protect and serve, is take the money and run - every chance you get. AIG covered hundreds of billions - maybe trillions - of dollars in bets placed by the Wall Street mafia in the derivatives casino. But that was a scam, since AIG didn't really have the cash. If AIG went down, then many of the gamblers on Wall Street would go down with it. Therefore, in a bipartisan, help out your favorite gangster agreement, Bush Republicans and Obama Democrats gave AIG $170 billion dollars of the people's money to rescue AIG's clients, the gambling banksters of Wall Street. And why shouldn't the guys who covered the bets in the first place get a piece of the public bailout, themselves? The logic of criminal financial enterprise dictates that they are no more morally reprehensible than their clients.
"It is the public that should be angry with Obama."
The biggest client was none other than Goldman Sachs. AIG's bailout included cash to cover at least $12.9 billion in Goldman Sach's casino bets. As it turns out, the two Godfathers of the Wall Street bailout are Robert Rubin, Obama's personal economics guru, and Henry Paulson, George Bush's Treasury Secretary - both former CEOs of Goldman Sachs. Goldman Sachs had a consigliere in both administrations, ensuring that the logic of bankster capitalism prevailed across party lines.
Barack Obama has no right to be angry at AIG's diversion of bailout money. It is the public that should be angry with Obama, for keeping the zombies of AIG and Goldman Sachs alive, so they can steal again. As of last month, according to the New York Times, Washington has committed around $9 trillion to the bankster bailout. Obama pretends to be angry about a measly $165 million ripoff by AIG's employees. Actually, he's politically embarrassed. That's what happens when you run with gangsters.
BAR executive editor Glen Ford can be contacted at Glen.Ford@BlackAgendaReport.com.
Wall Street celebrates government windfall
http://wsws.org/articles/2009/mar2009/toxi-m24.shtml
Wall Street celebrates government windfall for banks and big investors
By Barry Grey
24 March 2009
Wall Street erupted in a demonstration of euphoria and greed Monday as the Obama administration announced a plan to offload bankers' bad debts that amounts to an unprecedented looting of taxpayer funds to benefit the financial elite.
All of the major stock indexes soared as Treasury Secretary Timothy Geithner laid out details of the administration's so-called Public-Private Investment Program—a euphemism for a scheme to bankroll private investment firms and guarantee them huge profits in return for buying failed home loans and securities from the banks at vastly inflated prices.
The masters of Wall Street, who have been driving up share prices in recent days—especially bank stocks—in anticipation of the roll-out of the program, were delighted to find that it not only met, but exceeded their expectations.
Hedge funds and private equity firms that participate in the scheme will put up as little as 5 percent of the capital to buy between $500 billion and $1 trillion of the banks' junk assets, with the government providing the rest in the form of $75-$100 billion in Treasury funds and low-cost loans from the Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC). The loans will be guaranteed by the government, which will assume the overwhelming bulk of any losses.
Even though the bulk of the capital and financing will come from the government, the public-private investment funds set up under the scheme will be run by private investment firms, which will receive lucrative fees for dividing up the booty.
The banks cheered the deal because it will allow them, at their own discretion, to palm off their bad debts at prices many multiples of what they could currently fetch on the market. Since the government will bankroll the big investors and assume virtually all of the risk, the investors will be willing to pay inflated prices for the illiquid loans and securities in government-supervised auctions. They calculate that they can hold the assets until the housing market recovers and then sell them back to the financial markets at a return of 20 percent or more.
For their part, the banks will be able, at little cost, to cleanse their balance sheets of what is routinely referred to as "toxic waste," laying the basis for a big rise in their stock.
The entire scheme is voluntary. No one on Wall Street is required to do anything—unless he judges there is a substantial profit to be made. There is no requirement that the banks increase their lending. They can choose to continue to hoard their government windfalls—as they have done thus far with the billions they've received in cash injections and government loans—in order to pressure the state for even more favorable terms.
Stocks opened sharply higher after Geithner's presentation of the plan to reporters Monday morning. They continued to rise throughout the day. The Dow Jones Industrial Average closed with a gain of 497 points, or 6.8 percent. It was the Dow's biggest one-day rise since October 28, bringing it 18.8 percent higher than its low earlier this month. The other major indexes—the Standard & Poor's 500 and the Nasdaq—registered similar gains.
It was, above all, a banner day for bank stocks. Citigroup finished up 19 percent, Bank of America rose 26 percent, JPMorgan Chase closed 25 percent higher and Wells Fargo ended with a gain of 24 percent.
There was a political as well as an economic component to the jubilation on Wall Street. The plan and the related statements of top administration officials, beginning with Obama, were rightly taken to demonstrate that the Obama administration is nothing more than a direct instrument of the most powerful sections of the financial aristocracy.
Top administration economic officials and Obama himself spent the weekend reassuring Wall Street, which responded with fury to a bill passed by the House of Representatives taxing the bonuses of wealthy executives and traders at AIG and other bailed-out firms, that they did not support the measure and would impose no executive pay limits on firms that participated in the new bank bailout measure.
With Wall Street executives threatening to boycott the program unless they were given ironclad assurances that their fortunes would not be touched and there would be no "change in the rules" down the road, Geithner gave an interview that was published by the Wall Street Journal Monday morning pleading for hedge funds and banks to participate. "The Obama administration believes those provisions shouldn't apply to such broad programs [as the Public-Private Investment Plan] and an exception was made last month for participants in the Federal Reserve's consumer-lending facility," the newspaper reported.
The same issue carried a column by Geithner entitled "My Plan for Bad Bank Assets" which declared that "we need to be very careful not to discourage those investments the economy needs to recover from recession." It went on to equate protecting the million-dollar bonuses awarded by firms that have bilked the public for billions of dollars with defending "the rule of law." Geithner solemnly wrote that "when our government gives its word" to "responsible entrepreneurs and investors... we mean it."
In his press briefing Monday morning, he rejected any suggestion that the government might temporarily nationalize failing banks and declared, "We're going to do what's necessary to protect the system."
Obama, in remarks to the press on the toxic asset plan following a meeting with his top economic advisers, affirmed that it "will involve market participants who have every interest in making a profit."
In fact, the plan was drawn up in the closest consultation with the billionaire bankers and hedge fund managers who stand to profit from it. The Financial Times reported Monday:
"People close to the situation said the plan was the result of detailed talks between Treasury, banks, private equity groups and other investors over the past few weeks. Senior private equity executives said the key terms of the initiative unveiled on Monday went beyond their own wish-lists.
"Some investors had asked Treasury to provide debt equal to around three to four times the value of the equity to be injected in the public-private partnerships, but the authorities decided to grant leverage of up to six times for the purchase of toxic loans, making it even more attractive for private equity groups to participate in the plan...
"‘As it stands, there is very limited downside for us,' a senior Wall Street banker said. ‘If we like the price offered, we will sell the assets and record an accounting gain and if we don't, we will stay as we are.'"
Among the big Wall Street investors who praised the scheme and announced their intention to get in on the action was Bill Gross, the founder and head of Pacific Investment Management Co. (PIMCO), the world's biggest bond fund. Gross, along with billionaire investor Warren Buffett and Goldman Sachs CEO Lloyd Blankfein, first broached the idea of creating public-private investment funds to buy toxic bank assets with Treasury officials last fall.
The noted economist Jeffrey Sachs provided an accurate characterization of the plan in a commentary published Monday by the Huffington Post.
He wrote: "Geithner and Summers [Lawrence Summers, director of the White House's National Economic Council] have now announced their plan to raid the Federal Deposit Insurance Corporation (FDIC) and Federal Reserve (Fed) to subsidize investors to buy toxic assets from the banks at inflated prices. If carried out, the result will be a massive transfer of wealth—of perhaps hundreds of billions of dollars—to bank shareholders from the taxpayers (who will absorb losses at the FDIC and Fed)...
"The investment funds will have the following balance sheet. For every $1 of toxic assets that they buy from the banks, the FDIC will lend up to 85.7 cents (six-sevenths of $1), and the Treasury and private investors will each put in 7.15 cents in equity to cover the remaining balance. The Federal Deposit Insurance Corporation loans will be non-recourse, meaning that if the toxic assets purchased by private investors fall in value below the amount of the FDIC loans, the investment funds will default on the loans and the FDIC will end up holding the toxic assets...
"The FDIC is giving a ‘heads you win, tails the taxpayer loses' offer to the private investors."
Princeton University economist and New York Times columnist Paul Krugman offered a similar assessment, writing, "But the Geithner scheme would offer a one-way bet: if asset values go up, the investors profit, but if they go down, the investors can walk away from their debt. This isn't really about letting markets work. It's just an indirect, disguised way to subsidize purchases of bad assets."
Mournfully, he noted, "It's as if the president were determined to confirm the growing perception that he and his economic team are out of touch, that their economic vision is clouded by excessively close ties to Wall Street."
It is not, however, a matter of Obama's "clouded vision," but rather an administration that embodies the reality of class relations in America and the dictatorship of finance capital which is exercised through a political system dominated by two parties of the capitalist ruling elite. The wholesale theft of the social wealth embodied in the latest bailout scheme is a continuation of a policy that has, from day one, been driven by horror not at the impoverishment of tens of millions of workers, but rather the prospect that the crisis of their own making could cut into the vast wealth of the financial oligarchs.
On Monday, Wall Street celebrated the fact that it has in Washington a bunch of lackeys who can be counted on to do its bidding.
Wall Street celebrates government windfall for banks and big investors
By Barry Grey
24 March 2009
Wall Street erupted in a demonstration of euphoria and greed Monday as the Obama administration announced a plan to offload bankers' bad debts that amounts to an unprecedented looting of taxpayer funds to benefit the financial elite.
All of the major stock indexes soared as Treasury Secretary Timothy Geithner laid out details of the administration's so-called Public-Private Investment Program—a euphemism for a scheme to bankroll private investment firms and guarantee them huge profits in return for buying failed home loans and securities from the banks at vastly inflated prices.
The masters of Wall Street, who have been driving up share prices in recent days—especially bank stocks—in anticipation of the roll-out of the program, were delighted to find that it not only met, but exceeded their expectations.
Hedge funds and private equity firms that participate in the scheme will put up as little as 5 percent of the capital to buy between $500 billion and $1 trillion of the banks' junk assets, with the government providing the rest in the form of $75-$100 billion in Treasury funds and low-cost loans from the Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC). The loans will be guaranteed by the government, which will assume the overwhelming bulk of any losses.
Even though the bulk of the capital and financing will come from the government, the public-private investment funds set up under the scheme will be run by private investment firms, which will receive lucrative fees for dividing up the booty.
The banks cheered the deal because it will allow them, at their own discretion, to palm off their bad debts at prices many multiples of what they could currently fetch on the market. Since the government will bankroll the big investors and assume virtually all of the risk, the investors will be willing to pay inflated prices for the illiquid loans and securities in government-supervised auctions. They calculate that they can hold the assets until the housing market recovers and then sell them back to the financial markets at a return of 20 percent or more.
For their part, the banks will be able, at little cost, to cleanse their balance sheets of what is routinely referred to as "toxic waste," laying the basis for a big rise in their stock.
The entire scheme is voluntary. No one on Wall Street is required to do anything—unless he judges there is a substantial profit to be made. There is no requirement that the banks increase their lending. They can choose to continue to hoard their government windfalls—as they have done thus far with the billions they've received in cash injections and government loans—in order to pressure the state for even more favorable terms.
Stocks opened sharply higher after Geithner's presentation of the plan to reporters Monday morning. They continued to rise throughout the day. The Dow Jones Industrial Average closed with a gain of 497 points, or 6.8 percent. It was the Dow's biggest one-day rise since October 28, bringing it 18.8 percent higher than its low earlier this month. The other major indexes—the Standard & Poor's 500 and the Nasdaq—registered similar gains.
It was, above all, a banner day for bank stocks. Citigroup finished up 19 percent, Bank of America rose 26 percent, JPMorgan Chase closed 25 percent higher and Wells Fargo ended with a gain of 24 percent.
There was a political as well as an economic component to the jubilation on Wall Street. The plan and the related statements of top administration officials, beginning with Obama, were rightly taken to demonstrate that the Obama administration is nothing more than a direct instrument of the most powerful sections of the financial aristocracy.
Top administration economic officials and Obama himself spent the weekend reassuring Wall Street, which responded with fury to a bill passed by the House of Representatives taxing the bonuses of wealthy executives and traders at AIG and other bailed-out firms, that they did not support the measure and would impose no executive pay limits on firms that participated in the new bank bailout measure.
With Wall Street executives threatening to boycott the program unless they were given ironclad assurances that their fortunes would not be touched and there would be no "change in the rules" down the road, Geithner gave an interview that was published by the Wall Street Journal Monday morning pleading for hedge funds and banks to participate. "The Obama administration believes those provisions shouldn't apply to such broad programs [as the Public-Private Investment Plan] and an exception was made last month for participants in the Federal Reserve's consumer-lending facility," the newspaper reported.
The same issue carried a column by Geithner entitled "My Plan for Bad Bank Assets" which declared that "we need to be very careful not to discourage those investments the economy needs to recover from recession." It went on to equate protecting the million-dollar bonuses awarded by firms that have bilked the public for billions of dollars with defending "the rule of law." Geithner solemnly wrote that "when our government gives its word" to "responsible entrepreneurs and investors... we mean it."
In his press briefing Monday morning, he rejected any suggestion that the government might temporarily nationalize failing banks and declared, "We're going to do what's necessary to protect the system."
Obama, in remarks to the press on the toxic asset plan following a meeting with his top economic advisers, affirmed that it "will involve market participants who have every interest in making a profit."
In fact, the plan was drawn up in the closest consultation with the billionaire bankers and hedge fund managers who stand to profit from it. The Financial Times reported Monday:
"People close to the situation said the plan was the result of detailed talks between Treasury, banks, private equity groups and other investors over the past few weeks. Senior private equity executives said the key terms of the initiative unveiled on Monday went beyond their own wish-lists.
"Some investors had asked Treasury to provide debt equal to around three to four times the value of the equity to be injected in the public-private partnerships, but the authorities decided to grant leverage of up to six times for the purchase of toxic loans, making it even more attractive for private equity groups to participate in the plan...
"‘As it stands, there is very limited downside for us,' a senior Wall Street banker said. ‘If we like the price offered, we will sell the assets and record an accounting gain and if we don't, we will stay as we are.'"
Among the big Wall Street investors who praised the scheme and announced their intention to get in on the action was Bill Gross, the founder and head of Pacific Investment Management Co. (PIMCO), the world's biggest bond fund. Gross, along with billionaire investor Warren Buffett and Goldman Sachs CEO Lloyd Blankfein, first broached the idea of creating public-private investment funds to buy toxic bank assets with Treasury officials last fall.
The noted economist Jeffrey Sachs provided an accurate characterization of the plan in a commentary published Monday by the Huffington Post.
He wrote: "Geithner and Summers [Lawrence Summers, director of the White House's National Economic Council] have now announced their plan to raid the Federal Deposit Insurance Corporation (FDIC) and Federal Reserve (Fed) to subsidize investors to buy toxic assets from the banks at inflated prices. If carried out, the result will be a massive transfer of wealth—of perhaps hundreds of billions of dollars—to bank shareholders from the taxpayers (who will absorb losses at the FDIC and Fed)...
"The investment funds will have the following balance sheet. For every $1 of toxic assets that they buy from the banks, the FDIC will lend up to 85.7 cents (six-sevenths of $1), and the Treasury and private investors will each put in 7.15 cents in equity to cover the remaining balance. The Federal Deposit Insurance Corporation loans will be non-recourse, meaning that if the toxic assets purchased by private investors fall in value below the amount of the FDIC loans, the investment funds will default on the loans and the FDIC will end up holding the toxic assets...
"The FDIC is giving a ‘heads you win, tails the taxpayer loses' offer to the private investors."
Princeton University economist and New York Times columnist Paul Krugman offered a similar assessment, writing, "But the Geithner scheme would offer a one-way bet: if asset values go up, the investors profit, but if they go down, the investors can walk away from their debt. This isn't really about letting markets work. It's just an indirect, disguised way to subsidize purchases of bad assets."
Mournfully, he noted, "It's as if the president were determined to confirm the growing perception that he and his economic team are out of touch, that their economic vision is clouded by excessively close ties to Wall Street."
It is not, however, a matter of Obama's "clouded vision," but rather an administration that embodies the reality of class relations in America and the dictatorship of finance capital which is exercised through a political system dominated by two parties of the capitalist ruling elite. The wholesale theft of the social wealth embodied in the latest bailout scheme is a continuation of a policy that has, from day one, been driven by horror not at the impoverishment of tens of millions of workers, but rather the prospect that the crisis of their own making could cut into the vast wealth of the financial oligarchs.
On Monday, Wall Street celebrated the fact that it has in Washington a bunch of lackeys who can be counted on to do its bidding.
Thursday, March 26, 2009
The Real AIG Scandal
http://www.slate.com/id/2213942/
The Real AIG Scandal
It's not the bonuses. It's that AIG's counterparties are getting paid back in full.
By Eliot Spitzer
Tuesday, March 17, 2009
Everybody is rushing to condemn AIG's bonuses, but this simple scandal is obscuring the real disgrace at the insurance giant: Why are AIG's counterparties getting paid back in full, to the tune of tens of billions of taxpayer dollars?
For the answer to this question, we need to go back to the very first decision to bail out AIG, made, we are told, by then-Treasury Secretary Henry Paulson, then-New York Fed official Timothy Geithner, Goldman Sachs CEO Lloyd Blankfein, and Fed Chairman Ben Bernanke last fall. Post-Lehman's collapse, they feared a systemic failure could be triggered by AIG's inability to pay the counterparties to all the sophisticated instruments AIG had sold. And who were AIG's trading partners? No shock here: Goldman, Bank of America, Merrill Lynch, UBS, JPMorgan Chase, Morgan Stanley, Deutsche Bank, Barclays, and on it goes. So now we know for sure what we already surmised: The AIG bailout has been a way to hide an enormous second round of cash to the same group that had received TARP money already.
It all appears, once again, to be the same insiders protecting themselves against sharing the pain and risk of their own bad adventure. The payments to AIG's counterparties are justified with an appeal to the sanctity of contract. If AIG's contracts turned out to be shaky, the theory goes, then the whole edifice of the financial system would collapse.
But wait a moment, aren't we in the midst of reopening contracts all over the place to share the burden of this crisis? From raising taxes—income taxes to sales taxes—to properly reopening labor contracts, we are all being asked to pitch in and carry our share of the burden. Workers around the country are being asked to take pay cuts and accept shorter work weeks so that colleagues won't be laid off. Why can't Wall Street royalty shoulder some of the burden? Why did Goldman have to get back 100 cents on the dollar? Didn't we already give Goldman a $25 billion capital infusion, and aren't they sitting on more than $100 billion in cash? Haven't we been told recently that they are beginning to come back to fiscal stability? If that is so, couldn't they have accepted a discount, and couldn't they have agreed to certain conditions before the AIG dollars—that is, our dollars—flowed?
The appearance that this was all an inside job is overwhelming. AIG was nothing more than a conduit for huge capital flows to the same old suspects, with no reason or explanation.
So here are several questions that should be answered, in public, under oath, to clear the air:
What was the precise conversation among Bernanke, Geithner, Paulson, and Blankfein that preceded the initial $80 billion grant?
Was it already known who the counterparties were and what the exposure was for each of the counterparties?
What did Goldman, and all the other counterparties, know about AIG's financial condition at the time they executed the swaps or other contracts? Had they done adequate due diligence to see whether they were buying real protection? And why shouldn't they bear a percentage of the risk of failure of their own counterparty?
What is the deeper relationship between Goldman and AIG? Didn't they almost merge a few years ago but did not because Goldman couldn't get its arms around the black box that is AIG? If that is true, why should Goldman get bailed out? After all, they should have known as well as anybody that a big part of AIG's business model was not to pay on insurance it had issued.
Why weren't the counterparties immediately and fully disclosed?
Failure to answer these questions will feed the populist rage that is metastasizing very quickly. And it will raise basic questions about the competence of those who are supposedly guiding this economic policy.
The Real AIG Scandal
It's not the bonuses. It's that AIG's counterparties are getting paid back in full.
By Eliot Spitzer
Tuesday, March 17, 2009
Everybody is rushing to condemn AIG's bonuses, but this simple scandal is obscuring the real disgrace at the insurance giant: Why are AIG's counterparties getting paid back in full, to the tune of tens of billions of taxpayer dollars?
For the answer to this question, we need to go back to the very first decision to bail out AIG, made, we are told, by then-Treasury Secretary Henry Paulson, then-New York Fed official Timothy Geithner, Goldman Sachs CEO Lloyd Blankfein, and Fed Chairman Ben Bernanke last fall. Post-Lehman's collapse, they feared a systemic failure could be triggered by AIG's inability to pay the counterparties to all the sophisticated instruments AIG had sold. And who were AIG's trading partners? No shock here: Goldman, Bank of America, Merrill Lynch, UBS, JPMorgan Chase, Morgan Stanley, Deutsche Bank, Barclays, and on it goes. So now we know for sure what we already surmised: The AIG bailout has been a way to hide an enormous second round of cash to the same group that had received TARP money already.
It all appears, once again, to be the same insiders protecting themselves against sharing the pain and risk of their own bad adventure. The payments to AIG's counterparties are justified with an appeal to the sanctity of contract. If AIG's contracts turned out to be shaky, the theory goes, then the whole edifice of the financial system would collapse.
But wait a moment, aren't we in the midst of reopening contracts all over the place to share the burden of this crisis? From raising taxes—income taxes to sales taxes—to properly reopening labor contracts, we are all being asked to pitch in and carry our share of the burden. Workers around the country are being asked to take pay cuts and accept shorter work weeks so that colleagues won't be laid off. Why can't Wall Street royalty shoulder some of the burden? Why did Goldman have to get back 100 cents on the dollar? Didn't we already give Goldman a $25 billion capital infusion, and aren't they sitting on more than $100 billion in cash? Haven't we been told recently that they are beginning to come back to fiscal stability? If that is so, couldn't they have accepted a discount, and couldn't they have agreed to certain conditions before the AIG dollars—that is, our dollars—flowed?
The appearance that this was all an inside job is overwhelming. AIG was nothing more than a conduit for huge capital flows to the same old suspects, with no reason or explanation.
So here are several questions that should be answered, in public, under oath, to clear the air:
What was the precise conversation among Bernanke, Geithner, Paulson, and Blankfein that preceded the initial $80 billion grant?
Was it already known who the counterparties were and what the exposure was for each of the counterparties?
What did Goldman, and all the other counterparties, know about AIG's financial condition at the time they executed the swaps or other contracts? Had they done adequate due diligence to see whether they were buying real protection? And why shouldn't they bear a percentage of the risk of failure of their own counterparty?
What is the deeper relationship between Goldman and AIG? Didn't they almost merge a few years ago but did not because Goldman couldn't get its arms around the black box that is AIG? If that is true, why should Goldman get bailed out? After all, they should have known as well as anybody that a big part of AIG's business model was not to pay on insurance it had issued.
Why weren't the counterparties immediately and fully disclosed?
Failure to answer these questions will feed the populist rage that is metastasizing very quickly. And it will raise basic questions about the competence of those who are supposedly guiding this economic policy.
Dodd Blames Obama Administration
http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=aT_tMXRy2vDs
Dodd Blames Obama Administration for Bonus Amendment
By Ryan J. Donmoyer
March 19 (Bloomberg) -- Senate Banking Committee Chairman Christopher Dodd said the Obama administration asked him to insert a provision in last month’s $787 billion economic-stimulus legislation that had the effect of authorizing American International Group Inc.’s bonuses.
Dodd, a Connecticut Democrat, said yesterday he agreed to modify restrictions on executive pay at companies receiving taxpayer assistance to exempt bonuses already agreed upon in contracts. He said he did so without realizing the change would benefit AIG, whose recent $165 million payment to employees has sparked a public furor.
Dodd said he had wanted to limit executive compensation at companies that got money from the government’s financial-rescue fund. AIG has received $173 billion in bailout money. His provision was changed as the stimulus legislation was negotiated between the House and Senate.
“I did not want to make any changes to my original Senate-passed amendment” to the stimulus bill, “but I did so at the request of administration officials, who gave us no indication that this was in any way related to AIG,” Dodd said in a statement released last night. “Let me be clear -- I was completely unaware of these AIG bonuses until I learned of them last week.” He didn’t name the administration officials who made the request.
No Insistence
An administration official said last night that representatives of President Barack Obama didn’t insist on the change, though they did contend that the language in Dodd’s amendment could be legally challenged because it would apply retroactively to bonus agreements. The official spoke on the condition of anonymity.
That provision in the stimulus bill may undercut complaints by congressional Democrats about the AIG bonuses because most of them voted for the legislation. No Republicans in the House and only three in the Senate supported the stimulus measure.
“Taxpayers deserve better than this from their government, and this is just the latest reason why legislation must be transparent for all Americans to see before it is recklessly signed into law,” said Eric Cantor, the No. 2 Republican in the House.
The new law, approved by Congress Feb. 13 and signed into law by Obama the next week, effectively authorized bonus arrangements at companies receiving taxpayer bailouts as long as they were in place before Feb. 11. The AIG bonuses qualified under that provision.
Obama and many lawmakers who voted for the legislation, such as Senator Charles Schumer, a New York Democrat, and Senate Finance Committee Chairman Max Baucus, a Montana Democrat, are demanding AIG employees surrender their bonuses.
Schumer Letter
Schumer yesterday sent a letter to AIG Chief Executive Officer Edward Liddy warning him to return bonuses or face confiscatory taxes on them. The letter was signed by Senate Majority leader Harry Reid, a Nevada Democrat, and seven other senators.
Brian Fallon, a spokesman for Schumer, said the senator “supported a provision on the Senate floor that would have prevented these types of bonuses, but he was not on the conference committee that negotiated the final language.”
A House vote is planned for today on a bill to impose a 90 percent tax on executive bonuses paid by AIG and other companies getting more than $5 billion in federal bailout funds.
“I expect it to pass in overwhelmingly bipartisan fashion,” House Majority Leader Steny Hoyer, a Maryland Democrat, told reporters yesterday in Washington.
Republican Attacks
Republicans seized on the provision in the stimulus bill to paint Democrats as hypocrites.
“The fact is that the bill the president signed, which protected the AIG bonuses and others, was written behind closed doors by Democratic leaders of the House and Senate,” Iowa Senator Charles Grassley said in a statement.
AIG donated a total of $854,905 to political campaigns in 2008, according to the Center for Responsive Politics, a Washington-based research group. AIG employees as a group represent Dodd’s fourth-biggest donor during his career, the group’s research shows. The company’s political action committee, employees and immediate family members have given Dodd more than $280,000, the group said.
Dodd said the provision was written to give the Treasury Department enough discretion to reclaim bonuses as necessary.
“Fortunately, we wrote this amendment in a way that allows the Treasury Department to go back and review these bonus contracts and seek to recover the money for taxpayers,” he said.
Treasury Secretary Timothy Geithner told lawmakers in a letter this week that department lawyers believe it would be “legally difficult” to prevent AIG from paying bonuses.
Other Democrats who voted for the stimulus bill have ramped up criticism of AIG’s bonuses, including Massachusetts Representative Barney Frank, the chairman of the House Financial Services Committee, who told reporters, “I think the time has come to exercise our ownership rights.”
To contact the reporter on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net
Dodd Blames Obama Administration for Bonus Amendment
By Ryan J. Donmoyer
March 19 (Bloomberg) -- Senate Banking Committee Chairman Christopher Dodd said the Obama administration asked him to insert a provision in last month’s $787 billion economic-stimulus legislation that had the effect of authorizing American International Group Inc.’s bonuses.
Dodd, a Connecticut Democrat, said yesterday he agreed to modify restrictions on executive pay at companies receiving taxpayer assistance to exempt bonuses already agreed upon in contracts. He said he did so without realizing the change would benefit AIG, whose recent $165 million payment to employees has sparked a public furor.
Dodd said he had wanted to limit executive compensation at companies that got money from the government’s financial-rescue fund. AIG has received $173 billion in bailout money. His provision was changed as the stimulus legislation was negotiated between the House and Senate.
“I did not want to make any changes to my original Senate-passed amendment” to the stimulus bill, “but I did so at the request of administration officials, who gave us no indication that this was in any way related to AIG,” Dodd said in a statement released last night. “Let me be clear -- I was completely unaware of these AIG bonuses until I learned of them last week.” He didn’t name the administration officials who made the request.
No Insistence
An administration official said last night that representatives of President Barack Obama didn’t insist on the change, though they did contend that the language in Dodd’s amendment could be legally challenged because it would apply retroactively to bonus agreements. The official spoke on the condition of anonymity.
That provision in the stimulus bill may undercut complaints by congressional Democrats about the AIG bonuses because most of them voted for the legislation. No Republicans in the House and only three in the Senate supported the stimulus measure.
“Taxpayers deserve better than this from their government, and this is just the latest reason why legislation must be transparent for all Americans to see before it is recklessly signed into law,” said Eric Cantor, the No. 2 Republican in the House.
The new law, approved by Congress Feb. 13 and signed into law by Obama the next week, effectively authorized bonus arrangements at companies receiving taxpayer bailouts as long as they were in place before Feb. 11. The AIG bonuses qualified under that provision.
Obama and many lawmakers who voted for the legislation, such as Senator Charles Schumer, a New York Democrat, and Senate Finance Committee Chairman Max Baucus, a Montana Democrat, are demanding AIG employees surrender their bonuses.
Schumer Letter
Schumer yesterday sent a letter to AIG Chief Executive Officer Edward Liddy warning him to return bonuses or face confiscatory taxes on them. The letter was signed by Senate Majority leader Harry Reid, a Nevada Democrat, and seven other senators.
Brian Fallon, a spokesman for Schumer, said the senator “supported a provision on the Senate floor that would have prevented these types of bonuses, but he was not on the conference committee that negotiated the final language.”
A House vote is planned for today on a bill to impose a 90 percent tax on executive bonuses paid by AIG and other companies getting more than $5 billion in federal bailout funds.
“I expect it to pass in overwhelmingly bipartisan fashion,” House Majority Leader Steny Hoyer, a Maryland Democrat, told reporters yesterday in Washington.
Republican Attacks
Republicans seized on the provision in the stimulus bill to paint Democrats as hypocrites.
“The fact is that the bill the president signed, which protected the AIG bonuses and others, was written behind closed doors by Democratic leaders of the House and Senate,” Iowa Senator Charles Grassley said in a statement.
AIG donated a total of $854,905 to political campaigns in 2008, according to the Center for Responsive Politics, a Washington-based research group. AIG employees as a group represent Dodd’s fourth-biggest donor during his career, the group’s research shows. The company’s political action committee, employees and immediate family members have given Dodd more than $280,000, the group said.
Dodd said the provision was written to give the Treasury Department enough discretion to reclaim bonuses as necessary.
“Fortunately, we wrote this amendment in a way that allows the Treasury Department to go back and review these bonus contracts and seek to recover the money for taxpayers,” he said.
Treasury Secretary Timothy Geithner told lawmakers in a letter this week that department lawyers believe it would be “legally difficult” to prevent AIG from paying bonuses.
Other Democrats who voted for the stimulus bill have ramped up criticism of AIG’s bonuses, including Massachusetts Representative Barney Frank, the chairman of the House Financial Services Committee, who told reporters, “I think the time has come to exercise our ownership rights.”
To contact the reporter on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net
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