"In a time of universal deceit telling the truth is a revolutionary act." -George Orwell

Posts Tagged ‘Bailout’

Obama’s Faux Populism Sounds Like Bill Clinton’s Faux Populism

In Uncategorized on January 26, 2012 at 2:07 pm

Oldspeak:” ‘I’ll admit it: Listening to Barack Obama, I am ready to enlist in his campaign against the feed-the-rich Republicans … until I recall that I once responded in the same way to Bill Clinton’s faux populism. And then I get angry because betrayal by the “good guys” for whom I have ended up voting has become the norm.’ A Corporatist Democrat recycling the same high-flown but ultimately hollow rhetoric of corporate democrat of the past. A brilliant deconstruction of Obama’s faux populist oratory. Obama has mastered the essential political skill of words not matching deeds to devastating effect for many of us. America’s decline began under a Republican, and is currently being shepherded along by a Democrat. Party ‘in power’ changes periodically but the status quo never does. When will people wake up to the reality that their political class has been co-opted via a financial coup d’etat engineered by agents of the transnational corporate network? How many well-paying jobs have to be replaced with poverty wage jobs? How many inalienable rights have to be abrogated? How many small businesses have to be driven out of business? How many people have to be rendered homeless?  How much of our environment has to be destroyed before we see that our social and economic systems are unsustainable and on the brink of collapse?

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Staring At Empty Pages

By Robert Sheer @ Truthdig:

I’ll admit it: Listening to Barack Obama, I am ready to enlist in his campaign against the feed-the-rich Republicans … until I recall that I once responded in the same way to Bill Clinton’s faux populism. And then I get angry because betrayal by the “good guys” for whom I have ended up voting has become the norm.

Yes, betrayal, because if Obama meant what he said in Tuesday’s State of the Union address about holding the financial industry responsible for its scams, why did he appoint the old Clinton crowd that had legalized those scams to the top economic posts in his administration? Why did he hire Timothy Geithner, who has turned the Treasury Department into a concierge service for Wall Street tycoons?

Why hasn’t he pushed for a restoration of the Glass-Steagall Act, which Clinton’s deregulation reversed? Does the president really believe that the Dodd-Frank slap-on-the-wrist sellout represents “new rules to hold Wall Street accountable, so a crisis like this never happens again”? Can he name one single too-big-to-fail banking monstrosity that has been reduced in size on his watch instead of encouraged to grow ever larger by Treasury and Fed bailouts and interest-free money?

When Obama declared Tuesday evening “no American company should be able to avoid paying its fair share of taxes by moving jobs and profits overseas,” wasn’t he aware that Jeffrey Immelt, the man he appointed to head his jobs council, is the most egregious offender? Immelt, the CEO of GE, heads a company with most of its workers employed in foreign countries, a corporation that makes 82 percent of its profit abroad and has paid no U.S. taxes in the past three years.

It was also a bit bizarre for Obama to celebrate Steve Jobs as a model entrepreneur when the manufacturing jobs that the late Apple CEO created are in the same China that elsewhere in his speech the president sought to scapegoat for America’s problems. Apple, in its latest report on the subject, takes pride in attempting to limit the company’s overseas suppliers to a maximum workweek of 60 hours for their horribly exploited employees. Isn’t it weird to be chauvinistically China baiting when that country carries much of our debt?

 

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I’m also getting tired of the exhortations to improve the nation’s schools, certainly a worthy endeavor, but this economic crisis is the result not of high school dropouts as Obama suggested, but rather the corruption of the best and brightest graduates of our elite academies. As Obama well knows from his own trajectory in the meritocracy, which took him from one of the most privileged schools in otherwise educationally depressed Hawaii to Harvard Law, the folks who concocted the mathematical formulas and wrote the laws justifying fraudulent collateralized debt obligations and credit default swaps were his overachieving professors and classmates.

If he doesn’t know that, he should check out the record of Lawrence Summers, the man he picked to guide his economic program and who had been rewarded with the presidency of Harvard after having engineered Clinton’s deregulatory deal with Wall Street.

That is the real legacy of the Clinton years, and it is no surprise that GOP presidential contender Newt Gingrich has been campaigning on his rightful share of it. The international trade agreements that exported good U.S. jobs, the radical financial deregulation that unleashed Wall Street greed, and the free market zealotry of then-Fed Chairman Alan Greenspan, who was reappointed by Clinton, were all part of a deal Clinton made with Gingrich, House speaker at that time.

As Gingrich put it in the first Republican debate in South Carolina: “As speaker … working with President Bill Clinton, we passed a very Reagan-like program, less regulation, lower taxes.” Even the 15 percent tax break that Mitt Romney exploited for his carryover private equity income was a result of the unholy Clinton-Gingrich alliance. Both principals of that alliance were pimps for the financial industry, and that includes Freddie Mac, the for-profit stock-traded housing agency that Clinton coddled while it stoked the Ponzi scheme in housing and that rewarded the former speaker with $1.6 million to $1.8 million in consulting fees.

There were, finally, some bold words in Obama’s speech about helping beleaguered homeowners, but they ring hollow given this administration’s efforts to broker a sweetheart deal between the leading banks and the state attorneys general that would see the banks fined only a pittance for their responsibility in the mortgage meltdown. Obama could have had success demanding mortgage relief if he had made that a condition for bailing out the banks. Now the banksters know he’s firing blanks, and they are placing their bets on their more reliable Republican allies to prevent any significant demand for helping homeowners with their underwater mortgages.

Of course, Romney, Obama’s most likely opponent in the general election, will never challenge the Wall Street hold on Washington, since he is the personification of the vulture capitalism that is the true cause of America’s decline. Obama should shine in comparison with his Republican challenger, but there is little in his State of the Union speech to suggest he will chart a much-needed new course in his second term.

 

AIG’s Rescue Had ‘Poisonous’ Effect, U.S. Oversight Panel Says

In Uncategorized on June 12, 2010 at 1:38 pm

Oldspeak: “Ummm. Duh.”

From Hugh Son @ Bloomberg:

American International Group Inc.’s bailout had a “poisonous” effect on the U.S. financial system because it demonstrated the government would protect Wall Street firms from their own risk-taking, said a Congressional panel.

The Federal Reserve could have acted earlier to find a privately funded solution for New York-based AIG before the September 2008 rescue, the Congressional Oversight Panel said today in a report. The bailout, which has swelled to $182.3 billion, transformed banks’ financial bets into fully guaranteed obligations, the panel said.

“The government’s actions in rescuing AIG continue to have a poisonous effect on the marketplace,” said the panel, led by Harvard University law professor Elizabeth Warren. “The AIG rescue demonstrated that Treasury and the Federal Reserve would commit taxpayers to pay any price and bear any burden to prevent the collapse of America‘s largest financial institutions and to assure repayment to the creditors doing business with them.”

The rescue helped prevent an “utter collapse” of the U.S. economy, Treasury Secretary Timothy F. Geithner said in January. Geithner, 48, executed the bailout while he led the Federal Reserve Bank of New York in 2008. Lawmakers called the move a “backdoor bailout” because banks including Goldman Sachs Group Inc. and Societe Generale SA received payments from AIG to settle derivative contracts tied to subprime mortgages.

The report of more than 300 pages faults regulators and AIG management for AIG’s near-collapse. The New York Fed focused on a solution for Lehman Brothers Holdings Inc., which failed Sept. 15, 2008, a day before the AIG rescue was announced.

No Time

“By the time the Federal Reserve Bank reversed that approach, leaving Lehman to collapse into bankruptcy without help and concluding that AIG posed a greater threat to financial stability, time to explore other options was short,” the panel said.

The report “overlooks the basic fact that the global economy was on the brink of collapse and there were only hours in which to make critical decisions,” Andrew Williams, a Treasury spokesman, said in an e-mailed statement. “We have learned from that experience and have been fighting for more than a year to give the government authority to put firms, like AIG, out of existence when their failure poses a danger to our economic system.”

‘If Everything Goes Gangbusters’

The panel said in the report that the government’s prospects for recovering funds depends partly on the ability of AIG to find buyers for its units and on investors’ willingness to purchase shares if the Treasury Department sells its holdings. AIG turned over a stake of almost 80 percent as part of the bailout and the Treasury holds additional preferred shares from subsequent investments.

“If everything goes gangbusters, we will get paid back,” Warren said today in a Bloomberg Television interview. There is still a “lot of risk for the American taxpayer.”

The bailout includes a $60 billion Fed credit line, an investment of as much as $69.8 billion from the Treasury Department and up to $52.5 billion to buy mortgage-linked assets owned or backed by the insurer through swaps or securities lending.

AIG owes about $26.6 billion on the credit line and $49 billion to the Treasury. The company returned to profit in the first quarter, posting net income of $1.45 billion.

“I’m confident you’ll get your money, plus a profit,” AIG Chief Executive Officer Robert Benmosche told the panel in Washington on May 26. “We are a strong, vibrant company.”

Plane Leasing, Consumer Lending

If it becomes apparent that AIG won’t repay its rescue in full, the U.S. could consider breaking up the insurer and putting money-losing subsidiaries into bankruptcy, the panel said. Units that are candidates because they require outside funding and may have “limited potential sale value” include the consumer lending business and plane lessor, the panel said.

“Under this approach, the government could avoid indirectly subsidizing money-losing subsidiaries and their creditors, as is currently the case, if the subsidiaries could be put into bankruptcy without affecting other operations or the holding company,” the report said.

AIG leaders allowed the firm to accumulate “staggering amounts of risk” in derivatives and other areas, the panel said. The derivatives unit continued to assume through the beginning of 2008 that credit risk from credit-default swaps was “virtually non-existent,” according to the report.

‘Somewhat Odd’

“AIG’s assertion is somewhat odd given that the company underwrote this risk on behalf of clients who clearly believed there was some risk in these instruments worth insuring,” the panel said.

The insurer, once the world’s largest, insured 100,000 companies, municipalities and retirement plans, potentially affecting 100 million Americans, and was counterparty to some of the biggest financial firms, regulators said at the time of AIG’s bailout.

The breadth of operations weren’t “matched by a coherent regulatory structure to oversee its business.” The Office of Thrift Supervision had oversight of the parent company and failed to limit risks from swaps, the panel said.

Regulators have said that they were forced to save AIG to prevent a wave of failures that a collapse would have sparked.

‘The Blob’

“Panic was so heavy in the markets that it was almost a physical presence,” Fed Governor Elizabeth Duke said in a speech to bankers on June 8. “I kept having this image in my head of the panic being like the monster called ‘The Blob’ that I saw years ago in an old movie. Like the Blob, panic attacked one institution after another.”

Congress created the panel in 2008 to oversee Treasury activities in stabilizing the economy and the $700 billion Troubled Asset Relief Program. The program has been criticized by lawmakers including Senator Maria Cantwell, a Democrat from Washington, and Representative Jeb Hensarling, a Texas Republican, for helping big banks more than average citizens.