Not One Dime!
By Mike Whitney
01/10/08 - "ICH" - -- The mystery has been solved.
For nearly a year, we have been asking ourselves why the
investors and foreign banks that bought up hundreds of
billions of dollars of worthless mortgage-backed securities
(MBS) from US investment banks have not taken legal action
against these same banks or initiated a boycott of US
financial products to prevent more people from getting
ripped off?
Now we know the answer. It's because, behind the scenes,
Henry Paulson and Co. were working out a deal to dump the
whole trillion dollar mess on the US taxpayer. That's what
this whole $700 billion boondoggle is all about; wiping out
the massive debts that were generated in the biggest
incident of fraud in history. Rep Brad Sherman explained it
like this last night to Larry Kudlow:
"It (The bill) provides hundreds of billions of dollars of
bailouts to foreign investors. It provides no real control
of Paulson's power. There is a critique board but not really
a board that can step in and change what he does. It's a
$700 billion program run by a part-time temporary employee
and there is no limit on million dollar a month
salaries....... It's very clear. The Bank of Shanghai can
transfer all of its toxic assets to the Bank of Shanghai of
Los Angeles which can then sell them the next day to the
Treasury. I had a provision to say if it wasn't owned by an
American entity even a subsidiary, but at least an entity in
the US, the Treasury can't buy it. It was rejected.
The bill is very clear. Assets now held in China and London
can be sold to US entities on Monday and then sold to the
Treasury on Tuesday. Paulson has made it clear he will
recommend a veto of any bill that contained a clear
provision that said if Americans did not own the asset on
September 20th that it can't be sold to the Treasury.
Hundreds of billions of dollars are going to bail out
foreign investors. They know it, they demanded it and the
bill has been carefully written to make sure it can happen."
So, why hasn't the Treasury Secretary explained the real
purpose of the bailout to the American people? Could it be
that he knows that his $700 billion bailout would end up
like the Hindenburg, vanishing in sheets of flames?
This is a terrible bill, and it confers absolute authority
on one of the central players in the scandal, Henry Paulson,
who was the Chairman of Goldman Sachs at the time this MBS
garbage was being peddled around the planet to credulous
investors. Now Paulson will be in a position to buy up any
"troubled asset" he that he believes could pose a threat to
"financial market stability". That's just great! It is clear
that Paulson will use his unchecked powers to wipe the slate
clean and remove any possibility that foreign investors will
take legal action against the real perpetrators; the giant
Wall Street investment banks.
So, how do the American people like paying off Paulson and
Co. future legal bills? Is that how taxpayer revenue should
be spent instead of on education, health care and
infrastructure?
There's another reason why Paulson is working so hard to
pass the Bailout for Tycoons Bill; it's a windfall for the
banking giants. Citi did not simply pick up Wachovia by
happenstance nor did JP Morgan purchase Washington Mutual
because it wanted to perform its civic duty and prevent a
full-system meltdown. No way; they were clearly aware of the
way the wind was blowing. In fact, neither case manages to
pass the smell test.
This is from AP's Sara Lepro:
"Citigroup agreed Monday to purchase Wachovia's banking
operations for $2.1 billion in a deal arranged by federal
regulators, making the Charlotte-based bank the latest
casualty of the widening global financial crisis.
The deal greatly expands Citigroup's retail franchise—giving
it a total of more than 4,300 U.S. branches and $600 billion
in deposits—and secures its place among the U.S. banking
industry's Big Three, along with Bank of America Corp. and
JP Morgan Chase & Co.
But it comes at a cost: Citigroup Inc. said it will slash
its quarterly dividend in half to 16 cents. It also will
dilute existing shareholders by selling $10 billion in
common stock to shore up its capital position.
In addition to assuming $53 billion worth of debt, Citigroup
will absorb up to $42 billion of losses from Wachovia's $312
billion loan portfolio, with the Federal Deposit Insurance
Corp. agreeing to cover any remaining losses. Citigroup also
will issue $12 billion in preferred stock and warrants to
the FDIC.
(Ed; Here's the punch line) "The government's proposed $700
billion rescue plan for financial institution, being voted
on Monday by the House of Representatives, likely will prove
of added benefit to Citi.
While the plan broadly aims to prevent banks from profiting
on the sale of troubled assets to the government, there is
an exception made for assets acquired in a merger or buyout,
or from companies that have filed for bankruptcy. This could
allow Citigroup to sell toxic mortgages and other assets it
gained from Wachovia for a higher price than the bank
actually paid for them." ("Citigroup to buy Wachovia banking
operations"
Huh?!? So Citi not only gets an army of depositors (the
cheapest capital available!) but, at the same time, is going
to be able to dump it's mortgage-backed junk on the
taxpayer? And, guess what? The JP Morgan deal looks nearly
identical.
Is this "insider baseball" or not?
Does anyone want to wager that G-Sax will also get a
privileged spot at the public trough sucking up billions of
taxpayer dollars to patch together its tattered balance
sheet?
And what will the net result of Paulson's Bailout for
Fraudsters be; more consolidation of the financial industry
and the utter annihilation of local and regional banks.
That's a sure thing. The mom and pop banks across the
country are going to take it in the stern sheets if this
bill is passed. Bet on it.
The country has no time for this cynical scavenger-hunt. The
system is listing badly and we have ONE chance to get this
emergency bill right. There is no way an industry rep like
Henry Paulson, who has spent his entire career feathering
his own nest and handing out plums to his buddies, can
operate in the best interests of the American people.
Paulson has got to go!
According to Bloomberg News , Sept 29:
"The Federal Reserve will pump an additional $630 billion
into the global financial system, flooding banks with cash
to alleviate the worst banking crisis since the Great
Depression. The Fed increased its existing currency swaps
with foreign central banks by $330 billion to $620 billion
to make more dollars available worldwide. The Term Auction
Facility, the Fed's emergency loan program, will expand by
$300 billion to $450 billion. The European Central Bank, the
Bank of England and the Bank of Japan are among the
participating authorities.
The crisis is reverberating through the global economy,
causing stocks to plunge and forcing European governments to
rescue four banks over the past two days alone." (Bloomberg)
Get it? The Fed has ALREADY brushed aside Congress's "No"
vote and pumped money into the system; and look what
happened.
Nothing!
Libor is still at historic highs, the Ted spread has widened
to record levels and interbank lending is grinding to a
standstill. There's a run on the money markets that is
reducing the ability of businesses to turn over short term
debt. The system is shutting down, folks, and Paulson's
snake oil won't help. Why throw another $700 billion down a
rathole? 400 reputable economists--not the "faith based"
industry hacks that work for the Bush administration--are
opposed to this bailout. It has to be stopped.
This is a "real time" meltdown and it requires real
solutions, not bailouts for foreign creditors and Wall
Street Goliaths. (Foreign victims of this scam will have to
sue the perpetrators not the US taxpayer) As Nouriel Roubini,
chairman of Roubini Global Economics, points out, we are on
the verge of the "mother of all bank runs", a cross-border
savaging of reserves that would crash the entire financial
system. Here's Roubini on the next shoe to drop:
"The next step of this panic could become the mother of all
bank runs, i.e. a run on the trillion dollar plus of the
cross border short-term interbank liabilities of the US
banking and financial system as foreign banks as starting to
worry about the safety of their liquid exposures to US
financial institutions; such a silent cross border bank run
has already started as foreign banks are worried about the
solvency of US banks and are starting to reduce their
exposure. And if this run accelerates - as it may now - a
total meltdown of the US financial system could occur. We
are thus now in a generalized panic mode and back to the
risk of a systemic meltdown of the entire financial system.
And US and foreign policy authorities seem to be clueless
about what needs to be done next. Maybe they should today
start with a coordinated 100 bps reduction in policy rates
in all the major economies in the world to show that they
are starting to seriously recognize and address this rapidly
worsening financial crisis." (Nouriel Roubini's EconoMonitor)
We have no time for Paulson's self serving shenanigans. This
is not how one goes about recapitalizing the banking system
or bringing stability to the financial system. It's time to
get rid of the lobbyists and banking vermin and bring in the
economists and the people with real experience. Paulson's
plan is loser. Not one dime should go to this latest Wall
Street swindle. No bailout!
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