Congress passed the bailout legislation with little or no stipulation on how the money could be used, apparently assuming that the criminal enterprise centered on Wall Street would somehow just "do the right thing."
---
When Treasury Secretary and bald-pated "former" Goldman Sachs executive, Hank Paulson, unveiled his three-page Wall Street bailout "plan," it had all the appearance and subtlety of a ransom note. More appropriately, the plan ought to have been scrawled in crayon, or perhaps constructed of cutout letters from a newspaper. "Hand over the dough, or the economy gets it," was the obvious message. After weeks of disappearance, George W. Bush made a rare television appearance to amp up the dread about the looming financial crisis: act now, don't think, give us the money and unrestricted authority to do what needs to be done. It was classic shock doctrine manipulation in time of crisis.
But Congress actually balked at the initial obtuse proposal, slight on details and heavy on unrestricted license, complete with an explicit stipulation that neither Congress nor the judiciary could review or oversee a process that would be administration by another, similarly bald-pated "former" Goldman Sachs executive, Neel Kashkari. After the initial bill failed to pass muster in the House, a few more days and several hundred pages later, Congress passed their glommed up version, which was stuffed with sundry special interest favors like tax breaks for NASCAR.
The essentials of the Paulson plan were still intact, however, and still no one really knew exactly what the Treasury Department was going to do. Of course, it soon became apparent that the Treasury Department didn't really know what it was going to do either. First, Paulson intended to buy up Wall Street's "bad paper," the financial instruments that were rapidly delivering on the widening plain of mortgage foreclosures and bad debt write-downs. Questions only grew. No one could see how this "plan" was going to work. Once Europe decided on "equity investment," i.e. buying stock in financial companies, Paulson then swung Treasury onto that track. The initial intent of this was to grease frozen credit markets, help provide liquidity for new loans on Main Street. Even if this did work, it was a temporary jump start, but still no effort on to stanch the mortgage meltdown that was sure to keep bleeding out for months, if not years, to come.
That is because there was nothing to see there. There was no plan. Rest assured, we were told, even though there won't be any oversight and little external control over what Treasury would do with the money, Wall Street would assume a responsible role in averting further disaster from the disaster they had made.
Only after Treasury began to "inject" the first of an initial $250 billion, did it become apparent where the US taxpayer money was going. Banks were using the funds for mergers and acquisitions. Treasury largess was helping banks such as JP Morgan Chase, which was not in any dire straits, to be "a little bit more active on the acquisition side ... for some banks that are still struggling." The cash infusion, courtesy of taxpayers who saw the ceiling on the national debt rise to over $11 trillion, was helping major banks pump up their own position on the financial turf, expand operations and reduce regional competition. The banks that were "too big to fail" were getting bigger on the taxpayer nickel and encouraged in this effort by Paulson.
Worse than this, though, is news that much of the $163 billion so far provided to Wall Street will go to shareholder dividends, as financial market players want and need to keep stoking remaining investors with what is essentially a government funded bribe not to dump stock. Some of those investors receiving US taxpayer money include Warren Buffet and Saudi royal, Prince Alwaleed Talal. That's what is known as bang for the buck on Wall Street.
Congress passed the bailout legislation with little or no stipulation on how the money could be used, apparently assuming that the criminal enterprise centered on Wall Street would somehow just "do the right thing." Well, now it is being used, not to provide liquidity, not to unfreeze credit markets, but to pay dividends to well-heeled shareholders lest they be tempted to extract themselves even more from the train wreck known as the US financial industry. While this move may help keep the Dow Jones pumped for awhile, and thereby keep an even worse meltdown off the Bush administration's clock, in no way can it be suggested that this is any long term solution to the groundswell of ills rippling across the land.
It once was the case that government bailouts came with restrictions on how the money could be used. The 1979 bailout of Chrysler required the suspension of dividend payments precisely because it drained required capital from the project at hand. This flagrant financial malfeasance -- as though we haven't seen enough of that lately -- is being presented to us with nary a peep of protest on the American political stage.
Even as the insane McCain campaign wailed about Obama the "socialist," the Bush administration, led by skinhead Wall Street agents, happily hand over hundreds of billions of dollars, provided by expanding American public debt, to a corrupt and unrepentant financial industry that daily demonstrates, not only politically tone deaf behavior, but an invidious disrespect for the American public and its diminishing nickel.
Possibly the worst part of the chicanery of the equity buy-in, is that Paulson and Kashkari are deftly and secretly tying the US government interests directly to the financial well being of Wall Street. Indeed, the entire effort will ultimately cement into reality the adage that "what's good for Wall Street is good for America." This will be one more feature of the miserable Bush legacy, pulled off in the final months of eight long, disastrous years.
Who can seriously posit fear of socialism when callous, contemptuous "free market" villains are supposedly running the economy, and running it into the ground?
Kenneth Anderson is an astronomer who has worked on a number of NASA projects, Ken lives in Baltimore, where he devotes his scientific training to observations an inferences about current affairs, politics and the media. He authors Shockfront.org
