I can see, I can see when our hands our tied
I was a victim when you lied
You who smile back legislated
You who made me stupid hatred
You who used your money taking
You who tax and persecute
You who guarded all the loot
You who buried me alive
I will survive
Attack, Attack Attack
– Public Image Ltd.
Well, as you may have heard its bonus season on Wall Street and your money provided to bailout every last one of them is flying out the door. Best
is the $100 million for AIG, a company which in just over a year saw $185 billion of your tax dollars go through it. I guess its hard work keeping track of all that money. BofA, which remains on the Fed’s low interest and other public largess life support is giving out $4.4 billion. As the economy tanked in 2009, it was good year on Wall Street.
Now we have two cases of looting here, the first is of the taxpayer and the second is of shareholders in public companies. The latter has become an increasing problem as boards have become window dressing and the executives look to see how much money they can squeeze out. Thorstein Veblen, an essential thinker on political economy, spoke of this developing problem, of a rogue executive bureaucracy a hundred years ago, it is now fully manifest.
Meanwhile in the real economy, as 4th quarter results come in, the economy remains flat, all the reason more for those bonuses right? Just like the reasoning for Mr. Bernanke’s re-appointment, it could be worse.
Finally, coming soon to a government near you, IMF austerity. In the past, this has been saved for the developing world, let’s see how it works with the Greeks.
cross-posted from Archein: “bonuses, government, and the economy”
The debate over banks and banking came front and center this week. In his toughest language yet, President Barack Obama vowed to veto financial reform legislation that is not tough enough on Wall Street. “The lobbyists are already trying to kill it,” Obama told Congress in his State of the Union address. “Well, we cannot let them win this fight. And if the bill that ends up on my desk does not meet the test of real reform, I will send it back.”
The President’s rhetoric offers an important measure of progress. Now we can be assured that the political elite are paying attention to the poll numbers showing an unprecedented anger at the big banks and the Wall Street bailouts. Democrats are starting to figure out if they don’t take up this populist message and run with it in November, the Republicans will.
But the rest of the President’s speech and the other dramatic developments in the banking world this week indicate that Democratic actions are falling far short of their rhetoric, a pattern that voters are sure to notice.
First, the speech. Many had anticipated a big announcement on jobs. With jobless rates in the double digits and a projected 5-10 year haul to get employment back to normal levels, workers were hoping for something big and bold. Instead, Obama proposed $30 billion in TARP funds to get credit flowing to small businesses. $30 billion to put 16 million Americans back to work? $30 billion when the Wall Street bonus pool for a few thousand bankers was $140 billion this month? Democrats will live to regret this missed opportunity.
Also on Wednesday, U.S. Treasury Secretary Tim Geithner was called on the carpet once again by irate members of the House for his mishandling of the AIG bailout. To their credit, several Democrats asked the toughest questions. But Geithner bobbed and weaved and no knock-out punches were landed. This is a problem for the Democrats. The whole incident paints an ugly picture of the federal response to the financial meltdown, best described by Representative Edolphus Towns (D-NY): “The taxpayers were propping up the hollow shell of AIG by stuffing it with money and the rest of Wall Street came by and looted the corpse.”
On Thursday, Federal Reserve Chairman Ben Bernanke was reconfirmed by the Senate for another four year term. His nomination had been in trouble and a record number of senators voted no, but Obama stood by his man and pushed him through. The problem with Bernanke is best summarized by economist Simon Johnson: “Bernanke is an airline pilot who pulled off a miraculous landing, but didn’t do his preflight checks and doesn’t show any sign of being more careful in the future – thank him if you want, but why would you fly with him again (or the airline that keeps him on)?” While Bernanke may have saved Wall Street, he has shown little interest in using his power as Fed Chairman to aggressively aid Main Street. He is not the man for the job in these tough economic times and that will soon be apparent to the detriment of the Democrats who secured his confirmation.
Ultimately, however, the most important developments of the week were played out behind closed doors in the Senate. Senate Banking Chairman, Chris Dodd, made the decision some time ago to try to devise a bipartisan financial reform package. His package of reforms was then handed over to four bipartisan working groups. With thousands of bank lobbyists swarming the hill, it is no surprise that these groups are busily making the Dodd bill worse.
The derivatives language is being weakened and bankruptcy is emerging as the preferred method of unwinding financial institutions, which could leave taxpayers to foot the bill for this expensive procedure. To truly end the “too big to fail” problem and crack down on the reckless behavior of the biggest banks, we need strong, specific preventative measures such as leverage limits, capital and margin requirements, limits on counterparty exposures, a ban on proprietary trading and limits on bank size through a low cap on total liabilities. Even Obama’s signature reform, an independent consumer agency is in danger of being whittled down to a corner desk in a failed federal agency.
The President understands that the Wall Street bailout was “about as popular as a root canal.” But if Democrats continue to peddle this type of rhetoric while neglecting meaningful reform as they have done this week, the Republicans will run away with the anti-bailout message and with the election in November.
Crossposted from http://www.banksterusa.org/
One more secret of the American International Group’s bailout became public on Wednesday: a list of the tens of billions of dollars in toxic assets that the Federal Reserve Bank of New York bought for 100 cents on the dollar from A.I.G.’s trading partners.
Representative Darrell Issa of California, the ranking Republican on the House Oversight and Government Reform Committee, released the list after the committee’s hearing on the A.I.G. bailout, even though he said the New York Fed wanted to keep it under wraps until 2018. But Mr. Issa said it made little sense to keep the information private. (See the list on the jump.)
“A lot of these assets were short term,” he told Mary Willliams Walsh of The New York Times. “Most will have been liquidated in the next three to four years.”
The list of derivative transactions is part of the 250,000 pages of internal documents on A.I.G. that were subpoenaed by the House committee. Until now, the details of what the New York Fed bought from from A.I.G.’s counterparties in November 2008 were not publicly known, nor the specific losses.
In his statement releasing the document, Mr. Issa argued, “It’s not conjecture, it’s not speculation, it’s fact — the New York Fed gave a backdoor bailout to A.I.G.’s counterparties and then tried to cover it up.”
Mr. Issa added, “No one has answered the question as to why the New York Fed were so adamant at keeping details of the counterparty deal confidential.”