("Bush &) Obama's Trillion Dollar Bailouts -- Questions that won't die

Trillion $ Bailouts  – Questions that won’t die

by Ronald Bleier

11.6.09

 

A major political question that doesn’t want to die is whether the billion and trillion dollar Wall Street bailouts that Washington handed out were necessary to keep the economy from disintegrating.  Despite the persistence of the question, the only answer seemingly allowed in the mainstream is the monotonously uniform: Without the bailouts we’d be using beads for currency -- a line I heard on TV this week. 

 

Yet there is another, rather different answer available. The alternative response is that not only were the bailouts unnecessary to save the economy, but they represent perhaps the biggest single criminal theft and transfer of wealth to the wealthy from the rest of us.

 

Some of the evidence for such an unorthodox view was presented back in September by Mike Whitney, a regular contributor to the indispensable Counterpunch.org website.

 

Whitney took the trouble to read some of the findings of independent economist, Dean Baker, who took the trouble to look at some of the relevant data.

 

According to Mike Whitney

 

Lehman Bros. didn't die of natural causes; it was drawn-and-quartered by high-ranking officials at the US Treasury and the Federal Reserve. Most of the rubbish presently appearing in the media, ignores this glaring fact. Lehman was a planned demolition (most likely) concocted by ex-Goldman Sachs CEO Henry Paulson, who wanted to create a financial 9-11 to scare Congress into complying with his demands for $700 billion in emergency funding (TARP) for underwater US banking behemoths.  The whole incident reeks of conflict of interest, corruption, and blackmail.

 

(9.15.09)“Lehman Died So TARP and AIG Might Live”) http://Counterpunch.org/whitney09152009.html)

 

Whitney explains that Lehman brothers could have been saved relatively easily if “Bernanke and Paulson had merely provided guarantees for some of their trading positions.” According to Whitney, their claim that they didn’t have the legal authority for such guarantees was “a lie.”

 

Whitney continues by quoting economist Dean Baker who explains that the $700 billion TARP authority wasn’t necessary to rescue the commercial paper market - –the market that most major companies rely on to meet their payrolls and pay other routine bills.  Dean explains that Bernanke “forgot to tell Congress…that the Fed has the authority to directly buy commercial paper from financial and non-financial companies [and thus] the power to prevent the sort of economic collapse that Bernanke warned would happen if Congress did not quickly approve the TARP.” Indeed, Dean continues, the weekend after TARP was approved the plan for the Fed to buy this commercial paper was put in motion. (emphasis mine)

 

For more on the case for criminal indictments of Messrs Bernanke, Geithner, Summers, et. al., read the work of the brilliant Matt Taibi in recent articles in Rolling Stone --  if you can deal with his liberal use of obscenities which he childishly thinks somehow improves his prose -- who has done the legwork and taken the trouble to understand and to pass along the nature of some of the frauds that have been managed – and are doubtless continuing.  

Wall Street's Naked Swindle  by Matt Taibbi -- October 2009

http://www.rollingstone.com/politics/story/30481512/wall_streets_naked_swindle/print

A scheme to sell fake stocks helped kill Bear Sterns and Lehman Brothers — exposing the counterfeit nature of our entire economy.  

The Great American Bubble Machine  by Matt Taibbi  -- July 2009

http://www.rollingstone.com/politics/story/29127316/the_great_american_bubble_machine/print

From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression - and they're about to do it again.

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New York Times & Sarkozy: Obama says no to financial reform

Financial System Reform?? + update 4.3.09


French President Sarkozy’s earlier high profile threat to wreck the London G20 financial summit if his demands for tougher financial regulations were not met suggested that he well understood the signals coming from the Obama administration that they were not inclined to promote real reform. Much of the same unease was clear in the NYT editorial which detailed the evasions in Treasury Secretary Geithner’s well hyped but discouraging proposals.

The NYT editorial (3.29.09) “Questions for Reform” pointed out that Geithner’s call for large hedge funds and private equity firms to register with the Security and Exchange commission is a good start, but that under his proposal, the SEC would not really have the full authority necessary to address important concerns. Instead it would be reduced to merely reporting issues up a “convoluted chain of regulatory command.”

Secondly, Geithner’s call for oversight of unregulated derivatives includes a loophole “disguised as a new rule.” Despite the clear demand by the public and the international community for effective hedge fund and derivative regulation Geithner’s proposals suggest that the Obama administration has caved in to the worst offenders who seem to wish to maintain the current discredited system.

There’s more. The Times goes on to criticize what Geithner left unsaid. They fault him for not challenging the concept of firms too big to fail. Instead they find that the Geithner plan unaccountably “assumes that such firms will be a feature of the financial landscape going forward.”

The Times also notes the absence of a call for a thorough investigation of all the moving parts of the current system, without which the proper fix may be elusive and Geithner’s proposals merely a “charade.”

If the Obama administration is not going to take this once in a generation opportunity to promote effective reform on this clear and crucial issue, how can we expect them to protect our interests on much more tangled and controversial issues.

Whatever we might think of the right of center Sarkozy, it seems he has a better line on what is currently necessary than does the Obama administration.

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Update 4.3.09

It was embarrassing to read the front page story of the NYT for 4.2.09, “Obama Faces Calls for Rules on Finances.” Instead of enjoying our attractive and well spoken new leader cutting a dashing figure on the world stage, we find the Times forced to confirm that Obama was standing naked for all to see.

Obama’s position seems to be that Europe and the rest of the world – mainly China – should stimulate their economies so they can bail out Obama while he not merely bails out the reprehensibles (some of his major contributors), but, by giving real reform the back of his hand – as we might expect from Cheney – he works to ensure that their time in the sun will continue as long as Obama can create the trillions to do it with.
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Further reading.
There’s so much on the economic misdirection from Obama and his economic sidekicks, Geithner and Summers, that it's difficult to keep up -- not to mention, as Paul Krugman, writes, despair making.

One of many notable and important broadsides comes from the Times op ed page, by Nobel laureate Joseph E. Stigliz, “Obama’s Ersatz Capitalism," 4.1.09.

See also the very good Counterpunch.org website which seems to have article after article detailing the mess. For example:

Mike Whitney, Zombie Economics: Judgment Day for Geithner,” (3.23.09); “Geithner’s Hog Wallow” 3.27-29, 2009)
Dave Lindorff, “Toxic Bailouts” (3.23.09)
Dean Baker, “Billions More for Failed Banks” (3.25.09)
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