The Shock Doctrine
Disaster Capitalism in Action
Bailout Lacks Oversight Despite Billions Pledged
Amit R. Paley, Washington Post, November 13, 2008
"The Bush administration has committed $290 billion of the $700 billion rescue package. Yet for all this activity, no formal action has been taken to fill the independent oversight posts established by Congress when it approved the bailout to prevent corruption and government waste. Nor has the first monitoring report required by lawmakers been completed, though the initial deadline has passed.
"'It's a mess,' said Eric M. Thorson, the Treasury Department's inspector general, who has been working to oversee the bailout program until the newly created position of special inspector general is filled. 'I don't think anyone understands right now how we're going to do proper oversight of this thing.'"
Treasury Department Snuck a Windfall Clause for Banks into the Bailout Bill
Amit R. Paley, Washington Post, November 10, 2008
"The financial world was fixated on Capitol Hill as Congress battled over the Bush administration's request for a $700 billion bailout of the banking industry. In the midst of this late-September drama, the Treasury Department issued a five-sentence notice that attracted almost no public attention.
"But corporate tax lawyers quickly realized the enormous implications of the document: Administration officials had just given American banks a windfall of as much as $140 billion.
"The sweeping change to two decades of tax policy escaped the notice of lawmakers for several days, as they remained consumed with the controversial bailout bill. When they found out, some legislators were furious. Some congressional staff members have privately concluded that the notice was illegal. But they have worried that saying so publicly could unravel several recent bank mergers made possible by the change and send the economy into an even deeper tailspin."
See Also:
Schumer Questions IRS Rule Aiding Wells-Wachovia, Reuters, October 30
Obscure Tax Breaks Increase Cost of Financial Rescue, Wall Street Journal, October 18
After Change in Tax Law, Wells Fargo Swoops In, Washington Post, October 4
Federal Reserve Refuses to Disclose Details of Loans Totalling $2 Trillion
Mark Pittman, Bob Ivry and Alison Fitzgerald, Bloomberg News, November 10, 2008
"The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.
"Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return....
"Bloomberg News has requested details of the Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit Nov. 7 seeking to force disclosure."
See Also:
Lawmakers, Investors Ask Fed for Lending Disclosure, Bloomberg News, November 13
URGENT: Say NO to Larry Summers as the Next Treasury Secretary -- Sign the Petition!
Matt Stoller, Open Left, November 6, 2008
The Washington Note is reporting that former Clinton official Larry Summers is one of the leading nominees to become the Treasury Secretary for the Obama administration. In 1999, Summers was one of the key proponents of the banking deregulation that led to the rise of 'mega-banks' and the current financial crisis. At the time, Senators like Byron Dorgan and policy advocates like Public Campaign were warning the financial deregulation, but Summers did not listen. In addition to this remarkable lapse in judgment, Larry Summers has argued that women are innately less gifted in science than men, that 'Africa is Underpolluted', that child sweatshop work in Asia can be justified, and that energy used to oppose job destroying trade agreements was "very, very badly misplaced".
President-elect Obama spoke eloquently and often about the perils of deregulation and trade agreements that do not include worker and environmental protection, and excesses on Wall Street due to governance failures. Let's ask him to put someone in charge who did not actually help cause the current crisis, who did not contribute to the bleeding of America's industrial base, and who is not part of the corrupted failed elite that has ravaged our country.
CLICK HERE TO SIGN THE PETITION!
Goldman Sachs, Merrill Lynch Take Bailout Money, Slash Jobs
Stephen Gandel, Stephen Gandel, October 27, 2008
"Uncle Sam has a new name on Wall Street — Sugar Daddy. Bonuses for investment bankers and traders are projected to fall 40% this year. But analysts, compensation consultants and recruiters say the drop would be much more severe, perhaps as much as 70%, were it not for the government's efforts to prop up financial firms....
"One factor mitigating the financial industry's bonus intentions is the fact that there could be far fewer employed Wall Streeters by the time year-end payouts are made. Goldman Sachs reportedly plans to cut 10%, or 3,250 workers, from its payrolls. Barclays is expected to eliminate 3,000 jobs from the former investment-banking division of Lehman Brothers, which it acquired in September. And Merrill Lynch's John Thain recently said that he expects thousands of job cuts in the wake of his firm's acquisition. All told, Hintz expects Wall Street employment to fall 25%, which could mean a loss of 43,250 jobs in New York City alone and more than 200,000 jobs nationwide by the end of 2009."
Lobbyists Urge Bailout Money for Insurers, Automakers
Edmund L. Andrews and Eric Dash, New York Times, October 25, 2008
"The chase for a piece of the Treasury Department’s $700 billion bailout program intensified Friday as the government considered extending it to include insurance companies as well as banks, and the auto industry stepped up efforts to secure a share of the money....
"The Financial Services Roundtable, a lobbying group for financial services companies, asked the Treasury Department on Friday to open its program to broker-dealers, insurance companies, car companies and financial institutions owned by foreign corporations....
"Although the insurance industry is under pressure because of investment losses, some analysts said they did not understand why insurers needed immediate government help....Virtually all insurers have suffered investment losses, which in turn have driven down their stock prices, sometimes sharply, as investors dumped shares to avoid dilution while companies raise new money. And the credit rating agencies have been reviewing and downgrading many insurers’ debt this month.
"But neither of those trends implies an urgent liquidity crisis that would leave insurers unable to pay claims, analysts said. Insurers are generally considered immune to run-on-the-bank panics because they do not take deposits. Policyholders cannot usually pull out their money without incurring losses."
See also:
Hedge Funds Make Plea for Bailout Cash
"Insurance companies, automakers, hedge funds and foreign-owned banks are all making appeals to be included in the rescue package, contending that they need assistance as well."
Treasury Official Says Banking Consolidations Are a Goal of the Bailout
Mark Landler, New York Times, October 21, 2008
"In a step that could accelerate a shakeout of the nation's banks, the Treasury Department hopes to spur a new round of mergers by steering some of the money in its $250 billion rescue package to banks that are willing to buy weaker rivals, according to government officials.
"As the Treasury embarks on its unprecedented recapitalization, it is becoming clear that the government wants not only to stabilize the industry, but also to reshape it. Two senior officials said the selection criteria would include banks that need more capital to finance acquisitions.
"'Treasury doesn't want to prop up weak banks,' said an official who spoke on condition of anonymity, because of the sensitivity of the matter. 'One purpose of this plan is to drive consolidation.'"
Treasury to Outsource Implementation of $700 Billion Bailout
Mark Landler and Edmund L. Andrews, New York Times, October 4, 2008
"Treasury officials do not plan to manage the mortgage assets on their own. Instead, they will outsource nearly all of the work to professionals, who will oversee huge portfolios of bonds and other securities for a management fee....
"The selected asset management firms will receive a chunk of the $250 billion that Congress is allowing the Treasury to spend in the first phase of the bailout. Those firms will receive fees that are likely to be lower than the industry standard of 1 percent of assets, or $1 for every $100 under management....
"Using outside contractors on such an extensive scale raises a host of thorny questions, outside experts said. Among the most pressing is: How will the Treasury avoid conflicts of interest that fund managers will encounter as they work both for their own clients’ interests — which could pay higher fees — and the interests of taxpayers?
"'With anyone short of the stature and honesty of a Paul Volcker running it, you need to worry a lot about conflicts of interest,' said Alan S. Blinder, a former vice chairman of the Federal Reserve, referring to its former head. 'Unfortunately, there just aren’t many people with the expertise you need but without any possible conflicts.'"
See Also:
Treasury to dole out no-bid contracts due to "compelling urgency" of the crisis
Breakdown of Tax Cuts in Senate Bailout Bill
Jake Tapper, ABC, October 2, 2008
Read a breakdown here of many of the tax cuts offered in the Senate's bailout bill, including:
Lobbyists Target 80 House Members on Bailout Vote
Jeanne Cummings and Victoria McGrane, Politico, October 2, 2008
"Lists of House members who opposed the package were scoured, traded and passed on. About 80 were identified as primary targets after being deemed potential vote switchers, one insider said....
"If a taxpayer-backed, revolving megafund is ultimately created to end the credit crunch, credit would go to both the lawmakers who cobbled the deal together and the extraordinary, spontaneous lobbying effort by those most desperate to see it become law. Given the public's dislike of the package, their hurdle was high. And the business community's task was made even tougher by anti-tax groups earlier in the week that helped flood Capitol Hill with calls opposing the plan.
"There wasn't time to create any sort of business war room. So the strategy was mapped out through a steady flow of conference calls and e-mails. One key tactic that emerged was for the financial services industry to lower its profile. Main Street voices were chosen to take the lead. 'We realize that we're not the best messengers right now,' said one financial services lobbyist.
"John Castellani, head of the Business Roundtable, representing the nation's major corporations, held a conference call Tuesday with 90 CEOs urging them to call their local congressmen, go on television and activate other allied business groups. 'They are going to associations not engaged and saying, "You need to get engaged,"' Castellani said. 'This is not a drill.'"
