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‘No-Risk’ Insurance at F.D.I.C.
2009-04-07, New York Times
http://www.nytimes.com/2009/04/07/business/07sorkin.html?partner=rss&emc=rss&...

The Federal Deposit Insurance Corporation was set up 76 years ago with the important but simple job of insuring bank deposits. Now, because of what could politely be called mission creep, it’s elbowing its way into the middle of the financial mess as an enabler of enormous leverage. In the fine print of Treasury Secretary Timothy F. Geithner’s plan to lend as much as $1 trillion to private investors to help them buy toxic assets from our nation’s banks, you’ll find some details of how the F.D.I.C is trying to stabilize the system by adding more risk, not less, to the system. It’s going to be insuring 85 percent of the debt, provided by the Treasury, that private investors will use to subsidize their acquisitions of toxic assets. These loans, while controversial, were given a warm welcome by the market when they were first announced. And why not? The terms are hard to beat. They are, for example, “nonrecourse,” which means that if an investor loses money, he owes taxpayers nothing. It’s the closest thing to risk-free investing — with leverage! — around. But, as we’ve learned the hard way these last couple of years, risk-free investing is an oxymoron. So where did the risk go this time? To the F.D.I.C., and ultimately, to us taxpayers. A close reading of the F.D.I.C.’s statute suggests the agency is using a unique — some might call it plain wrong — reading of its own rule book to accomplish this high-wire act. Somehow, in the name of solving the financial crisis, the F.D.I.C. has seemingly been given a blank check, with virtually no oversight by Congress.

Note: For a powerfully revealing archive of reports from reliable sources on the hidden realities of the financial bailout, click here.

Fed Refuses to Disclose Recipients of $2 Trillion
2008-12-12, Bloomberg News
http://www.bloomberg.com/apps/news?pid=20601109&sid=apx7XNLnZZlc

The Federal Reserve refused a request by Bloomberg News to disclose the recipients of more than $2 trillion of emergency loans from U.S. taxpayers and the assets the central bank is accepting as collateral. Bloomberg filed suit Nov. 7 under the U.S. Freedom of Information Act requesting details about the terms of 11 Fed lending programs, most created during the deepest financial crisis since the Great Depression. The Fed responded Dec. 8, saying it’s allowed to withhold internal memos as well as information about trade secrets and commercial information. “If they told us what they held, we would know the potential losses that the government may take and that’s what they don’t want us to know,” said Carlos Mendez, a senior managing director at New York-based ICP Capital LLC. The Fed stepped into a rescue role that was the original purpose of the Treasury’s $700 billion Troubled Asset Relief Program. The central bank loans don’t have the oversight safeguards that Congress imposed upon the TARP. Total Fed lending exceeded $2 trillion for the first time Nov. 6. It rose by 138 percent, or $1.23 trillion, in the 12 weeks since Sept. 14, when central bank governors relaxed collateral standards to accept securities that weren’t rated AAA. “There has to be something they can tell the public because we have a right to know what they are doing,” said Lucy Dalglish, executive director of the Arlington, Virginia-based Reporters Committee for Freedom of the Press.

Financial Bailout Balloons to the Trillions
2008-11-25, ABC News
http://abcnews.go.com/Business/Economy/story?id=6332892

The government's financial bailout will be the most expensive single expenditure in American history, potentially costing around $7.5 trillion -- or half the value of all the goods and services produced in the United States last year. In comparison, the total U.S. cost of World War II adjusted for inflation was $3.6 trillion. The bailout will cost more than the total combined costs in today's dollars of the Marshall Plan, the Louisiana Purchase, the Korean War, the Vietnam War and the entire historical budget of NASA, including the moon landing, according to data compiled by Bianco Research. It remains to be seen whether the government's multipronged approach to bail out banks, stimulate spending and buy up mortgages will revive the economy, but as the tab continues to grow so does concern over where the government will find the money. Monday the government guaranteed an additional $306 billion to bail out Citigroup, and today Treasury Secretary Henry Paulson pledged $800 billion to make credit more available to consumers and small businesses, and to buy up mortgages from Fannie Mae and Freddie Mac. Congress last month allocated $700 billion for an emergency bailout of some of Wall Street's most storied firms by purchasing their troubled assets. The funds allocated through the Troubled Assets Relief Program are but a small part of the government's overall bailout spending. Bailout programs also include a Federal Reserve plan to buy as much as $2.4 trillion in short-term notes called commercial paper that began Oct. 27, and an FDIC plan to spend $1.4 trillion to guarantee bank-to-bank loans that commenced Oct. 14, according to Bloomberg News, which first compiled the total cost of the bailout.

Note: $7.5 trillion amounts to about $25,000 for every person in the U.S. What's going on here? For many revealing reports on the realities of the Wall Street bailout, click here.

Paulson makes it clear: He's in charge
2008-11-13, San Francisco Chronicle (San Francisco's leading newspaper)
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/11/13/BUUK1439IF.DTL

Henry Paulson's speech Wednesday made it pretty clear: The Treasury secretary has seized control of the financial system. "He is absolutely the most powerful person in the country. Maybe the world," says Wall Street accounting expert Robert Willens. The most telling line in his speech came when Paulson was explaining why he did a 180-degree turn with money approved by Congress under the $700 billion bailout bill. Instead of using it to buy troubled mortgage assets from banks, as clearly envisioned, he scrapped that idea and used it to make equity investments in banks. "In consultation with the Federal Reserve, I determined that the most timely, effective step to improve credit market conditions was to strengthen bank balance sheets quickly through direct purchases of equity in banks," he said. If Paulson bothered consulting with President Bush, he didn't mention it. In fact, he didn't even mention the president until the tail end of his speech, when he talked about the global summit Bush is hosting this weekend. I can understand why Paulson wants to distance himself from an unpopular president, especially one who has little facility for complex financial matters. But Bush is [the] president and even President-elect Barack Obama knows there can be only one president at a time. And his last name is not Paulson. In September, when Paulson asked for a $700 billion blank check from Congress to fix the financial markets, he got a lot of blowback. By the time Congress was done with his proposal, it had grown from 2 1/2 pages to more than 450. Yet it now appears that Paulson got the blank check he wanted.

Note: Why doesn't Congress have some say in what is done with this $700 billion? That's over $3,000 for every taxpayer in the U.S. which is being spent with practically no accountability. Is this what democracy looks like? For many key articles revealing the hidden realities of the bailout, click here.

Warning: King Henry's bailout like Rummy's Iraq
2008-11-10, MarketWatch (A Wall Street Journal Digital Network Website)
http://www.marketwatch.com/news/story/reagonomics-hides-sleeper-cells-harbori...

So you thought Barack Obama's victory signaled the death of Reaganomics? Wrong, wrong: Reaganomics is very much alive. In a subtle, bloodless coup, the Reaganomics ideology magically pulled victory out of the jaws of defeat in the meltdown. The magic happened fast and quietly, in the shadows, while you were in a trance, distracted by the election drama. Recently Naomi Klein, author of The Shock Doctrine: The Rise of Disaster Capitalism, framed the issue perfectly: "Has the Treasury partially nationalized the private banks, as we have been told? Or is it the other way around?" The question was rhetorical, the answer painfully clear. In a few weeks Wall Street did the old bait and switch, emerging from an economic and market disaster with new powers, in total control of America. And thanks to Treasury Secretary Henry Paulson's brilliant bailout coup, Reaganomics is now the new "sleeper cell" quietly hidden inside the Obama White House and America's Treasury, where it will be for a long time to come. Listen closely folks: You and your government are and will continue being conned out of trillions. Klein further exposed this insanity in a recent Rolling Stone article, "The New Trough: The Wall Street bailout looks a lot like Iraq, a 'free-fraud zone' where private contractors cash in on the mess they helped create." Paulson's privatization, outsourcing and management of the $700 billion bailout has the exact same Reaganomics ideological, strategic and deceptive footprints that President George W. Bush and former Defense Secretary Donald Rumsfeld used to privatize, outsource and mismanage the costly Iraq War blunder.

Note: For the powerfully revealing article by Naomi Klein mentioned in the article above, click here. Speaking on Tulsa Oklahoma’s 1170 KFAQ, Senator James Inhofe of Oklahoma (Republican) has revealed that Treasury Secretary Henry Paulson was the source of the threat of martial law in the US if the $700 billion bailout bill was not passed that was exposed on the House floor by Rep. Brad Sherman. For many key articles revealing the hidden realities of the bailout, click here.

Bernanke Is Fighting the Last War
2008-10-18, Wall Street Journal
http://online.wsj.com/article/SB122428279231046053.html

"Nothing," [famed economist] Anna Schwartz says, "seems to have quieted the fears of either the investors in the securities markets or the lenders and would-be borrowers in the credit market." The credit markets remain frozen, the stock market continues to get hammered, and deep recession now seems a certainty -- if not a reality already. [Recently, according to Schwarz, Secretary of the Treasury Hank Paulson has] shifted from trying to save the banking system to trying to save banks. These are not, Ms. Schwartz argues, the same thing. In fact, by keeping otherwise insolvent banks afloat, the Federal Reserve and the Treasury have actually prolonged the crisis. "They should not be recapitalizing firms that should be shut down." Rather, "firms that made wrong decisions should fail," she says bluntly. "You shouldn't rescue them. Everything works much better when wrong decisions are punished and good decisions make you rich." How did we get into this mess in the first place? As in the 1920s, the current "disturbance" started with a "mania." But manias always have a cause. "In every case, it was expansive monetary policy that generated the boom in an asset. The particular asset varied from one boom to another. But the basic underlying propagator was too-easy monetary policy and too-low interest ratest. And then of course if monetary policy tightens, the boom collapses." Today's crisis isn't a replay of the problem in the 1930s, but our central bankers have responded by using the tools they should have used then. They are fighting the last war. The result, she argues, has been failure.

Note: Anna Schwarz and Nobel-winner Milton Friedman authored A Monetary History of the United States. It's the definitive account of how misguided monetary policy turned the stock-market crash of 1929 into the Great Depression. The excellent article above mentions that Fed Reserve Chairman Bernanke once said "I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. We won't do it again." Top bankers and their cronies have been aware of what causes the boom/bust cycle for over 100 years and taken full advantage of it. Try to find one top banker who lost significant money in any bust cycle.

A Few Speculators Dominate Vast Market for Oil Trading
2008-08-21, Washington Post
http://www.washingtonpost.com/wp-dyn/content/article/2008/08/20/AR20080820038...

Regulators had long classified a private Swiss energy conglomerate called Vitol as a trader that primarily helped industrial firms that needed oil to run their businesses. But when the Commodity Futures Trading Commission examined Vitol's books last month, it found that the firm was in fact more of a speculator, holding oil contracts as a profit-making investment rather than a means of lining up the actual delivery of fuel. Even more surprising to the commodities markets was the massive size of Vitol's portfolio -- at one point in July, the firm held 11 percent of all the oil contracts on the regulated New York Mercantile Exchange. The discovery revealed how an individual financial player had gained enormous sway over the oil market without the knowledge of regulators. Other CFTC data showed that a significant amount of trading activity was concentrated in the hands of just a few speculators. The CFTC ... now reports that financial firms speculating for their clients or for themselves account for about 81 percent of the oil contracts on NYMEX, a far bigger share than had previously been stated by the agency. That figure may rise in coming weeks as the CFTC checks the status of other big traders. Some lawmakers have blamed these firms for the volatility of oil prices, including the tremendous run-up that peaked earlier in the summer. "It is now evident that speculators in the energy futures markets play a much larger role than previously thought, and it is now even harder to accept the agency's laughable assertion that excessive speculation has not contributed to rising energy prices," said Rep. John D. Dingell (D-Mich.).

Investors' Growing Appetite for Oil Evades Market Limits
2008-06-06, Washington Post
http://www.washingtonpost.com/wp-dyn/content/article/2008/06/05/AR20080605043...

Hedge funds and big Wall Street banks are taking advantage of loopholes in federal trading limits to buy massive amounts of oil contracts, ... helping to push oil prices to record highs. The federal agency that oversees oil trading, the Commodity Futures Trading Commission, has exempted these firms from rules that limit speculative buying. The CFTC has also waived regulations over the past decade on U.S. investors who trade commodities on some overseas markets, freeing those investors to accumulate large quantities of the future oil supply by making purchases on lightly regulated foreign exchanges. Over the past five years, investors have become such a force on commodity markets that their appetite for oil contracts has been equal to China's increase in demand over the same period, said Michael Masters, a hedge fund manager who testified before Congress on the subject last month. The commodity markets, he added, were never intended for such large financial players. Commodities have become especially enticing to investors as the credit crisis has roiled other investment opportunities such as stocks and debt-related securities. The recent flood of investment money has transformed the markets for oil, as well as uranium, wheat, cotton and other goods, into a volatile realm that some insiders call the Wild West of Wall Street. Michael Greenberger, a professor at the University of Maryland and former CFTC commissioner, said there were loopholes the agency could close without much effort. "There's smoke here, and the CFTC hasn't wanted to look if there's a fire," he said. "But these are dark markets. They don't even know who's doing the trading."

Note: For revealing reports on financial corruption and criminality from major media sources, click here.

The Global Ruling Class: Billion-dollar Babies
2008-04-24, The Economist magazine
http://www.economist.com/books/displaystory.cfm?story_id=11081878

Who rules the world? The rise of nation states produced national ruling classes. It would be odd if the current integration of the world economy did not produce new global elites — business people and financiers who run global companies and global politicians who steer supra-national organisations such as the European Union (EU) and the International Monetary Fund. David Rothkopf, a visiting scholar at the Carnegie Endowment for International Peace, argues that these elites constitute nothing less than a new global “superclass”. They have all the clubby characteristics of the old national ruling classes, but with the vital difference that they operate on the global stage, far from mere national electorates. They attend the same universities. They are groomed in a handful of world-spanning institutions such as Goldman Sachs. They belong to the same clubs — the Council on Foreign Relations in New York is a particular favourite — and sit on each other's boards of directors. Many of them shuttle between the public and private sectors. They meet at global events such as the World Economic Forum at Davos and the Trilateral Commission or — for the crème de la crème — the Bilderberg meetings or the Bohemian Grove seminars that take place every July in California. Mr Rothkopf is anything but a crank, and he is right when he says that, these days, the most influential people around the world are also the most global people. He is also admirably ambivalent about his subject. He worries about surging inequality — the richest 1% of humans own 40% of the planet's wealth — and about the rumbling backlash against so much unaccountable power.

Note: For reliable, verifiable information the secret societies of which the global elite are a part, click here. Superclass: The Global Power Elite and the World They Are Making by David Rothkopf is available here.

Government Accountability Office Report
2006-12-15, Comptroller General of the United States
http://fms.treas.gov/fr/06frusg/06gao2.pdf

The Secretary of the Treasury ... is required annually to submit financial statements for the U.S. government to the President and the Congress. GAO is required to audit these statements. Certain material weaknesses in financial reporting and other limitations on the scope of our work resulted in conditions that continued to prevent us from expressing an opinion on the accompanying consolidated financial statements for the fiscal years ended September 30, 2006 and 2005. The federal government did not maintain effective internal control over financial reporting. While we are unable to express an opinion ... the following key items deserve emphasis. The U.S. government’s total reported liabilities, net social insurance commitments, and other fiscal exposures continue to grow and now total approximately $50 trillion, representing approximately four times the Nation’s total output (GDP) in fiscal year 2006, up from about $20 trillion, or two times GDP in fiscal year 2000. The retirement of the“baby boom” generation is [also] closer to becoming a reality with the first wave of boomers eligible for early retirement under Social Security in 2008. It seems clear that the nation’s current fiscal path is unsustainable and that tough choices by the President and the Congress are necessary in order to address the nation’s large and growing long-term fiscal imbalance. Other material weaknesses were the federal government’s inability to: determine the full extent to which improper payments exist; identify and resolve information security control weaknesses; and effectively manage its tax collection activities.

Note: The full 172-page report is available here. Why didn't any of the media cover this eye-opening report? Is the fact that the national debt has risen 150% since 2000 not news? For a possible answer, click here. To learn of the trillions of unaccounted for dollars in the military, click here.

Insiders' stock sale-purchase ratio widens
2006-12-07, Chicago Tribune/Bloomberg
http://www.chicagotribune.com/business/chi-0612070153dec07,0,3801935.story

Stock sales by America's corporate leaders exceeded purchases last month by the widest ratio in nearly 20 years. Executives sold $63.18 of shares for every $1 they bought in November, the largest ratio since at least January 1987. U.S. securities laws require company executives and directors to disclose stock purchases or sales within two business days. Insiders sold $8.4 billion in shares last month, according to data compiled from SEC filings. Buying was ... $133 million. The overall insider-selling amount was the fifth-highest since 1987. Selling peaked at $13.9 billion in March 2000. The data have "value for investors," said Wayne Reisner at Carret Asset Management in New York. "It's people who are very familiar with their company and their stock." Insiders executed 6.34 sales transactions for each purchase transaction in the eight weeks ended Dec. 1. That's up from 2.45 in the period ended Aug. 4 and above the ratio of 2.25 he considers neutral for the market. Microsoft ranked first among U.S. companies, with $594.2 million in sales by insiders in November. Seagate Technology and DreamWorks Animation SKG Inc. ranked second and third, at $311.8 million and $224.2 million, respectively. Google Inc. was fourth, at $182.1 million.

Note: Isn't it interesting that the NASDAQ stock index reached it's all-time high in March 2000, the exact month executive stock selling hit its record, and just prior to the huge NASDAQ crash. Is it possible that corporate executives knew something the rest of us didn't?

World's wealth gap grows; poorest half has 1% of assets
2006-12-05, Denver Post (Denver's leading newspaper)
http://www.denverpost.com/headlines/ci_4785148

The richest 2 percent of adults still own more than half of the world's household wealth, perpetuating a yawning global gap between rich and poor, according to research published Tuesday. The report from the Helsinki-based World Institute for Development Economics Research shows that in 2000 the richest 1 percent of adults - most of whom live in Europe or the United States - owned 40 percent of global assets. The richest 10 percent of adults accounted for 85 percent of assets. By contrast, the bottom 50 percent of the world's adult population owned barely 1 percent of the world's wealth. "Income inequality has been rising for the past 20 to 25 years, and we think that is true for inequality in the distribution of wealth," said James Davies, a professor of economics at the University of Western Ontario, one of the report's authors. But ... there are some hopeful signs: China and India, which are developing rapidly, are gaining wealth, and in countries such as Bangladesh, the spread of microcredit institutions is helping people increase their personal wealth.

Note: If you are interested in a secure vehicle in which to place your investments which helps to directly pull families out of poverty in a big way through microcredit and microloans, click here.

Military waste under fire: $1 trillion missing
2003-05-18, San Francisco Chronicle (San Francisco's leading newspaper)
http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2003/05/18/MN251738.DTL

The Department of Defense, already infamous for spending $640 for a toilet seat...couldn't account for more than a trillion dollars in financial transactions, not to mention dozens of tanks, missiles and planes. The nonpartisan General Accounting Office has raised the volume of its perennial complaints about the financial woes at Defense, which recently failed its seventh audit in as many years. "Overhauling DOD's financial management operations represent a challenge that goes far beyond financial accounting," GAO chief David Walker told lawmakers. Recent government reports suggest the Pentagon's money management woes have reached astronomical proportions. A GAO report found Defense inventory systems so lax that the U.S. Army lost track of 56 airplanes, 32 tanks, and 36 Javelin missile command launch-units. When military leaders were scrambling to find enough chemical and biological warfare suits to protect U.S. troops, the department was caught selling these suits as surplus on the Internet "for pennies on the dollar," a GAO official said. "We are overhauling our financial management system," said Dov Zakheim, the Pentagon's chief financial officer. "The Pentagon has failed to address financial problems that dwarf those of Enron," said Rep. Henry Waxman, D-Los Angeles. Gregory Kutz, director of GAO's financial management division [said] "I've been to Wal-Mart. They were able to tell me how many tubes of toothpaste were in Fairfax, Va. And DOD can't find its chem-bio suits." Opposition to defense spending is portrayed as unpatriotic. Legislators are often more concerned about winning Pentagon pork than controlling defense waste.

Note: You can read the GAO Report (Page 17 on missing planes). Page two states, "To date, no major part of DOD has yet been able to pass the test of an independent audit." For an intriguing Online Journal article exposing the deep role of the Pentagon's former CFO (Chief Financial Officer) Zakheim in this corruption, click here. Why wasn't and isn't this front page headlines? Why are newspaper editors keeping this most vital information from the public?

666: Goldman's latest bonus bears the mark of the beast
2009-05-03, The Independent (One of the U.K.'s leading newspapers)
http://www.independent.co.uk/news/business/analysis-and-features/666-goldmans...

Something strange is afoot when Popbitch – provider of a weekly email beloved of students, stuffed full of celebrity tittle-tattle and links to the silliest miscellany of the web – breaks off from such glorious trivia to encourage readers to support GoldmanSachs666.com, a deadly serious website measuring the political tentacles of the mighty investment bank. The credit-market catastrophe that has plunged the world into recession is everywhere stirring new ways of thinking about how banking relates to the wider world, but nowhere more so than among a generation coming into political consciousness in these searing times. Something is brewing, some argue, that could make the "regulatory-financial complex" something to rail against in the same way that the military-industrial complex was in the Cold War. This should worry Goldman Sachs. More so than any other firm, it exists at the intersection of politics and high finance. "It was listening to the news coming out of AIG that got me fired up," says Mike Morgan, founder of GoldmanSachs666.com. "While politicians were screaming about $165m paid out to AIG executives in bonuses, $180bn was walking out the door." The Federal Reserve and the then-treasury secretary, Hank Paulson, decided to funnel public funds to AIG, and its counterparties were paid in full. You don't have to scratch far into the internet to find conspiracy theories: Mr Paulson was chief executive of Goldman before going into government; he appointed Edward Liddy, formerly of Goldman, to run AIG; Goldman was AIG's biggest counterparty, receiving $12.9bn from AIG after the bailout.

Note: For lots more on the Wall Street bailout, click here.

Why Creditors Should Suffer, Too
2009-04-05, New York Times
http://www.nytimes.com/2009/04/05/business/economy/05view.html?partner=rss&em...

The Obama administration’s proposals to reform financial regulation sound ambitious enough as they aim to bring companies like A.I.G. under a broader umbrella of government rule-making and scrutiny. But there is a big hole in these proposals, as there has already been in the government’s approach to bailing out failing financial companies. Even as they focus on firms deemed too big to fail, the new proposals immunize the creditors and counterparties of such firms by protecting them from their own lending and trading mistakes. This pattern has been evident for months, with the government aiding creditors and counterparties every step of the way. Yet this has not been explained openly to the American public. In truth, it’s not the shareholders of the American International Group who benefited most from its bailout; they were mostly wiped out. The great beneficiaries have been the creditors and counterparties at the other end of A.I.G.’s derivatives deals — firms like Goldman Sachs, Merrill Lynch, Deutsche Bank, Société Générale, Barclays and UBS. These firms engaged in deals that A.I.G. could not make good on. The bailout, and the regulatory regime outlined by Timothy F. Geithner, the Treasury secretary, would give firms like these every incentive to make similar deals down the road. In both the bailouts and in the new proposals, the government is effectively neutralizing creditors as a force for financial safety. This suggests a scary possibility — that the next regulatory regime could end up even worse than the last.

Note: For a powerfully revealing archive of reports from reliable sources on the hidden realities of the financial bailout, click here.

Big Bonuses at Fannie and Freddie Draw Fire
2009-04-04, New York Times
http://www.nytimes.com/2009/04/04/business/04bonus.html?partner=rss&emc=rss&p...

Fannie Mae and Freddie Mac, the two troubled companies at the heart of the nation’s mortgage market, are set to pay their employees “retention bonuses” totaling $210 million, despite calls from lawmakers to cancel the payments. The bonuses, which were made public on Friday, were defended by the companies’ federal regulator, James B. Lockhart, who said he intended to let them proceed. In a letter sent last week to Senator Charles E. Grassley, an Iowa Republican, Mr. Lockhart disclosed that 7,600 Fannie and Freddie workers were scheduled to receive payouts aimed at retaining those “employees most critical to keep and difficult to replace.” Under the plan, 213 employees will receive retention bonuses worth more than $100,000 this year, and one Freddie Mac executive will receive $1.3 million. Those figures drew sharp rebukes from Mr. Grassley and other lawmakers, who noted that Fannie and Freddie had received pledges of $400 billion from taxpayers to offset huge losses since they were seized by the government in September. Similar bonuses paid by the American International Group, which was also bailed out by taxpayers, incited fiery attacks from the White House and legislators when they were revealed last month. “It’s hard to see any common sense in management decisions that award hundreds of millions in bonuses when their organizations lost more than $100 billion in a year,” Mr. Grassley said in a statement. “It’s an insult that the bonuses were made with an infusion of cash from taxpayers.”

Note: For many revealing reports on the realities behind the Wall Street bailouts, click here.

Obama’s Ersatz Capitalism
2009-04-01, New York Times
http://www.nytimes.com/2009/04/01/opinion/01stiglitz.html?partner=rss&emc=rss...

The Obama administration’s $500 billion or more proposal to deal with America’s ailing banks has been described by some in the financial markets as a win-win-win proposal. Actually, it is a win-win-lose proposal: the banks win, investors win — and taxpayers lose. Treasury hopes to get us out of the mess by replicating the flawed system that the private sector used to bring the world crashing down, with a proposal marked by overleveraging in the public sector, excessive complexity, poor incentives and a lack of transparency. In theory, the administration’s plan is based on letting the market determine the prices of the banks’ “toxic assets” — including outstanding house loans and securities based on those loans. The reality, though, is that the market will not be pricing the toxic assets themselves, but options on those assets. The two have little to do with each other. The government plan in effect involves insuring almost all losses. Since the private investors are spared most losses, then they primarily “value” their potential gains. This is exactly the same as being given an option. Under the plan by Treasury Secretary Timothy Geithner, the government would provide about 92 percent of the money to buy the asset but would stand to receive only 50 percent of any gains, and would absorb almost all of the losses. Some partnership! What the Obama administration is doing is far worse than nationalization: it is ersatz capitalism, the privatizing of gains and the socializing of losses. It is a “partnership” in which one partner robs the other.

Note: The author of this analysis, Joseph E. Stiglitz, is a professor of economics at Columbia University. He was chairman of the Council of Economic Advisers from 1995 to 1997, and was awarded the Nobel prize in economics in 2001. For many revealing reports on the realities behind the Wall Street bailouts, click here.

A.I.G. Planning Huge Bonuses After $170 Billion Bailout
2009-03-15, New York Times
http://www.nytimes.com/2009/03/15/business/15AIG.html?partner=rss&emc=rss&pag...

The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to executives in the same business unit that brought the company to the brink of collapse last year. Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them. The payments to A.I.G.’s financial products unit are in addition to $121 million in previously scheduled bonuses for the company’s senior executives and 6,400 employees across the sprawling corporation. The payment of so much money at a company at the heart of the financial collapse that sent the broader economy into a tailspin almost certainly will fuel a popular backlash against the government’s efforts to prop up Wall Street. A.I.G., nearly 80 percent of which is now owned by the government, defended its bonuses, arguing that they were promised last year before the crisis and cannot be legally canceled. Of all the financial institutions that have been propped up by taxpayer dollars, none has received more money than A.I.G.. The bonuses will be paid to executives at A.I.G.’s financial products division, the unit that wrote trillions of dollars’ worth of credit-default swaps that protected investors from defaults on bonds backed in many cases by subprime mortgages. Seven executives at the financial products unit were entitled to receive more than $3 million in bonuses.

Note: For many revelations of the amazing realities of the Wall Street bailout, click here.

Some Banks, Feeling Chained, Want to Return Bailout Money
2009-03-11, New York Times
http://www.nytimes.com/2009/03/11/business/economy/11bailout.html?partner=rss...

Financial institutions that are getting government bailout funds have been told to put off evictions and modify mortgages for distressed homeowners. They must let shareholders vote on executive pay packages. They must slash dividends, cancel employee training and morale-building exercises, and withdraw job offers to foreign citizens. As public outrage swells over the rapidly growing cost of bailing out financial institutions, the Obama administration and lawmakers are attaching more and more strings to rescue funds. The conditions are necessary to prevent Wall Street executives from paying lavish bonuses and buying corporate jets, some experts say. Some bankers say the conditions have become so onerous that they want to return the bailout money. The list includes small banks ... as well as giants like Goldman Sachs and Wells Fargo. They say they plan to return the money as quickly as possible or as soon as regulators set up a process to accept the refunds. A senior Treasury official involved in the bailout effort said the administration was carefully trying not to do anything that could harm the banks and was giving financial incentives to modify mortgages. But by keeping weak banks operating, the markets continue to sink and taxpayer costs are mounting, outside experts said. “The current policy is likely to result in weaker banks,” Mr. Seidman said. “And keeping insolvent banks in operation does not benefit the system.”

Note: Could it be that that the main reason top bank executives are now talking about giving money back is that don't want to give up their lavish bonuses and corporate jets? What about all the talk about how the whole world would go to pot if they didn't get this bailout money? Somehow this is not surprising.

New Bank Bailout Could Cost $2 Trillion
2009-01-29, Wall Street Journal
http://online.wsj.com/article/SB123319689681827391.html

Government officials seeking to revamp the U.S. financial bailout have discussed spending another $1 trillion to $2 trillion to help restore banks to health, according to people familiar with the matter. President Barack Obama's new administration is wrestling with how to stem the continuing loss of confidence in the financial system, as it divides up the remaining $350 billion from the $700 billion Troubled Asset Relief Program launched last fall. The potential size of rescue efforts being discussed suggests the administration may need to ask Congress for more funds. The administration is expected to take a series of steps, including relieving banks of bad loans and distressed securities. The so-called "bad bank" that would buy these assets could be seeded with $100 billion to $200 billion from the TARP funds, with the rest of the money -- as much as $1 trillion to $2 trillion -- raised by selling government-backed debt or borrowing from the Federal Reserve. The administration is also seeking more effective ways to pump money into banks, and is considering buying common shares in the banks. Government purchases so far have been of preferred shares, in an effort to both protect taxpayers and avoid diluting existing shareholders' stakes. Given the weakened state of the banking industry, with bank share prices low and their capital needs high, economists say the government probably can't avoid owning at least some banks for a temporary period.

Note: Note that the U.S. government has to borrow from the Federal Reserve, which most people don't realize is privately owned by the richest banks. For more on this, click here. The $2 trillion of taxpayer money for Wall Street's toxic assets revealed here is in addition to over $7 trillion already committed according to CNN and others. Wouldn't government debt of this magnitude threaten a broad range of government services and risk seriously weakening the dollar? For many other revealing reports on the Wall Street bailout, click here.

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