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The Bailout Deception By Charlene Muhammad Western Region Correspondent Updated Dec 9, 2008, 03:54 pm
Despite billion dollar bailout, America's economic woes worsen
In September when President George W. Bush, U.S. Treasury Secretary Henry Paulson, Jr. and U.S. Federal Reserve Chairman Ben Bernanke asked for $700 billion in taxpayer money to help rescue the failing economy, they promised to use the money to buy bad mortgages from lending institutions. That was supposed to help ease the burden of rapid foreclosures, get banks lending again, and jump start consumer confidence.
Barely two months later, Sec. Paulson announced that the bailout money acquired under the guidelines of the Emergency Economic Stabilization Act of 2008's Troubled Relief Asset Program would not be used to buy bad bank assets. Instead it was used to buy shares in the banks, which in turn is supposed to mitigate mortgage loans and resume lending.
The banks not lending the money goes beyond criminal conduct. It's literally stealing from the national coffers, the taxpayers and after they've basically robbed the taxpayers to rescue these entities, the entities have been rewarded by a bailout. That was the bait, said Professor James Taylor of the University of San Francisco and incoming president of the National Conference of Black Political Scientists.
Prof. Taylor added, The switch was they got the money and we're not seeing, at least in the short term, evidence of them liberalizing lending practices or making the money available to the market.
Critics insist it is insane that the entire crisis started with mortgage backed financing yet housing has not received any attention under the $700 billion bailout. They also argue that taxpayers would never have knowingly agreed to a bailout that left them out and will cost much more than initially forecast.
Sec. Paulson pointed out that the taxpayers and homeowners are being rescued through the HOPE NOW Alliance, a coalition of mortgage servicers, investors and counselors, which was set up to help prevent foreclosures. In late October, HOPE NOW reported that 2.5 million foreclosures were averted because of its efforts since July 2007. In September alone, 212,000 people retained their homes, it said.
But according to RealtyTrac, Inc., an online foreclosure database, some 280,000 U.S. households received foreclosure filings in October and other reports indicate that 85,000 homes were foreclosed on that same month.
Meanwhile, economists say, U.S. taxpayers are being forced to stand by and watch as their billions rescue investment banks and high-priced executives. According to reports, $250 billion of the bailout money is to be distributed partly toward shares in Bank of America, Merrill Lynch, J.P. Morgan, Citigroup, Goldman Sachs Group, Inc., Bank of New York Mellon, Wells Fargo & Co., Morgan Stanley and State Street. The Treasury drew harsh criticism from taxpayers, economists, analysts and news media because it concealed the names of the banks that received funding.
Roderick Harrison, of the Joint Center for Economic and Political Studies, said the secrecy was to avoid weakening investor and consumer confidence in the receiving institutions.
Mr. Harrison said he doesn't believe that the bailout was a deception but that Sec. Paulson realized the plan was not workable. It would have taken too much time to find ways to identify bad bank assets and develop ways to buy them, he said.
They're sitting on the money figuring that they don't know what's going to happen in the next six months and it's better to have assets in banks. Some are using the money in mergers to buy up smaller banks to better themselves down the line. But we've got to get those credit lines flowing again, because if not, soon people will be into deeper debt and credit woes, Mr. Harrison said.
According to Sec. Paulson, the revised plan will focus on auto loans, credit card and student loan companies and the government will continue to explore ways to reduce the risk of foreclosure. Recently, top automakers, led by General Motors, announced that they faced certain bankruptcy unless the government stepped in to bail them out, too.
Meanwhile, U.S. taxpayers footing the bill are facing a new wave of foreclosures next April when the Adjustable Rate Mortgages, in which payments either go up or down, will reset again on hundreds of thousands of home loans. Unemployment continues to increase. The Labor Department reported that in the first week of November, workers filed 516,000 unemployment insurance claims. 32,000 more than the week before.
This was deception in my opinion because the Congress and the American people were told one thing by the Treasury Secretary and it turns out he had something else in mind. The U.S. should just concede that it has lost control over its responsibilities regarding the economic crisis and abdicated it to one man, said Andre Eggelletion, an economist and host of The Andre Eggelletion Show, heard on www.ustalknetwork.com.
Obviously, Mr. Eggelletion added, if Sec. Paulson told taxpayers that the bailout was necessary to salvage mortgage assets on bank books and help families struggling against foreclosures, people expected that he had already analyzed the situation and determined it was the correct course of action.
There have been numerous statewide summits on foreclosures and housing solutions. Some housing experts have sought to use public and private resources to acquire foreclosed properties to help stabilize neighborhoods. The Federal Reserve created the Homeownership and Mortgage Initiative to help prevent foreclosures and rebuild neighborhoods, and one community-based organization has created a national lease program to help families get into affordable homes. But none of these efforts have solved the national problem.
Some economists have labeled the bailout a stab in the dark to solve an unprecedented crisis that will yet have greater repercussions than the Great Depression of 1929. Prof. Taylor said that it's ironic that World War II helped to rebuild the economy and ended the Great Depression, whereas the unchecked, Iraq and Afghanistan Wars helped to bring on the collapse of the U.S. economy.
Until Congress decides to obey the mandates of the Constitution and restore the power over monetary and credit policy to the people to whom it rightfully belongs, the citizens of the U.S. through their elected representatives, we will forever be on the high road to debt slavery and economic tyranny, Mr. Eggelletion said.
Posts: 3595 | From: Moved To Mars. Waiting with shotgun | Registered: Dec 2006
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^ Glad you are finally showing a bit of sense. However, I'm sure you would not agree with my theory on the Bush family's historic legacy of stealing through the banking system from Prescott, to George Sr & Neil, to Jeb, to George.
Posts: 3595 | From: Moved To Mars. Waiting with shotgun | Registered: Dec 2006
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The federal prosecutor must agree since he fined Neil $40K for fraudulent activities while making free handout loans (bailouts) to friends at the S&L he ran.
You agree with George Bush enough to be in the 22% of Americans who think he did a good job while in office. That's against the 78% of Americans who say that can't wait until he's out of office and won't miss him when he's gone.
But, to be fair, I do sense a slow movement in your thinking from far illogical right, to less illogical left. Posts: 3595 | From: Moved To Mars. Waiting with shotgun | Registered: Dec 2006
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If you had any sort of grasp of history you would not look at it from the left or the right. You are so ideological that when you do get information hyou do not know how to process it or place it in context.
Posts: 2069 | From: Texas | Registered: Sep 2008
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The history I grasp is the FACT Neil Bush was prosecuted, found guilty, and fined for fraud in the previous banking S&L failures. There is no ideology with truth.
I do SENSE you inching away from extreme right hard headness, towards reasonable thought though.
Haha, that's a compliment. Posts: 3595 | From: Moved To Mars. Waiting with shotgun | Registered: Dec 2006
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We live in a capitalist nation. Business firms in a capitalist economy have produced agreat wealth for those citizens willing to work hard. This also means that they must adjust their employment to the circumstances of the moment depending on which phase of the business cycle we are in. If you lose your job go get a better one, or at least another.
Posts: 2069 | From: Texas | Registered: Sep 2008
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^ This is hardly capitalism we are seeing, but blatant theft and thievery on a astronomical scale. The same thievery that destroyed the Russian economy now turned on the United States itself. The US financial community are it's self destructive and traitorous oligarchs.
Like the silly Republicans who believe the auto crisis is some how due to the UAW, many misrepresented ideologies are also at fault.
Mainly, it's just poor values, greed and theft. but what can you expect if the US government runs a Ponzi scheme like Social Security, than why shouldn't the financial community. Contradiction has a way of turning in on itself.
Posts: 3595 | From: Moved To Mars. Waiting with shotgun | Registered: Dec 2006
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quote:Business firms in a capitalist economy have produced agreat wealth....
for those who play the grand casino game known as the stock market.
You just bet on those companies that are turning big profits--i.e. those companies that have been exploiting their workers the most. You bet on them by buying their stock. And when the same companies start losing--i.e. less profits--you dump them and move on--like a mosquito looking for fresh blood.
Posts: 5492 | Registered: Nov 2004
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^ and that's only a fraction of it. Wall street is an entropic system which can only lead to inflation and degradation of products and services. Much of the corruption is due to corporate leaders and executives having no real skills on how to increase profit margins by offering greater product value, so they trick Wall St by offering solutions which down grade customer services, lower product quality, and leverage corporate debt. At some point, the house of cards has to come tumbling down as we are seeing in banking and financial industries today.
The real problem with the Auto makers is not their products or the UAW and it's workers. Their real problem is Wall Street and the bankers who set wild and stupid growth expectations quarter after quarter sucking out profits while producing nothing.
It's no big surprise that those employed on Wall Street are 98% Republican.
Posts: 3595 | From: Moved To Mars. Waiting with shotgun | Registered: Dec 2006
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Guys , you are eaten up with emotion but present totally misleading information. You can leave downtown Houston and drive west for 25 miles past half a million dollar homes all the way. Capitalism produces great wealth for those who are smart and work hard, the remaineder have a right to be poor.
Posts: 2069 | From: Texas | Registered: Sep 2008
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^ Hammer, I think most of your problem is, you've never been out of Houston. For every million dollar home you find in Houston, you'll find 1,000,000 1-2 bedroom shacks. Half of those, with no central Air conditioning. Your example shows a lopsided view of the real world.
The billions we seeing being made today is not through working hard, but by Ponzi schemes, Creative book keeping, and out right theft. Mostly, it's criminals like George Bush and Paulson giving their friends, interest free, no payback loans in the same way Neil Bush was caught lending a dozen associates $200,000 each and taking $40,000 for his services. These Republican friends never paid back the bank loans and taxpayers ended up paying them off. Same as this bailout.
You may call that hard work, but I call it what it is, felonious criminal activity. I believe these criminals have all the right in the world to steal, but all the right to be incarcerated as well.
Posts: 3595 | From: Moved To Mars. Waiting with shotgun | Registered: Dec 2006
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quote:Originally posted by meninarmer: ^ and that's only a fraction of it. Wall street is an entropic system which can only lead to inflation and degradation of products and services. Much of the corruption is due to corporate leaders and executives having no real skills on how to increase profit margins by offering greater product value, so they trick Wall St by offering solutions which down grade customer services, lower product quality, and leverage corporate debt. At some point, the house of cards has to come tumbling down as we are seeing in banking and financial industries today.
The real problem with the Auto makers is not their products or the UAW and it's workers. Their real problem is Wall Street and the bankers who set wild and stupid growth expectations quarter after quarter sucking out profits while producing nothing.
It's no big surprise that those employed on Wall Street are 98% Republican.
The "credit rating agencies" (Fitch, Moody's, and Standard & Poor), financial gatekeepers, were rating things that clearly did not warrant "triple-A" ratings. For investors, a triple-A rating became the stamp of approval that said this investment is safe.
I saw a Congressional Committee testimony last month investigating whether S&P had in fact rated a particular deal incorrectly, the one this instant message discusses:
Rep. John Yarmuth (KY): "This is not an email this is an instant message, or a series of instant messages between two S&P officials who are chatting back and forth. As I show you these you'll see that what they're talking about - they're talking about rating a certain deal. Here's what they said":
Official #1: "By the way that deal is ridiculous."
Official #2: "I know, right. Model definitely does not capture have the risk."
Official #1: "We should not be rating it."
Official #2: "We rate every deal. It could be structured by cows and we would rate it."
Now the Committee went back to investigate whether S&P had in fact rated this particular deal, and the SEC informed the Committee that it indeed had rated it.
Remember Enron, all of those scandals when the accountants were in on the fraud? It makes me think that these Committee hearings are a lot of grandstanding for the cameras. We just go full circle . . . again and again. It remains to be seen if our government will get involved in doing something about rating criteria of companies.
The SEC oversee credit rating agencies. Christopher Cox reputation has been tarnished by the collapses of Bear Stearns Cos. and Lehman Brothers Holdings Inc. as well as criticism from lawmakers that it hasn't aggressively enforced securities laws. I'm very interested in Obama's pick as SEC chairman, its just that important.
Posts: 1549 | From: California, USA | Registered: Jan 2006
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Myra, the credit reporting agencies are a joke!
How can A.I.G. and Wall Street qualify for a no terms, no interest trillion dollar loan when they have what equates to bankruptcy while an average citizen with average scores of 700 and no debt or bankruptcy be denied. Even worst, the Wall street loan is coming out of the pockets of those previously denied taxpayers interest free, so the banks can loan them their own miney back to them with interest. It's a crazy ass world. REVOLUTION!!!
The whole house of cards needs to be not reformed, but dismantled. REVOLUTION!!!
Posts: 3595 | From: Moved To Mars. Waiting with shotgun | Registered: Dec 2006
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Wall Street and Banking CEO and Executive Pay Soars!!!
Last year, CEOs of companies in the Standard & Poor's 500 index on average took in $10.5 million in pay, 344 times that of the average U.S. worker, according to the Institute for Policy Studies and United for a Fair Economy, two groups that focus on social justice issues.
Many executives whose firms have been hard-hit by the mortgage crisis have earned sizable pay. Richard Fuld, the chairman and chief executive of Lehman Brothers Holdings Inc, which filed for bankruptcy protection last week, was awarded $22 million in fiscal 2007, for instance.
"Why should executives who were well paid, driven by the subprime investment bubble, be able to keep that money at taxpayers' expense?" said Richard Ferlauto, director of pension and benefit policy at the American Federation of State, County and Municipal Employees, a critic of executive pay plans.
While over two million US workers received pink slips last year, Wall Street chief executives treated themselves to some of their fattest pay packages ever.
Leading the pack was Citigroup’s Sanford Weill, who was paid $44.6 million—$122,000 a day including Saturdays and Sundays—for his work as chairman and CEO of the world’s largest financial services company. The cash portion of his 2003 package came to $30 million ($1 million in salary plus a $29 million bonus), an unprecedented amount according to corporate compensation analysts.
In addition to his 2003 compensation, Weill, who retired as CEO in October but remains chairman until 2006, realized $23 million from exercising stock options granted in prior years. His employer also agreed to buy 5.57 million shares of his Citigroup stock holdings for $262.4 million. Weill still owns 19.6 million shares as of the beginning of March, according to the company’s proxy statement.
Other top Citigroup executives received big boosts in their pay last year. Charles Prince, who succeeded Weill as CEO, took home a $29.2 million package, nearly four times his 2002 remuneration. Robert Willumstad, who became the chief operating officer in October, was paid a total of $28.6 million, a 280-percent increase over 2002.
The combined total doled out to Citigroup’s top three executives came to over $102 million.
Elsewhere on Wall Street, Merrill Lynch’s president and CEO, E. Stanley O’Neal, received his largest paycheck ever at $28 million—half in cash, and more than triple his 2002 pay. O’Neal is credited with boosting Merrill Lynch’s profits to a record $4 billion last year after cutting over 20,000 jobs at the company.
James Cayne, chairman and CEO of Bear Stearns, another big investment house, earned more than $39 million counting $12.3 million in gains on his performance-based stock units. This compares with his $28 million payday the year before. Last summer Cayne was one of the staunchest defenders of Richard Grasso, the former chairman of the supposedly non-profit New York Stock Exchange, who was forced to resign when word leaked out about his $140 million deferred compensation payout.
Goldman Sachs CEO Lloyd Blankfein, who took home $54.3 million in salary, bonus, options and restricted stock. Earnings at Goldman grew about 80% in 2006 over 2005, helping Blankfein top the Wall Street compensation chart even though he only got the top job at Goldman last June, when former CEO Henry Paulson left the firm to become Treasury secretary in the Bush administration.
The pay package of CEO Stanley O'Neal, which was filed under the new disclosure rules, indicates that he received $46.4 million for the year, and exercised $16.7 million worth of options.
Meanwhile, in his first full year at the helm of Morgan Stanley after taking over for Philip Purcell, who was ousted in 2005, John Mack led his firm to record profit. As a result, he pulled in a pay package of $41.4 million for the year.
At Lehman Bros., which enjoyed record earnings, CEO Richard Fuld got $40.7 million. It was a similar story at Bear Stearns, where CEO James Cayne got $40 million after helping his firm set a profit record.
But while these executives were among the top earners in companies in the Standard & Poor's 250, they lagged behind many of their peers in terms of perks.
Merrill Lynch's O'Neal received $213,000 worth of personal use of a company car and driver, and another $149,000 worth of travel on the corporate jet. Morgan Stanley's Mack received $321,000 worth of personal flight time on his company's corporate jet, as well as the services of a car and driver.
While Blankfein at Goldman Sachs also had a car and driver, his perks stopped there. The same was true for Lehman's Fuld and Bear Stearns' Cayne. The men paid for any personal air travel they took during the year. None of the Wall Street firms paid for country club memberships or tax gross-ups — when the company pays the tax bill on their perks.
"It's a very simple way to pay people," says Alan Johnson of Johnson Associates, a financial services consulting firm. "Senior executive pay on Wall Street is driven by financial results. The numbers today are six to seven times what they were a few years ago although numbers can be deceiving as showb by today's financial situation."
Off Wall Street, the only CEO whose compensation puts him in the same league as the investment bankers is Ray Irani of Occidental Petroleum, who raked in $52.1 million in 2006.
Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns together awarded $65.6 billion in compensation and benefits last year to their 186,000 employees, or an average of over $350,000 per employee, mostly whites and Jews.
Goldman said it had set aside a total of $16.5 billion this year for salaries, bonuses and benefits. On average, this would translate to $622,000 per employee.
The industry's bonuses are larger than the gross domestic products of Sri Lanka, Lebanon or Bulgaria, and the average bonus of $219,198 is more than four times higher than the median U.S. household income in 2006, according to Census Bureau data.
UJA-Federation, a Jewish philanthropy, raised $41 million, up from $38 million last year, at an annual campaign event hosted last month at the home of Alan Greenberg, the 80-year-old chairman of Bear Stearns's executive committee. The organization hopes to raise at least $21.5 million at its annual Wall Street dinner on Dec. 5, topping last year's $21 million, said Stuart Tauber, UJA's senior vice president.
Demand for ``super-luxury'' apartments in Manhattan, those priced at or above $10 million, also was at an all-time high in 2007, said Pamela Liebman, chief executive officer of the Corcoran Group real estate brokers. A 12-room Park Avenue apartment placed on the market this month sold in less than a week for more than the $12 million asking price, she said.
``Some people were a little surprised because there's been so much negative talk in the press about the market,'' Liebman said. ``When there's all this talk about the credit crunch and potential job loss and not everybody sharing in the same pie, the ones who are the most fortunate don't want to rub it in anyone's face so they're quiet about their purchases.''
Posts: 3595 | From: Moved To Mars. Waiting with shotgun | Registered: Dec 2006
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