William Greider: Paulson's Swindle Revealed

[marmar]

from The Nation:



Paulson's Swindle Revealed
By William Greider
October 29, 2008



The swindle of American taxpayers is proceeding more or less in broad daylight, as the unwitting voters are preoccupied with the national election. Treasury Secretary Hank Paulson agreed to invest $125 billion in the nine largest banks, including $10 billion for Goldman Sachs, his old firm. But, if you look more closely at Paulson's transaction, the taxpayers were taken for a ride--a very expensive ride. They paid $125 billion for bank stock that a private investor could purchase for $62.5 billion. That means half of the public's money was a straight-out gift to Wall Street, for which taxpayers got nothing in return.

These are dynamite facts that demand immediate action to halt the bailout deal and correct its giveaway terms. Stop payment on the Treasury checks before the bankers can cash them. Open an immediate Congressional investigation into how Paulson and his staff determined such a sweetheart deal for leading players in the financial sector and for their own former employer. Paulson's bailout staff is heavily populated with Goldman Sachs veterans and individuals from other Wall Street firms. Yet we do not know whether these financiers have fully divested their own Wall Street holdings. Were they perhaps enriching themselves as they engineered this generous distribution of public wealth to embattled private banks and their shareholders?

Leo W. Gerard, president of the United Steelworkers, raised these explosive questions in a stinging letter sent to Paulson this week. The union did what any private investor would do. Its finance experts vetted the terms of the bailout investment and calculated the real value of what Treasury bought with the public's money. In the case of Goldman Sachs, the analysis could conveniently rely on a comparable sale twenty days earlier. Billionaire Warren Buffett invested $5 billion in Goldman Sachs and bought the same types of securities--preferred stock and warrants to purchase common stock in the future. Only Buffett's preferred shares pay a 10 percent dividend, while the public gets only 5 percent. Dollar for dollar, Buffett "received at least seven and perhaps up to 14 times more warrants than Treasury did and his warrants have more favorable terms," Gerard pointed out.

"I am sure that someone at Treasury saw the terms of Buffett's investment," the union president wrote. "In fact, my suspicion is that you studied it pretty closely and knew exactly what you were doing. The 50-50 deal--50 percent invested and 50 percent as a gift--is quite consistent with the Republican version of spread-the-wealth-around philosophy." .......(more)

The complete piece is at: http://www.thenation.com/doc/20081110/greider2

[groovedaddy]

1. Jeesh...couldn't you just see this shit coming? Another pat on the back for my Congress critter

for voting against the bailout.

[cui bono]

32. Do you know a link to find the final vote?

I know my guy voted no the first time around, and would bet that he did the second, but I never found a link to the final vote. This is something I'm not good at finding... I never know what to look it up as.

[groovedaddy]

33. Here you go

http://clerk.house.gov/evs/2008/roll681.xml

[cui bono]

43. Thank you so much. My guy, Becerra didn't fail me!

Voted no again. I really like him, except that he felt impeachment was not practical even though he thought it was warranted. He gives out pocket constitutions at his "coffees".

[Elidor]

2. Thank god it passed!

I have mercifully forgotten the names of the rubes who kept saying that at the time.

[SammyWinstonJack]

13. Kinda silent now, aren't they?

[Elidor]

18. I just remembered one of them

Think of the most obnoxious poster in GD on a day-to-day basis.

[SammyWinstonJack]

22. ...

:evilgrin:

[varelse]

26. Unfortunately I can't seem to forget :/

I envy you :(

[reflection]

37. Yes, Thank God It Passed.

:eyes:

[happydreams]

40. Was that OPERATIONMINDFART? Anything that "passes" is ok with him!

:rofl:

[htuttle]

3. This swindle has been going on all through the bailout

For example, Paulson has given AIG many, many times more money than the worth of all of it's stock ($120 billion bailout so far vs a total market cap of $4-6 billion). The same was true of Freddie Mac and Fannie Mae as well.

They're either less savvy business people than my cat or they are just robbing the taxpayers blind. Which do you suppose is more likely?

[CrispyQ]

4. Is anyone surprised?

We let the same people who got us into this mess tell us how to get out of it & anyone is surprised they fucked us again?

:banghead: :banghead: :banghead: :banghead: :banghead:

[Occulus]

5. Cheerleaders?

Got anything to say about this outrage?

No?

I thought not.

:grr:

[no_hypocrisy]

6. Remember the hysterical urgency to bail out the banks?

If nothing were done within days, our economy would collapse?

A good swindle never allows the mark to have time to think over the deal.

[redqueen]

7. "consistent with the Republican version of spread-the-wealth-around philosophy"

Exactly. They're all for spreading the wealth around... as long as it's on their terms.

And I raise my middle finger to the "Told you so" (vulgarity omitted)s in this thread. Tell it to Krugman and to our "good Dems" in the Senate who backed it, you divisive, smug (vulgarity omitted)s.

[The Magistrate]

8. An Excellent Piece, Sir

[pberq]

9. Let's hope Senator Obama addresses this

How can this be allowed to stand?

[OneGrassRoot]

11. Agreed. n/t

[Hydra]

15. He won't

I predicted that this money would be gone by Jan 21st, and that they might even ask for more. Obama's TV ad stated that this bill "helped but was not enough"...

Doesn't sound like someone who thinks we got taken for a ride.

[jonnyblitz]

28. why would he? he was for the bailout. nt

[Romulox]

34. Obama and the Democractic leadership pushed for this harder than anyone. nt

[Dover]

39. And it's not like he's hidden his affiliation. People are blind to what they do not want to see.

Which is why we can continue to get ripped off in broad daylight, and in fact hand over our
treasure to them with a smile and invite our own demise as a democracy.

Obama has been in the pocket of big finance/big energy from the get-go...and very openly so.
And yet people do not hear it. In fact no one can run for national office who stands outside
this closed system.

People never learn. The SYSTEM IS BROKEN, and CORRUPT BEYOND MEASURE. Even someone with the
best of intentions cannot bring meaningful change from INSIDE it.

Remember this from Moyer's interview with Kevin Phillips (author of Bad Money)?


BILL MOYERS: No, I was going to say Obama's trademark rhetoric of inspiration seems to desert him when he talks about economic affairs.

KEVIN PHILLIPS: He doesn't seem to have anything very specific to say. That's part of the problem. A second problem is, for me at least, you know, just as I can't believe that John McCain ever wanted to get his economic advice from Phil Gramm. I mean, Phil Gramm, a former Texas Senator, appalling. He and his wife were known as Mr. and Mrs. Enron because they were so flagrant, that's McCain.

But then you've got Obama with Bob Rubin and he doesn't have any problem with the hedge fund types. I mean, one of the Chicago people was a major financer of his. He gets a guy to pick his vice-president. Turns out to be somebody who was part of the Fannie and Freddie mess.

So I don't exactly see Obama as this fellow riding in on a horse who represents all kinds of reformism. It's an important thing probably to have to change from the Republicans but I don't see that he is free of the ties to finance and Democratic Party financial types.

..snip..

BILL MOYERS: You wrote in that AMERICAN PROSPECT piece that some people, particularly in the reform community and among progressives, see this as a great opportunity for returning to the New Deal regulatory period instigated by Franklin Roosevelt in the pits of the Depression. You don't think that's happening.

KEVIN PHILLIPS: Well, I mean, there's several difficulties here. First of all, at this point, what you've got are the Democrats are the party right at this point that's getting most of the financial money. When Franklin D. Roosevelt won in 1932, we know he wasn't getting most of the financial money.

The second thing is I don't think we're more than partway through. The Democrats think it's going to be another 1933, they get in there, they can do all the New Deal stuff. My feeling is that they're coming in halfway and they're going to have to make hard decisions that are going to eat the Democratic coalition like a bologna sandwich. They're going to start civil wars-

BILL MOYERS: How come? What do you mean?

KEVIN PHILLIPS: Well, if you're going to bail out Wall Street while you're saying oh, the Social Security recipients, maybe they don't even need that money. A lot of people in the financial community basically want to push Social Security on some sort of voluntary basis and needs test it and get rid of it. Now, a lot of Democrats in the labor movement are very nervous about Obama. They put out press releases talking about Rubin-nomics because they see that the flesh of the Democratic Party carries a lunchbox. But the new soul of the Democratic Party wears a pinstripe suit.

http://www.pbs.org/moyers/journal/09192008/transcript2.html

[blues90]

42. he voted for it !

[busybl]

10. stack 'em in the corner

with the 600 dollar hammers.

[femrap]

12. Who will be our new Atty General and

will he/she work for the people or the rich, white boyz? Any bets??? And will this administration face any charges?

[Danascot]

21. I'd bring Elliot Spitzer out of exile

Tell him it's his shot at redemption and to keep his dick in his pants. He knows where the bodies are buried and who buried them. Plus there is a real likelihood the same people lining their pockets in the bailout were the people that tipped off the authorities that he was messin' where he shouldn't have been messin'. Ready to go on day one. Show those GOPers what a real pitbull is like.

[bertman]

25. Now that's an AG or Special Prosecutor I could get behind. Great idea Danascot.

[Hydra]

36. Who cares where Spitzer puts his dick?

As you say, he knows this issue inside and out. Make him a Special Prosecutor and turn him loose. If he wants a busty brunette as part of his payment package, make it happen.

[truedelphi]

14. K& R for later reading n/text

[redqueen]

16. ...

:kick:

[mhatrw]

17. Why can't taxpayers get the same deal Buffett got?

Could it be because the foxes are in charge of our Treasury's hen house?

[Name removed]

19. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Uncle Joe]

20. Kicked and recommended.

Thanks for the thread, marmar.

[bluesmail]

23. Dennis Kucinich (I think, because it's something he would do)

asked for investigations into the enormous amount of money CEO's will get paid. :thumbsup:

[Leopolds Ghost]

24. Wow. Will Obama prosecute? Perhaps if we have AG Kerry. Not if Rubin/Summers are allowed back in.

Rubin and Summers are equally corrupt.

[KG]

27. Thank Gawd It Passed!

:hurts: like a b.m. after you've eaten a block of cheese the size of a car battery....

[Laelth]

29. Good essay. k&r

The United States is a LIBERAL Country.

:dem:

-Laelth

[Jim Sagle]

30. Whaddya want those poor bank execs to do? Settle for ribeye instead of porterhouse?

That just won't do. The taxpayer will just have to bite the bullshit.

[cui bono]

31. Thank god it passed!

:eyes:

:crazy:

[chimpymustgo]

35. The raping and pillaging of the America - with our side paving the way. WTF???

[Dover]

38. And to add insult to grave injury.... they call it "NATIONALIZING" .....

Like so many of their inverted terms that, in fact, mean the opposite.
You have to have some distinction between government and 'other' bodies in order that those other bodies might be considered nationalized. But in THIS country, the distinctions are meaningless and our government is, for all intents and purposes, a subsidiary of the major corporate players in finance/energy.

The painful irony is that WE THE PEOPLE are subsidizing our own demise. The end of democracy and rise of corporatocracy (posing as a national government).

I think we could change the economic landscape if we all simultaneously removed our money from
the top nine megabanks that are planning greater and greater consolidation (this is truly the game of Monopoly on a global scale), and place it in mid-sized and smaller community banks, many of which have done due diligence regarding risk rather than bankrupting us and gambling with our money.

That is a way WE could have an enormous impact to begin leveling the playing field.

I think their immediate plan will involve the complete collapse and choking death of the midsize and smaller banks (and expect the feasting to begin in earnest between election day and the inauguration...using OUR bailout money):


"It will hasten consolidation, no doubt about it," said Frederick Cannon, chief equity strategist at investment bank Keefe, Bruyette & Woods Inc.

The stock market reflected that fact Tuesday, he said, noting that investors bid up the shares of banks more likely to be helped by the government, while shares of capital-starved institutions considered unlikely to get government funds declined.

"The program is also likely to hasten the evolution of the country's financial system from a conglomeration of community banks into a network of bigger, interconnected institutions", said Timothy J. Yeager, a former economist for the Federal Reserve Bank of St. Louis and a finance professor at the University of Arkansas...>


http://www.latimes.com/business/la-fi-banks15-2008oct15,1,5539413.story


_____________________________________________

[happydreams]

41. Looks like old Warren Buffet' 's greed has no limits. What a sick fucking joke.