U.S. bailouts benefited foreign firms, report says

[mike r]

Source: Washington Post

The federal government's effort to stabilize the financial system in 2008 by flooding money into as many banks as possible resulted in a boon to many foreign firms and left the United States shouldering far more risk than governments that took a narrower approach, according to a new report by a panel overseeing the Treasury's $700 billion bailout fund.

Members of the Congressional Oversight Panel, in a report due out Thursday, note that America's broad financial rescues had more impact internationally than the narrower bailout programs of other countries had on U.S. firms. They cite as a case study the bailout of insurance giant American International Group. While the Treasury committed up to $70 billion to AIG through its Troubled Assets Relief Program, the report states, much of that money ended up in the coffers of foreign trading partners in France, Germany and other countries. The cash that the United States poured into AIG alone equaled twice what France spent on its total capital injection program, and half what Germany spent.

"The point we make forcefully in this report is that there were no data about where this money was going, no information about where this money was going," said panel chair Elizabeth Warren, a Harvard law professor. "Without that information, no one could make a deliberate policy choice" about whether to ask foreign governments to contribute to the financial rescues.

The report urges regulators to gather more information about the international flow of funds in normal times and to document the flow of rescue funds. It also cites the need for the international community to collaborate in responses to future global financial collapses, and it urges U.S. officials to undertake regular crisis planning and "war gaming" for the international financial system.

Read more: http://www.washingtonpost.com/wp-dyn/content/article/2010/08/11/AR2010081106215.html

[OhioChick]

1. Nice. n/t

[Wilms]

2. .

[w4rma]

3. Go 'free' trade! (nt)

:sarcasm:

[snot]

4. Wow, WaPo's all over it, huh?

From a blog post nearly 2 years ago (with permission, from http://c-cyte.blogspot.com/2008/10/few-key-concerns-re-bailout-bill.html ; not sure if the links in this post still work):

Thursday, October 2, 2008
A Few Key Concerns Re- the Bailout Bill

This is a very rough draft, but I thought impt. to get it out.

We may well be at a make-or-break moment like few our country has faced before. So pls try to digest this sufficiently to pick out a few points you can relate to and call your congresscritters NOW.

Under the Bailout Bill, Paulson's Authority to Buy Bad Debt on Behalf of Taxpayers Is NOT Limited to U.S. Firms, or Even to Debt Secured by U.S. Properties

As stated by Rep. Brad Sherman (CA) on CNBC (video at http://www.cnbc.com/id/15840232?video=873682522&play=1 ):

"The Bank of Shanghai can transfer all of its toxic assets to the Bank of Shanghai of Los Angeles which can then sell them the next day to the Treasury. I had a provision to say if it wasn't owned by an American entity even a subsidiary, but at least an entity in the US, the Treasury can't buy it. It was rejected.

"The bill is very clear. Assets now held in China and London can be sold to US entities on Monday and then sold to the Treasury on Tuesday. Paulson has made it clear he will recommend a veto of any bill that contained a clear provision that said if Americans did not own the asset on September 20th that it can't be sold to the Treasury.

"Hundreds of billions of dollars are going to bail out foreign investors. They know it, they demanded it, and the bill has been carefully written to make sure that can happen."

See also http://uk.youtube.com/watch?v=GqIFoBXGizc .

(And there's more interesting stuff in the same post)

[girl gone mad]

5. Right, its not news at all.

We talked about it here, even, at the time it was happening.

[leveymg]

6. Keeping the pipeline of foreign money flowing was the whole point of the bailout. Of course

a bunch of global banks latched onto the scheme. It was made for them, by them. Does anyone here seriously believe that Wall Street is still a U.S. institution that serves domestic interests? Who reads that book by its cover?

[Prometheus Bound]

7. Yes, indeed, wasn't that the point?

As a foreigner, I was frankly relieved to see US taxpayers step up and bail out the financial world, but I could never understand how or why American taxpayers went along with it. It's not like they could afford it.

[Romulox]

8. Thank GAWD it passed!

There would've been ARMAGEDDON if those bonus checks weren't paid!