Naomi Klein: The Bush gang's parting gift: a final, frantic looting of public wealth

[marmar]

from the Guardian UK:



The Bush gang's parting gift: a final, frantic looting of public wealth
The US bail-out amounts to a strings-free, public-funded windfall for big business. Welcome to no-risk capitalism

Naomi Klein
The Guardian, Friday October 31 2008


In the final days of the election many Republicans seem to have given up the fight for power. But don't be fooled: that doesn't mean they are relaxing. If you want to see real Republican elbow grease, check out the energy going into chucking great chunks of the $700bn bail-out out the door. At a recent Senate banking committee hearing, the Republican Bob Corker was fixated on this task, and with a clear deadline in mind: inauguration. "How much of it do you think may be actually spent by January 20 or so?" Corker asked Neel Kashkari, the 35-year-old former banker in charge of the bail-out.

When European colonialists realised that they had no choice but to hand over power to the indigenous citizens, they would often turn their attention to stripping the local treasury of its gold and grabbing valuable livestock. If they were really nasty, like the Portuguese in Mozambique in the mid-1970s, they poured concrete down the elevator shafts.

Nothing so barbaric for the Bush gang. Rather than open plunder, it prefers bureaucratic instruments, such as "distressed asset" auctions and the "equity purchase program". But make no mistake: the goal is the same as it was for the defeated Portuguese - a final, frantic looting of the public wealth before they hand over the keys to the safe.

How else to make sense of the bizarre decisions that have governed the allocation of the bail-out money? When the Bush administration announced it would be injecting $250bn into US banks in exchange for equity, the plan was widely referred to as "partial nationalisation" - a radical measure required to get banks lending again. Henry Paulson, the treasury secretary, had seen the light, we were told, and was following the lead of Gordon Brown. .......(more)

The complete piece is at: http://www.guardian.co.uk/commentisfree/2008/oct/31/useconomy-banking

[GreenPartyVoter]

1. It was the first thing that crossed my mind when the bailout was suggested.

[malaise]

2. Ditto

Shameless scoundrels.

[undergroundpanther]

5. Ditto that ditto

Resentful thugs. I hope the Democratic president and congress can TAKE BACK the money they have STOLEN from US!!!

[femrap]

22. Remember...many

of those who approved of the bailout were Dems. Wall Street and Hedge Funds give Dems huge amounts of money. HUGE.

In fact, these are the ONLY Dem Senators who did NOT vote for the Bailout:

Cantwell
Dorgan
Feingold
Johnson
Landrieu
Nelson (FL)
Stabenow
Tester
Wyden

All the others voted FOR the Bailout...except Kennedy. He was ill.

And this vote occurred on 10/1/08. Just 30 days ago...and look how fast the $ is being spent.

We're more communist than China!

[zonmoy]

25. You do know there is a difference between communism and fascism.

giving huge amounts to corporate crooks is closer to fascism than communism.

[femrap]

29. I was referring to 'nationalization'

but I get your point. And I was trying to make a joke....Do I have to put a bunch of smilies on the post to get a chuckle.

[wolfgangmo]

37. And if they get a little "roughed up" when they are arrested.

I am pretty OK with that too. And then toss the pisspots in the drunk tank/ general population of the jail while letting the prisoners know that the asswipes coming in were responsible for their dads, moms, etc, losing their jobs, retirement or homes.

[TahitiNut]

10. Ditto x 4

Uh-huh. Yup.

[OmmmSweetOmmm]

6. Mine too.

[lonestarnot]

11. Mine too.

[The Backlash Cometh]

3. I say there should be no statute of limitation on getting these creeps.

[undergroundpanther]

8. Agreed no statute of limitations for robber barons and tyrants!

And there should be a way to go after their friends, family, acquaintances and business contacts.And forever seek to prosecute all these pigs in ANY country they attempt to hide in, after they get out of power too.

[Iwillnevergiveup]

4. The world is lucky

to have Naomi Klein - she's really on the case. After I finished reading a library copy of "Shock Doctrine," I accidentally garden-hosed it. So, by damaging the book, I bought it from the library and get to keep it! :thumbsup:

[CrispyQ]

17. I toss my canvas book bag in the back of my truck.

One day, without thinking, I went through the car wash. :blush: I bought the two library books that were in it & some favorite books of mine have now the tale-tell markings of water logged pages!

;)

[klyon]

21. When I finish my copy of "Shock Doctrine" I will donate it to the

local library as I often do.

[nadinbrzezinski]

7. And for once she is wrong

see early legislation in the New Deal as in VERY EARLY new deal.

[Beam Me Up]

9. And they're able to get away with it because ... ???

I think these fucks are holding the whole country hostage and this was the price tag for getting them to leave more or less "peacefully".

[undergroundpanther]

12. Yep

Considering the horrible"non lethal" weapons they have made to oppress citizens lest we get"uppity".

I say that the Dem's should go after these robber barons to the ends of the earth as the economic terrorists they are, and take back every stolen dime of public money ands perks they and their families,acquaintances,friends,and business cohorts steal.

[glitch]

16. That's what I think! Only I don't trust them to keep this deal any more than they've kept any other.

What was that rule about negotiating with terrorists? Hope I am wrong.

[Beam Me Up]

18. I agree totally!

[Richard Steele]

13. That's the B*shCabal motto: "Too Busy Stealing to Govern". Same as it ever was. K&R

[amandabeech]

14. Pelosi and Reid need to call Congress back into session asap.

If they can't put some teeth into that bailout package with some amendments, they might be able to jaw down some of these evil folks.

The big problem with the banks IMHO is that there was no quid pro quo for that dinero. The British handed out the pounds with the binding promise from the banks that they would commence lending with the capital and not go on a dividend or acquisition spree.

Corporate law requires that the boards of directors and executives act in the best interests of the shareholders, not the country at large. Executives are shareholders in that they hold options that are probably underwater, and their personal interests are allied with short-term shareholder interests.

I just do not understand how Pelosi and Reid's staffs could have been rolled like that. Obama stood there with Rubin and Tyson, so you know that he didn't exactly hear any dissenting voices on the matter, but he's going to have to step up to the plate on November 5. If he just goes along with all this, we're really in trouble.

[tex-wyo-dem]

15. No coincidence that the...

War profiteers, big energy and robber baron wall street bankers have raided the treasury and and are now wealthy beyond their wildest imaginations. This was a planned heist from the moment bush** entered the 2000 race.

Now that Obama looks to be the next likely POTUS, as Klein so clearly descibes it, time to make haste and get while the gettin' is good. Kind of puts new light on the timing and immediacy (i.e. "Crisis") of the "bail-out," don't it...

[paparush]

19. Yes. Wars to turn millionaires into billionaires. Plain and simple.

[barbtries]

34. yep

after all these years it's probably been only the last several months that i have concluded that the war in iraq was ALL about lining the pockets of the privateers.

[zonmoy]

26. Planned long before

such cabals plan thing much more long term.

[kentuck]

20. I have heard no one talk about the effect of taking $700 billion out of our economy?

Isn't that a recipe for spiraling deflation? The banks are drinking our milkshakes.

[seafan]

23. The Bush gang's parting gift: a final, frantic looting of public wealth

From the latter half of Naomi's article:


The Bush gang's parting gift: a final, frantic looting of public wealth


By Naomi Klein
Guardian, UK

October 31 2008

.....

In fact, there has been no nationalisation, partial or otherwise. American taxpayers have gained no meaningful control over the banks, which is why the banks are free to spend the new money as they wish. At Morgan Stanley, it looks as if much of the windfall will cover this year's bonuses. Citigroup has been hinting it will use its $25bn buying other banks, while John Thain, the chief executive of Merrill Lynch, told analysts: "At least for the next quarter, it's just going to be a cushion." The US government, meanwhile, is reduced to pleading with the banks that they at least spend a portion of the taxpayer windfall for loans - officially, the reason for the entire programme.

What, then, is the real purpose of the bail-out? My fear is this rush of dealmaking is something much more ambitious than a one-off gift to big business: that the Bush version of "partial nationalisation" is rigged to turn the US treasury into a bottomless cash machine for the banks for years to come. Remember, the main concern among the big market players, particularly banks, is not the lack of credit but their battered share prices. Investors have lost confidence in the honesty of the big financial players, and with good reason. ..... This tethering of the public interest to private companies is the real purpose of the bail-out plan: Paulson is handing all the companies admitted to the programme - a number potentially in the thousands - an implicit treasury department guarantee. To skittish investors looking for safe places to park their money, these equity deals will be even more comforting than a triple-A from Moody's rating agency.

Insurance like that is priceless. But for the banks, the best part is that the government is paying them to accept its seal of approval. For taxpayers, on the other hand, this entire plan is extremely risky, and may well cost significantly more than Paulson's original idea of buying up $700bn in toxic debts. Now taxpayers aren't just on the hook for the debts but, arguably, for the fate of every corporation that sells them equity.
Interestingly, mortgage fund giants Fannie Mae and Freddie Mac both enjoyed this kind of unspoken guarantee before they were nationalised at the start of this crisis. For decades the market understood that, since these private players were enmeshed with the government, Uncle Sam could be counted on to always save the day. It was, as many have pointed out, the worst of all worlds. Not only were profits privatised while risks were socialised, but the implicit government backing created powerful incentives for reckless business practices.

With the new equity purchase programme Paulson has taken the discredited Fannie and Freddie model and applied it to a huge swath of the private banking industry Again, there is no reason to shy away from risky bets, especially since the treasury has made no such demands of the banks (apparently it doesn't want to "micromanage".)
To further boost market confidence, the federal government has also unveiled unlimited public guarantees for many bank deposit accounts. Oh, and as if this were not enough, the treasury has been encouraging the banks to merge, ensuring that the only institutions left will be "too big to fail", thereby guaranteed a bail-out. In three ways, the market is being told loud and clear that Washington will not allow the financial institutions to bear the consequences of their behaviour. This may be Bush's most creative innovation: no-risk capitalism.

There is a glimmer of hope. In answer to Senator Corker's question, the treasury is indeed having trouble dispersing the bail-out funds. So far it has requested about $350bn of the $700bn, but most of this hasn't yet made it out the door. Meanwhile, every day it becomes clearer that the bail-out was sold to the public on false pretences. Clearly, it was never really about getting loans flowing. It was always about doing what it is doing: turning the state into a giant insurance agency for Wall Street, a safety net for the people who need it least, subsidised by the people who will most need state protections in the economic storms ahead.

This duplicity is a political opportunity. Whoever wins on November 4 will have enormous moral authority. It should be used to call for a freeze on the dispersal of bail-out funds, not after the inauguration but right away. All deals should be renegotiated, this time with the public getting the guarantees.

.....

House of Representatives passes controversial $700 billion Wall Street bailout, October 3, 2008


Senate attached bailout plan to Paul Wellstone Mental Health/Addiction Equity Act of 2007, October 2, 2008


Naomi Wolf: "A police state is one whose leader has his own treasury and his own military.", October 2, 2008


Senate starts the ball rolling on Bailout Bill, October 1, 2008


Thom Hartmann says history is repeating itself. Hoover resisted pay cuts for top financial heads,. October 1, 2008


http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4046627">Greenwald: 'If there is any "pitchfork moment", ... it would be this.', September 20, 2008

[redqueen]

24. Bush gang? Is Barney Frank in that gang? (nt)

[HamdenRice]

27. uh...

You're trying to use logic. That won't work on a Halloween, when the villagers are roaming the village with their pitchforks seeking monsters to kill.

Get with the program: "let it collapse!"

:sarcasm:

[redqueen]

28. ...

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4337683

[HamdenRice]

31. While I respect union pension funds financial analytic capability ...

there is something definitely wrong with the basic outline of the analysis in that article. It is true that the value of any security is related to its yield -- the interest or dividend that's paid on it.

The problem with the Greider article is that it is valuing the government's preferred stock as though it were common stock. The preferred has to be "redeemed" or bought back at its face value, so it's impossible for it to be worth half of what Buffet paid for his preferred stock.

I would like to see the Bloom/Steelworkers analysis, because Greider's summary of it makes absolutely no sense.

Paulson paid $125 billion for preferred stock in banks. Buffet paid $5 billion for preferred stock in banks. There is absolutely no question that, as Bloom points out, Buffet got a much better deal -- approximately twice as better a deal on income on the investment.

If the stock had been common stock, Buffet's stock would be worth twice as much as Treasury's. The argument is that Treasury's $125 billion is now worth only $62.5 billion.

But both Treasury and Buffet were sold preferred, not common stock. So both are also promised the face value of of the preferred stock -- $125 billion in the case of Treasury and $5 billion in the case of Buffet.

That means Treasury's preferred stock can't go below $125 billion in value -- unless the bank fails of course. So the article doesn't explain how on earth Treasury's stock is worth $62.5 billion.

So the "theft" isn't that the banks walk away with $62.5 billion; it's that Treasury will make billions in dividends, but not as many billions as Buffet did. If you look at the actual numbers, the complaint is that Paulson's deal will earn $6.25 billion for the Treasury on $125 billion in preferred bank stock next year instead of $12.5 billion, which it would have earned if it got Buffet's deal. But it is still, on balance, profitable to the Treasury.

It's true that Treasury got a worse deal, but other than that the numbers in the Grieder article are completely off. That said, Treasury should have gotten Buffet's deal, but the scale of the subsidy to the banks is nothing like what is being written about it.

At the same time, some other DUers are posting links to a WaPo article that says that the current bailout structure will make money for Treasury but not unfreeze the credit markets. So much is being written and posted that is directly contradictory, I wonder how people can hold these conflicting ideas in their heads all at the same time.

:shrug:

DUers are not prepared to look at the numbers objectively. The pitchforks are out and they want to believe the worst ghost story anyone is willing to tell them.

[redqueen]

32. Thank you, as always, HamdenRice...

for the insight.

[SpiralHawk]

30. k and r. Essential reading for every American citizen

Republicons are stealing EVEN MORE from America.

Why do republicons HATE AMERICA/

[hisownpetard]

33. With his last breath, Bush will try to screw this country.

May he reap his just rewards.

[Kurovski]

35. K&R. (nt)

[Turbineguy]

36. Yes, but we knew that in 2000.

It was just a question of how they would do it.

Actually, they've been looting the Treasury all along. This is just to compensate for not getting the Social Security Trust Fund.

It's rather clever really. This will cost me about 1 percent of what my pension fund has lost already. So for me, I either give them 1 percent or the rest.

[Greyskye]

38. Yep. Said as much in a DU rant a while back

http://journals.democraticunderground.com/Greyskye/14

[Poseidan]

39. fascists, endlessly short-sighted

When they die a horrible fate, I will be there to gloat.