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Commentary and review of The New Trough - Naomi Klein's article in Rolling Stone's November 13, 2008 issue
http://www.rollingstone.com/politics/story/24012700/the_new_trough
The details are starting to emerge on the Bailout and it is apparent this criminal administration and Congress are at it again. It was bad enough to send partisan republicans to Iraq to hand out Plane Loads of money to Contractors, but this latest scam takes the cake.
Reuben Jeffrey III is named the chief investment officer for the bailout program. This is the guy who as chairman of the Commodity Futures Trading Commission between 05 and 07 who advocated for flexibility in regulation, which did not regulate the high risk trading at the heart of the meltdown.
Jeffrey, who was also part of the Bremer CPA in Baghdad in the early days. He ws in charge of hiring a staff who's function was to hand over plane loads of money to private contractors. When asked by Congress what he learned he said contracts should be handed out with more speed and flexibility.
So we are now outsourcing the bailout with no time for a bidding process or the drafting of rigorous rules to make sure those applying do not have conflicts of interest. In other words, an open invitation to bullshit about how they love their country and can be trusted to regulate themselves.
Six law firms were invited to bid for the first major contract. Four declined because of conflicts of interest. The firm awarded the contract - Simpson Thacher & Bartlett apparently takes a more relaxed approach to conflicts of interest.
It provided legal support to companies trading mortgage-backed securities - the financial WMDs as Warren Buffett called them, that detonated the banking industry.
This firm was hired to spend $250 billion of the bailout money to purchase equity in Americas banks. The first stage was to buy stakes in 9 of the country's top banks - 7 of which this firm represented.
This firm agreed to not represent these banks against the US when they negotiate with Treasury for the equity money. This firm has retained the right to represent banks when they apply for other parts of the $700 billion bailout not covered by its contract. The conflicts of interest increase further when you look at Simpson Thacher's lead lawyer; Lee Meyerson, who personally represented 3 of the 9 banks bailed out in the first round.
This firm could act right, but the first test wasn't reassuring. the deal to give the 9 banks $125 billion to ease the credit crunch; crippling the economy, in the form of badly needed loans. Problem is no one put this in writing. The part about lending money to homeowners and small businesses was implied - not required. There is no obligation for the banks to lend the money one way or the other says a Treasury spokeswomen. We're not looking to control their operations.
Many of the banks appear to have no intention of wasting the money on loans; at least for the next quarter. The CFO for Citigroup; Gary Crittenden, has hinted his company would use its share of the cash - $25 billion - to buy up competitors. He said the buyouts present the possibility of taking advantage of opportunities that might normally be closed to us.
Add to this Morgan Stanley planning to pay themselves $10.7 billion this year, much of it in bonuses. Not only do the taxpayers save this company, we are funding their 2008 bonuses.
England's Gordon Brown negotiated a similar bailout, but with meaningful guarantees for taxpayers, voting rights at banks, seats on the boards, 12% annual dividend payments to the government, suspension of dividend payments to shareholders, restrictions on executive bonuses and legal requirements that the banks lend money to homeowners and small businesses.
We got no controlling interest in banks we saved, no voting rights, no seats on the boards and 5% in dividend payouts to the government while shareholders continue to colle ct dividends. Golden parachute and bonuses already promised by the banks will still be paid out to executives.
The day after Paulson met with the top banks, Treasury announced Bank of New York Mellon would receive the contract of Master Custodian of the bailout. Bank of Mellon has a bad record for mischief. $22.5 billion money laundering lawsuit in Moscow and has been forced to pay out $14 million in settlements.
The contract prohibits unethical behavior, but the arrangement is rife for abuse. Mellon holds $1.2 billion in subprime mortgage securities. It will rceive $3 billion as part of the equity program and be eligible to apply for taxpayer money from the program it is being paid to administer.
This is a must read article. All this information can be independently checked out. Of course, always remember if you want the facts to go your way, turn a blind eye to what does not fit into ones world view.
http://www.rollingstone.com/politics/story/24012700/the_new_trough
The details are starting to emerge on the Bailout and it is apparent this criminal administration and Congress are at it again. It was bad enough to send partisan republicans to Iraq to hand out Plane Loads of money to Contractors, but this latest scam takes the cake.
Reuben Jeffrey III is named the chief investment officer for the bailout program. This is the guy who as chairman of the Commodity Futures Trading Commission between 05 and 07 who advocated for flexibility in regulation, which did not regulate the high risk trading at the heart of the meltdown.
Jeffrey, who was also part of the Bremer CPA in Baghdad in the early days. He ws in charge of hiring a staff who's function was to hand over plane loads of money to private contractors. When asked by Congress what he learned he said contracts should be handed out with more speed and flexibility.
So we are now outsourcing the bailout with no time for a bidding process or the drafting of rigorous rules to make sure those applying do not have conflicts of interest. In other words, an open invitation to bullshit about how they love their country and can be trusted to regulate themselves.
Six law firms were invited to bid for the first major contract. Four declined because of conflicts of interest. The firm awarded the contract - Simpson Thacher & Bartlett apparently takes a more relaxed approach to conflicts of interest.
It provided legal support to companies trading mortgage-backed securities - the financial WMDs as Warren Buffett called them, that detonated the banking industry.
This firm was hired to spend $250 billion of the bailout money to purchase equity in Americas banks. The first stage was to buy stakes in 9 of the country's top banks - 7 of which this firm represented.
This firm agreed to not represent these banks against the US when they negotiate with Treasury for the equity money. This firm has retained the right to represent banks when they apply for other parts of the $700 billion bailout not covered by its contract. The conflicts of interest increase further when you look at Simpson Thacher's lead lawyer; Lee Meyerson, who personally represented 3 of the 9 banks bailed out in the first round.
This firm could act right, but the first test wasn't reassuring. the deal to give the 9 banks $125 billion to ease the credit crunch; crippling the economy, in the form of badly needed loans. Problem is no one put this in writing. The part about lending money to homeowners and small businesses was implied - not required. There is no obligation for the banks to lend the money one way or the other says a Treasury spokeswomen. We're not looking to control their operations.
Many of the banks appear to have no intention of wasting the money on loans; at least for the next quarter. The CFO for Citigroup; Gary Crittenden, has hinted his company would use its share of the cash - $25 billion - to buy up competitors. He said the buyouts present the possibility of taking advantage of opportunities that might normally be closed to us.
Add to this Morgan Stanley planning to pay themselves $10.7 billion this year, much of it in bonuses. Not only do the taxpayers save this company, we are funding their 2008 bonuses.
England's Gordon Brown negotiated a similar bailout, but with meaningful guarantees for taxpayers, voting rights at banks, seats on the boards, 12% annual dividend payments to the government, suspension of dividend payments to shareholders, restrictions on executive bonuses and legal requirements that the banks lend money to homeowners and small businesses.
We got no controlling interest in banks we saved, no voting rights, no seats on the boards and 5% in dividend payouts to the government while shareholders continue to colle ct dividends. Golden parachute and bonuses already promised by the banks will still be paid out to executives.
The day after Paulson met with the top banks, Treasury announced Bank of New York Mellon would receive the contract of Master Custodian of the bailout. Bank of Mellon has a bad record for mischief. $22.5 billion money laundering lawsuit in Moscow and has been forced to pay out $14 million in settlements.
The contract prohibits unethical behavior, but the arrangement is rife for abuse. Mellon holds $1.2 billion in subprime mortgage securities. It will rceive $3 billion as part of the equity program and be eligible to apply for taxpayer money from the program it is being paid to administer.
This is a must read article. All this information can be independently checked out. Of course, always remember if you want the facts to go your way, turn a blind eye to what does not fit into ones world view.
Views: 151
Replies to This Discussion
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Permalink Reply by Duncan McGehee on
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Read the article and it should flesh out the details. Remember, I was paraphasing to an extent. Note that the online artcle is updated and Reuben Jeffrey III was removed due to; I guess, his ties to the CPA in Iraq.
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Permalink Reply by Cooter on
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Funny..."criminal" administration and "congress"..the whole article is entrenched in left wing propaganda
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Permalink Reply by Grillin' - MmmMmm on -
Agreed Cooter. If they want to get some credence as a plausible newsworthy source, they should start by putting away their partisan rhetoric. The proper way to have said this is "criminal administration AND criminal congress". There is more than enough blame to spread across all in D.C. And this is coming from a confessed "right wing nut" like me!
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putting criminal in twice was redundant, so I connected both to criminal with the word and.
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Permalink Reply by Grillin' - MmmMmm on
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actually, you may have something. Saying "criminal congress" is indeed redundant. Using the word "congress" in any setting should have the implied "criminal" already there!
Kind of like saying "lying politician"...no need for both words, one goes with the other!
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Permalink Reply by Grice on -
Could you be talking about the amendment to code 382? In either case, could you explain the details of how it supports your position of creating a "loophole" for the banking industry?
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Are you running a failing business? Are your creditors about to come in and take back your desks, computers, and factory equipment? Well there still might be hope! If you can show a significant lose for the year Treasury Secretary Paulson could have a buyer for you. You see, during the $700 billion dollar bailout a few weeks ago Mr. Paulson changed section 382 of the tax code.
Section 382 is what allowed the merger between Wachovia and Wells Fargo work. What is this handy little bit of tax code that wields such power? Well 382 allow banks to buy failing banks and use their losses to offset profits. Somehow, in some obscure corporate tax code way, this is good. To me and you it feels like I got screwed with your pants on.
The estimated windfall amount to banks exercising this little bit of corporate tax code skullduggery could be as high as $140 billion. When is inauguration day?
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11.10.08More financial skullduggeryPosted in Bush Administration, Business, GOP, Government at 8:58 am by LeisureGuy
http://leisureguy.wordpress.com/2008/11/10/more-financial-skulldugg...
Hilzoy picks up on an important (and illegal) development. Her post begins:
Here’s a disturbing story:
“The financial world was fixated on Capitol Hill as Congress battled over the Bush administration’s request for a $700 billion bailout of the banking industry. In the midst of this late-September drama, the Treasury Department issued a five-sentence notice that attracted almost no public attention.But corporate tax lawyers quickly realized the enormous implications of the document: Administration officials had just given American banks a windfall of as much as $140 billion.
The sweeping change to two decades of tax policy escaped the notice of lawmakers for several days, as they remained consumed with the controversial bailout bill. When they found out, some legislators were furious. Some congressional staff members have privately concluded that the notice was illegal. But they have worried that saying so publicly could unravel several recent bank mergers made possible by the change and send the economy into an even deeper tailspin.
“Did the Treasury Department have the authority to do this? I think almost every tax expert would agree that the answer is no,” said George K. Yin, the former chief of staff of the Joint Committee on Taxation, the nonpartisan congressional authority on taxes. “They basically repealed a 22-year-old law that Congress passed as a backdoor way of providing aid to banks.” (…)
The change to Section 382 of the tax code — a provision that limited a kind of tax shelter arising in corporate mergers — came after a two-decade effort by conservative economists and Republican administration officials to eliminate or overhaul the law, which is so little-known that even influential tax experts sometimes draw a blank at its mention. Until the financial meltdown, its opponents thought it would be nearly impossible to revamp the section because this would look like a corporate giveaway, according to lobbyists.
Andrew C. DeSouza, a Treasury spokesman, said the administration had the legal authority to issue the notice as part of its power to interpret the tax code and provide legal guidance to companies. He described the Sept. 30 notice, which allows some banks to keep more money by lowering their taxes, as a way to help financial institutions during a time of economic crisis. “This is part of our overall effort to provide relief,” he said.”
The WSJ covered this a few weeks back (h/t publius.)
Here’s the relevant section of the Internal Revenue Code. It provides that “The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section and section 383″. I am not a lawyer, still less a tax lawyer, but offhand, I would not have thought that rescinding a law counts as promulgating a regulation necessary or appropriate to carry out its purposes. And if it doesn’t, it’s not clear where Secretary Paulson gets the authority to give banks a twelve-figure tax break.
Meanwhile, in other news, Treasury seems to be about to shovel around $40 billion more at AIG: …
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Permalink Reply by Grice on
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Thank you. I have been reading more about this secretive induction, and has me concerned for what other hidden policies will be discovered in the near future.
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Permalink Reply by Checkmateking on
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Rollling Stone? are you kidding me. I would trust Pravda first.
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Trust yourself and do the due dillgence. All articles published need to be sourced. Unless you verify with other sources what is stated, you might as well trust Pravda first. Sounds like you didn't bother to read the article.
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Permalink Reply by Checkmateking on
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The only time I ever picked up that anti-American rag was when I was on a friends toilet and had nothing else to read, I was shocked at the bald-faced left wing spin and egregiously sick attacks on Bush. If one were not aware otherwise and read only Rollin Stone one would assume we were at war with some nefarious villain named Bushwho was out to destroy America. If you want to look at the root cause of the financial meltdown you have to go back to the Barney Frank, Chris Dodd, and the other Criminals at Freddie and Fannie, like Franklin Raines and for a short period Obama's new chief of staff Rahm Emmanual
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