The Quiet Coup – The Atlantic (May 2009)
In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldnâ€™t be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldnâ€™t roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people.
But thereâ€™s a deeper and more disturbing similarity: elite business interestsâ€”financiers, in the case of the U.S.â€”played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.
President Obama and Secretary of the Treasury Geithner have given Goldman Sachs a $13 billion no-strings-attached, no-interest, non-repayable grant
This was operationalized through the AIG Bailout. Goldman Sachs, which has taken billions in TARP funds and other government welfare, and had previously stated it had no material interest in AIG, nonetheless received $13 billion in payments from AIG after the government gave even more money to AIG. Goldman Sachs is not only a fraudster of a company, it is a welfare queen, dependent on the federal government to pay for its reckless, antisocial behaviors.
Other large institutions have benefited as well.
In an inexplicably good move (he, after all, liedjust today on ABC’s This Week by saying he spent his entire career in public service) , Secretary of the Treasury Timothy Geithner has asked for the authority to nationalize large financial institutions. I hope he gets it, and uses it. Zombies such as Citi, and welfare queens such as Goldman Sachs, should be seized, their shareholders wiped out, their officers civially prosecuted for mismanagement and criminally prosecuted for fraud, and their assets transferred to the treasury.
Hour 1. Scene: The Senate Joint Committee to Investigate the Crimes of Jack Bauer
Stuffy Senate Committee Chairman: “Mr. Bauer, the charges brought against you by the committee today are quite serious. While you say that you had no choice but to impersonate the President, order the arrest of most of the Cabinet, dissolve the Senate, and, as you said, ‘Stop talking and start retrieving the Omega Device,” many of us here today…
Jack Bauer: May I remind YOU, we did retrieve the Omega Device
Stuffy Senator: “As I was saying, your extra-constitutional actions to retrieve a device that,as you said while impersonating our President, could ‘disolve matter into its most elemental forms’…”
Bauer: “Rashid Ivanovskov Yamato had already used the Omega Device to destroy CTU!”
Stuffy Senator: “And may I remind you that when you are on trial for dissolving the Senate, in the Senate, it may be wise to show a little…”
(Doors fly open. FBI agent Tina Leans marches in, striding to the front of the committee room):
Stuffy Senator: What is the meaning of this!
Agent Leans: I’m sorry, Mr. Chairman. Mr. Bauer needs to come with me. We are in a financial crisis. Orders of the President.
Hour 2. Scene: The Offices of Mr. Dawhler Pound Yurrow, International Financier
Jack: *punching Mr. Yurrow* Where are the points? Last I looked, the stock market was at 14,000, now it’s at less than 8,000! Where are the points? What did you do with the money?
Mr. Yurrow: I don’t know what you are talking about!
Jack: *punching more forcefully* Don’t give me that. The financial system is in crisis, and we have audiotapes of you driving down the price of stocks. Where did you drive those prices too?!?
Mr. Yurrow: I’ll never tell you!
Jack: *roughly drops Mr. Yurrow to the floor, and menacingly picks up a Hostess Cupcake (TM)* Do you like Hostess Cupcakes (TM), Mr. Yororw?
Mr. Yurrow: Why… yes. Hostess Cupcakes (TM) are delicious! Why?
Jack: You won’t after this!
Hour 3. D.C. Headquares, International Committee for Counter-Proliferation of W.M.D.. Main vault.
Jack (flanked by FBI Agents): Open up your vaults! We know the Dow Joints points are in here!
Strange man in business suit: I can’t!
Jack: Why not?
Strange man: There was… an accident. Humans can no longer tolerate exposure to the lost points. It is… dangerous…
Jack: *angrily* What’s going on?
Strange man: We wanted to double our money… It was just business. But there was an accident.. The assets… they are toxic!
Jack: You’re under arrest!
Hour 4. FBI Building, Integgoration room. Mr. Yurrow and the Strange Man are handcuffed to each other.
Jack: How do I decontaminate the toxic assets?
Mr. Yurrow: I won’t talk until I get immunity from the President!
Jack: That will never happen. *punches Mr. Yurrow, turns to the Strange Man.* You, who are you, and how we do clean those assets?
Strange Man: I’m afraid you’ll have to listen to my colleague, Mr. Bauer. I’m Secretary of the Treasury Tim Geithner!
Hour 5. Office of the Director of the FBI
Secretary Geithner (on the phone): Yes, Mr. President. I am sure the only way to save the economy is to grant a Presidential Pardon to Mr. Yurrow. *nods head* (to Bauer): “The President agrees. Mr. Yurrow is a free man.”
Mr. Yurrow: Untie me!
(Jack Bauer grudgingly unties Mr. Yurrow)
Secretary Geithner (on the phone): Yes, Mr. President. I am sure the only way to save the economy, now that you have pardoned Mr. Yurrow for stashing 6,000 Dow Jones basis points in a radioactive locker, is to decontamine those assets. Yes, Mr. President. We must give Mr. Yurrow billions — perhaps trillions — more in guarantees, and he promises that he will try very hard not to do it again. … * nods * ( to Bauer). After this meeting, escort Mr. Yurrow to the Treasury Department. He has a couple of tons of money to pick up.
Mr. Yurrow: I knew I would win!
Bauer: *attempts to contain rage*
Secretary Geithner (on the phone): Yes, Mr. President. I am sure the only way to save the economy, now that you have pardoned Mr. Yurrow and printed billions of dollars, is to arrest Jack Bauer, a traitor to the United….
Bauer (leaps up): This can’t be! This isn’t change I can believe in!
(Bauer lunges at Secretary Geithner, but as he tries to throw a punch, his ring gets stuck in something).
Jack Bauer: “What… the?…”
(Secretary Geithner’s face is revealed to be a mask. Jack Bauer rips it off, reveleaing…)
Jack Bauer: Former Secretary of the Treasury Hank Paulson!
From CNBC, I gather that Goldman Sachs received $10 billion in TARP funds, and paid out $10 billion in bonuses.
Of course, the typical CNBC crew resorts to this news with shouts of ‘class warfare!,’ but I think there’s an interesting problem here.
I was under the impression that the TARP was to stabilize institutions whose failures were otherwise unavoidable and whose downfall would lead to massive jolts to the global economy.
Instead, it appears that Goldman Sachs faced a choice between going bust and perhaps losing those employees who could other jobs in this bad economy, and of course would face higher rates of employees quitting in the years ahead.
How “needed” are these TARP funds if the choice is not between bankruptcy and TARP, but between reduced marginal ability to retain staff and TARP?
Wall Street is one of the biggest campaign contributors to both parties, and the Street’s contributions have increased considerably over the last several election cycles. According to the Center for Responsive Politics, by the 2006 elections, Wall Street contributions to the Democratic Party had caught up with its rising contributions to Republicans.
Yet what’s happened to the Wall Street campaign contributions and to the lobbyists? They’re still going strong. We now know that many of the financial giants that have been bailed out by taxpayers continue to finance a platoon of Washington lobbyists, who are at this moment trying to influence TARP II and the next attempt to regulate Wall Street. In effect, your money and mine, and that of all other taxpayers, is paying these lobbyists to push Congress in a direction we have every reason to believe is not in our interests but in the continued interests of Wall Street. Citigroup, the recipient of $45 billion of taxpayer money so far, is still fielding “an army” of Washington lobbyists, according to the New York Times. Its lobbyists are working on a host of issues, including the bailout. In the fourth quarter of 2008, when it got its first infusion of bailout money, Citi spent $1.77million on lobbying fees. During the last three months of 2008, at least seven other firms receiving bailout funds (American Express, Capital One, Goldman Sachs, KeyCorp, Morgan Stanley, PNC and Bank of New York Mellon) lobbied the government about the bailout.
It is dangerous to the country that Washington is giving failed banks money with which to extract political favors from Washington.
Six months ago, if I would have been asked what the largest, most politically connected, corrupt, and insolvent banks were, I would have guessed names like Industrial and Commercial Bank of China, and China Construction Bank: not Citi and Bank of America.
It would be better to allow the banks to be nationalized than keep funding this aristocracy of pull.
The Bush-Pelosi Bailout, also called the TARP (Trouble Asset Relief Program), is not popular. The Bailout was passed because George Bush and Nancy Pelosi scared legislators legislatures into giving an unprecedented amount of power to the President during peacetime. We were told that unless we began buying subprime mortgages right now, the world financial crisis would end.
We are no longer in a financial crisis. LIBOR, the rate at which banks lend to each other, is at its lowest level in years. We are now in a bad recession, and we should allow our Constitution to work without the questionable manipulations of the Secretary of the Treasury.