The Secret $7.77 Trillion Bailout

[blueduck37.livejournal.com]

Apologies if this story was posted here already; I couldn't find a post on it.

Now we've all heard the lie statement that the Tea Party began as a cultural backlash to a new President, who to conservatives was the face of a changing America that scared them protest and backlash to the 2008 TARP program even though no conservative protests occurred until early 2009.

So I assume they will join Occupy Wall St in demanding major changes to Wall St and our banking system after Bloomberg News' big story about a shadow bailout that was occurring, via the Federal Reserve. They gained this info through the invaluable Freedom of Information Act. As the article notes, "It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year."

The article discusses how this "secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger."

To me, the most anger-inducing facts are the lies and deception that surrounded this, from the Wall St. end. We learn that Wall St firms lied to investors (pretending to be healthy, while this was going on), as well as to Congress, who passed a weak reform bill with bad information.

For instance, we learn that-

Bankers didn’t disclose the extent of their borrowing. On Nov. 26, 2008, then-Bank of America (BAC) Corp. Chief Executive Officer Kenneth D. Lewis wrote to shareholders that he headed “one of the strongest and most stable major banks in the world.” He didn’t say that his Charlotte, North Carolina-based firm owed the central bank $86 billion that day.
....

JPMorgan Chase & Co. CEO Jamie Dimon told shareholders in a March 26, 2010, letter that his bank used the Fed’s Term Auction Facility “at the request of the Federal Reserve to help motivate others to use the system.” He didn’t say that the New York-based bank’s total TAF borrowings were almost twice its cash holdings or that its peak borrowing of $48 billion on Feb. 26, 2009, came more than a year after the program’s creation.

And that-

New York-based Morgan Stanley (MS), took $107 billion in Fed loans in September 2008, enough to pay off one-tenth of the country’s delinquent mortgages. The firm’s peak borrowing occurred the same day Congress rejected the proposed TARP bill, triggering the biggest point drop ever in the Dow Jones Industrial Average. (INDU) The bill later passed, and Morgan Stanley got $10 billion of TARP funds, though Paulson said only “healthy institutions” were eligible.

Free market!

Multiple Senators are quoted as saying “We didn’t know the specifics," which is great for a democracy. It notes that having all of the information of what was really going on would have likely resulted in a different (stronger?) Wall St reform bill. As it is, it doesn't really fix anything. Too big to fail still exists, etc.

If news about a secret bailout and its surrounding deception doesn't spur any action for real change, nothing will. This is why many in the OWS movement feel the system is hopeless. And that's not good for democracy either.

[PS- Bloomberg News also has another great story about how, as Bush's Treasury Secretary, Hank Paulson passed on insider info to his hedge fund friends.]

Comments

[politikitty.livejournal.com]

You reek of intellectual cowardice.

You scorn the Tea Party for not joining OWS, while refusing to consider collaberation with an organization that wants increased accountability for the Fed. If you refuse to stand with libertarians, it's not hard to understand why libertarians and other conservatives might refuse to stand with you. If you like the increased polarization in politics, fine. But it's hypocritical to call out the Tea Party for their contribution to partisan polarization, when you refuse to even entertain an alliance with another party because they hold a position on an unrelated issue.

You cheerlead the_rukh's bizarre argument about the problem being lobbying, when the Fed is actually well insulated from lobbyists. You pull the Fed back into the democratic process, you might decrease regulatory capture, but you increase lobbyists. I would think you would notice the tug of war inherent in that argument. But no. You push for the politicization of the Fed with absolutely no respect for the historical reasons it was created as an independent agency.

You can't even bring yourself to understand why a libertarian believes what they do. They don't think people are magic and don't do any wrong ever. Instead they think that regulation increases the cost of market entry, which leads to fewer but larger oligopolistic firms. Regulation is unlikely to work due to either regulatory capture or government officials who do not have enough experience to forsee pitfalls. So when things go wrong (and it's the market, firms inevitably fail all the time, just like people fail or water is wet), the harm is much worse than if we had kept the firms small with less influence in the market.

They don't think that socialism is bad because of COMMUNISTS OMG. They believe that government intervention is bad because, you know, it actually impoverishes people. Which is a good reason to be against something. I don't care what Jeff believes. Using him as an easy way to dismiss a group of people because you don't agree with them (except when you do) is, again, cowardice.

Barack Obama is only now starting to warm up to gay rights. Bill Clinton signed DOMA. Almost a third of Democrats are pro-life. (I can't find a poll on same sex marriage which includes party ID) You stand with bigots who have backwards views on social issues already. You just look the other way and hope people won't point it out.

[blueduck37.livejournal.com]

You reek of intellectual cowardice.


That's my deodorant actually. Sorry about that.

You scorn the Tea Party for not joining OWS, while refusing to consider collaberation with an organization that wants increased accountability for the Fed.

I want that accountability too. But, frankly, that's the only area of the economy that the Tea Party wants accountability. Wall St, corporations, companies that pollute, etc... all should be left to their own devices, they say. I'm not going to give credit to a movement with which I disagree 90% of the time because their central banking conspiracy fears happen to match up with my concerns about the Fed, or because Ron Paul also opposes the wars. Stuff like Social Security, workers rights, EPA regs, etc etc... they are important to me.

Instead they think that regulation increases the cost of market entry

They believe that government intervention is bad because, you know, it actually impoverishes people.

These are talking points.

You can come out of the (conservative) closet now. I came out of a closet once. It's very empowering.

PS- Yes, Democrats like Obama or Clinton have mixed records on social issues. But if your claim is that there's no difference on gay rights or a woman's right to choose or issues like that between, say, Barack Obama and Ron Paul, then I cannot take that seriously.

[politikitty.livejournal.com]

Right.

So you have a fundamental disagreement with both the Tea Party and libertarians. So you shouldn't expect them to join OWS. It's a cheap shot to feign surprise that the Tea Party won't join OWS. Neither side is interested in a narrow campaign to end Fed intervention and get money out of Washington. They're too enmeshed with the larger partisan argument of whether the solution is more government or less.

Stop trying to pretend that they're more partisan than you because they won't approach OWS for collaboration.

My claim is that George Wallace was more liberal on race issues than most Democrats in 1958, gaining the endorsement of the NAACP and decrying the KKK. It wasn't his personal views that made him endorse segregation. It was the will of the people. The backbone of the Democratic party is increasingly minority. While that might not matter for gay rights, which has the next generation supporting it regardless of race OR party, it certainly does for abortion. It's highly plausible that in 20 years the majority of the Democratic party will not support abortion.

The people you stand with who are bigots (voters, not Barack Obama) might get to lead the party. That's the point. Right now people for whom bigotry is their biggest issue, the Republican party is the only game in town. And that doesn't hurt us much because a lot of bigots don't actually have gay marriage or abortion as their TOP issue. But again, the idea that Democrats are guaranteed to be the party against bigotry is absurd and goes against all history.

I've been pretty open that I'm a Democrat who's for free markets. Have you only just now noticed my views? I'm sorry that I don't change my opinions when it's politically convenient. But considering Democrats haven't exactly clamored to OWS, I don't think it's proof positive that I'm a closet conservative.

[blueduck37.livejournal.com]

My claim is that George Wallace was more liberal on race issues than most Democrats in 1958, gaining the endorsement of the NAACP and decrying the KKK. It wasn't his personal views that made him endorse segregation. It was the will of the people. The backbone of the Democratic party is increasingly minority.

Oy!

You insisting that the Democratic Party wasn't the party that was liberal on race issues is just as silly as implying that there's no difference between the Dems and the GOP on, say, gay rights because Clinton signed DOMA... or because since Obama was slow on the gay rights victories he's achieved and is fighting for he's somehow on the same level as the GOP which insists gay marriage will destroy American values.

While I would never make any apologies for the Southern Democrat racists of the old Jim Crow era and acknowledge that is part of the party's history, I'm pretty sure that it was Democratic Presidents like JFK and Johnson who pushed for, and then achieved, the Civil Rights Act which brought an end to Jim Crow (and is a law that the GOP opposed then and which Tea Party conservatives like Rand Paul, etc, insist even now was bad for freedom). I'm pretty sure it was Democratic President Johnson who passed the Voting Rights Act. And I'm pretty sure that it was conservative magazines like the National Review, which were publicizing editorials stating "the central question that emerges... is whether the White community in the South is entitled to take such measures as are necessary to prevail, politically and culturally, in areas where it does not predominate numerically? The sobering answer is Yes – the White community is so entitled because, for the time being, it is the advanced race."

To pretend that those facts don't matter because George Wallace's history is complicated or something is silly.

But again, the idea that Democrats are guaranteed to be the party against bigotry is absurd and goes against all history.

And if a time comes when the GOP becomes a party that supports social progress, environmental issues, labor rights, and progressive economics, I'll become a Log Cabin Republican. But that's a hypothetical.

I've been pretty open that I'm a Democrat who's for free markets. Have you only just now noticed my views?

Nope. I've known for a while. Heck, I can remember back in 2007 (http://ljdemocrats.livejournal.com/2509514.html) arguing w/ you over the minimum wage.

My point is a) you're not really a liberal (you're a conservative Democrat like a Ben Nelson... right-wing on fiscal stuff; mostly liberal on social concerns); and that b) the way you are portraying Democrats is based on a strawman.

For instance, you say: "I'm a Democrat who's for free markets"

This implies that Democrats are not for free markets. A regulated free-market is still a free market. Is it a market not free if labor has certain rights and groups with which to have a more level field against the power of their bosses? Is a market not free if it has environmental laws to keep our air, water, and communities clean and safe? Is a market not free if laws like (the now gone) Glass-Steagall Act keep a banking system from getting dangerously large? Is a market not free if there are agencies which oversee it to prevent and punish abuses?

The modern GOP insists that such a market ISN'T free, and you seem to agree. I do not. Now, you are free to believe to want whatever kind of economy you want, but don't claim that we don't believe in free markets.