You might recall that I wrote a blog expressing my suspicions when the $700 million bailout was passed by Congress and immediately signed into law by George W. Bush. Here’s what I said:
The more I think about it, the more convinced I am that some of that $700 billion authorized by Congress to bail out the financial system will be diverted to serve private interests. I am not an accountant, and I don’t know much about the complex world of derivatives. But I know how to Google “Goldman Sachs.” And I found the investment bank was in dire distress before the bailout package was approved by Congress…
I went on to remind readers of the connections Treasury Secretary Hank Paulson (photo at right) and his associates have with the very banks they were supposed to be bargaining with, and I mentioned that this situation looked a lot like the Savings & Loan looting of the late 1980s, which cost $1.4 trillion. So I was not surprised to read a report today by The Nation’s William Greider, titled: “Paulson’s Swindle Revealed.” Greider points out that:
Paulson agreed to invest $125 billion in the nine largest banks, including $10 billion for Goldman Sachs, his old firm. But, if you look more closely at Paulson’s transaction, the taxpayers were taken for a ride – a very expensive ride. They paid $125 billion for bank stock that a private investor could purchase for $62.5 billion. That means half of the public’s money was a straight-out gift to Wall Street, for which taxpayers got nothing in return.
The veteran reporter noticed the same thing I did, that “Paulson’s bailout staff is heavily populated with Goldman Sachs veterans and individuals from other Wall Street firms.” And he wondered whether they have fully divested their Wall Street holdings. “Were they perhaps enriching themselves as they engineered this generous distribution of public wealth to embattled private banks and their shareholders?” he asked.
Leo W. Gerard, president of the United Steelworkers, raised these questions in a letter to Paulson this week. The union’s finance experts vetted the terms of the bailout investment and calculated the real value of what Treasury bought with the public’s money. In the case of Goldman Sachs, the analysis could conveniently rely on a comparable sale 20 days earlier. Billionaire Warren Buffett invested $5 billion in Goldman Sachs and bought the same types of securities – preferred stock and warrants to purchase common stock in the future. Only Buffett’s preferred shares pay a 10 percent dividend, while the public gets only 5 percent. Dollar for dollar, Buffett “received at least seven and perhaps up to 14 times more warrants than Treasury did and his warrants have more favorable terms,” Gerard pointed out.
“I am sure that someone at Treasury saw the terms of Buffett’s investment,” the union president wrote. “In fact, my suspicion is that you studied it pretty closely and knew exactly what you were doing. The 50-50 deal – 50 percent invested and 50 percent as a gift – is quite consistent with the Republican version of spread-the-wealth-around philosophy.”
Not spread the welath around; spread the wealth up. The “little people” get a little piece of the pie and the big shots get a big piece of the pie. That seems only fair to people like George W. Bush and John McCain.
There’s more. Leo Gerard told Paulson: “If the result of our analysis is applied to the deals that you made at the other eight institutions…. you paid $125 billion for securities for which a disinterested party would have paid $62.5 billion. That means you gifted the other $62.5 billion to the shareholders of these nine institutions.”
If the same rule of thumb is applied to Paulson’s $700 billion bailout fund, Gerard said this will constitute a gift of $350 billion from the American taxpayers “to reward the institutions that have driven our nation – and it now appears the whole world – into its most serious economic crisis in 75 years.”
I knew this bailout gimmick was another huge heist, just like the Savings & Loan job two decades ago.
And don’t forget, McCain and the Bush clan (photo at right: (L-R) Neil, George W., George H. W., and Jeb) were mixed up in that story. I’m sure I don’t need to recount the scandal involving McCain and a crook named Charles Keating, but you may not be aware that Jeb and Neil Bush reaped huge profits by defaulting on loans. And the Reagan-Bush Administration covered up the situation by reducing the number and depth of examinations required of S&Ls as well as attacking political opponents who sounded early alarms. Information on the impending S&L bailout was kept from the media until after Bush won the 1988 elections. (You can find a detailed account on the Internet – at:
I can’t help wondering who is really behind this latest rip-off, and how much more they’ll trick Congress into shelling out before it’s all over.
I know this financial stuff is complicated and everybody is caught up in the excitement of the elections, but as Greider says, the people running the country must take action to stop taxpayers from being fleeced this time. “Is anyone angry?” Greider asks. I don’t know about you but I’m mad as hell and I don’t think we should take this abuse any more. You might want to call your Congressman and mention Greider’s article, for one thing.