Where'd the bailout money go? Shhhh, it's a secret

[baseline bum]

http://news.yahoo.com/s/ap/20081222/ap_on_bi_ge/meltdown_secrets

WASHINGTON – It's something any bank would demand to know before handing out a loan: Where's the money going? But after receiving billions in aid from U.S. taxpayers, the nation's largest banks say they can't track exactly how they're spending the money or they simply refuse to discuss it.

... rest of the article available from the link above




(Scott) Garrett, the New Jersey congressman, said the nation might never get a clear answer on where hundreds of billions of dollars went.

"A year or two ago, when we talked about spending $100 million for a bridge to nowhere, that was considered a scandal," he said.

:pctoss

[boutons_]

As always, anything in dubya's deranged world touched by dubya's cronies, crooks, and bunglers ends up totally fucked

There's lots of ideological house-trashing going on at EPA, etc as dubya's goons use their last days in office to trash govt, workers' rights and protections, the environment, whatever they can find.

Paulsen looting the Treasury for $700B is just more house-wrecking as the dubya goons throw their last ideologically drunken frat keg party.

Remember Paulsen's original 3-pager was:

"Give me $700B,

Give it to me in 7 days or my finnancial cronies will destroy the country,

and

make me and the $700B beyond the reach of the courts and Congress"

==============

http://graphics8.nytimes.com/images/misc/logoprinter.gif (http://www.nytimes.com/)

December 21, 2008
Economic View

Missing the Target With $700 Billion
By ALAN S. BLINDER

“First you say you do, and then you don’t. And then you say you will, and then you won’t. You’re undecided now, so what are you gonna do?”
— “Undecided,” by Sid Robin and Charlie Shavers

UNFORTUNATELY, Treasury Secretary Henry M. Paulson Jr. (http://topics.nytimes.com/top/reference/timestopics/people/p/henry_m_jr_paulson/index.html?inline=nyt-per) has turned this old song into the unofficial theme of the Troubled Assets Relief Program, the $700 billion bailout (http://topics.nytimes.com/top/reference/timestopics/subjects/c/credit_crisis/bailout_plan/index.html?inline=nyt-classifier). His frequent changes of direction are not only embarrassing, they also upset the very markets this program was designed to calm.

It pains me to say this, because I was among the first to call upon Congress to create two institutions to deal with the financial crisis (http://topics.nytimes.com/top/reference/timestopics/subjects/c/credit_crisis/index.html?inline=nyt-classifier): one to buy and refinance home mortgages, the other to buy what came to be called “troubled assets.” The legislation signed in October empowered the TARP to do both. Sadly and amazingly, it has done neither.

Regarding mortgages, Mr. Paulson is in a tong war with Sheila C. Bair (http://topics.nytimes.com/top/reference/timestopics/people/b/sheila_bair/index.html?inline=nyt-per), chairwoman of the Federal Deposit Insurance Corporation (http://topics.nytimes.com/top/reference/timestopics/organizations/f/federal_deposit_insurance_corp/index.html?inline=nyt-org), who wants to deploy a small fraction of the TARP money to refinance millions of mortgages. Her plan may not be perfect — whose is? — but she’s pushing in the right direction. But he, apparently, disagrees and has devoted no money to this purpose.

Regarding mortgage-related securities — the “troubled assets” themselves — Mr. Paulson stunned markets on Nov. 12 by announcing that he wouldn’t spend a dime on that purpose, either. Oh? As one of my students asked me the next morning, shouldn’t they at least change the name?

Instead, taxpayer money has been used mainly to recapitalize ailing banks. To be sure, this use of the TARP is perfectly legal. The legislation gives the secretary broad authority to buy “any other financial instrument” that he deems “necessary to promote financial market stability.” That certainly includes buying bank stock.
The question is not one of legality, but of judgment. Old-fashioned believers in democracy may recall that a reluctant Congress was sold on the idea of buying troubled assets, not on injecting capital into banks. No wonder members are crying foul.

In fairness, Mr. Paulson was not alone in advocating capital injections. Many economists and financial experts agreed. But I doubt that many of them intended for the government to buy preferred stock with no control rights, at above-market prices and with no public-purpose strings attached. The automakers are not being treated this way in their $13.4 billion loan.

Because about half of the $700 billion remains uncommitted, let’s review the arguments supporting the three main uses of the TARP:

MORTGAGES The financial crisis began with falling home prices and fears of rampant mortgage defaults — fears that are now coming true. Those fears depressed the values of securities based on mortgages, making them “troubled.” Foreclosures are painful and costly events that destroy real estate values and force fire sales of homes — which depress prices further. It is hard to see a way out of this mess without seriously reducing foreclosures. Understanding that, Congress directed the Treasury secretary to use the TARP to get mortgages refinanced. But he has not.

MORTGAGE-RELATED SECURITIES There were several rationales for buying troubled mortgage-backed securities.

First, panic had virtually shut down the markets for these securities — markets that must be restarted to restore our system of mortgage finance.

Second, one source of that panic was that nobody knew what the securities were worth. A functioning market would establish objective valuations.

Third, many mortgages are buried in complex securities. Buying the securities would let government refinance the underlying mortgages.

Mr. Paulson says he changed his mind about buying troubled assets because the facts changed. I’m sure that many facts changed. But what new facts invalidate the rationales above?

Furthermore, there are clear synergies among the main uses: Buying mortgage-backed securities helps the government acquire mortgages to refinance, refinancing mortgages to avert foreclosures enhances the values of these securities, and both policies support the one position that Mr. Paulson has embraced wholeheartedly, bolstering the finances of banks.

RECAPITALIZING BANKS Granting the secretary catch-all authority to buy “any other financial instrument” was a sensible addendum to the law. It offered much-needed flexibility to respond to unforeseen circumstances — an auto bailout, for example. But whoever imagined that the addendum would consume nearly all the TARP money, leaving nothing for its two stated purposes?

But suppose you believe (though I don’t) that recapitalizing banks was the best use of all the money. Even then, the secretary’s execution leaves much to be desired. Never mind the lack of transparency and the management issues recently cited by the Government Accountability Office (http://topics.nytimes.com/top/reference/timestopics/organizations/g/government_accountability_office/index.html?inline=nyt-org).

Think about this:

Treasury has bought preferred stock with no control rights. The 5 percent dividend rate that taxpayers will generally receive is half what Warren Buffett (http://topics.nytimes.com/top/reference/timestopics/people/b/warren_e_buffett/index.html?inline=nyt-per) got from Goldman Sachs (http://topics.nytimes.com/top/news/business/companies/goldman_sachs_group_inc/index.html?inline=nyt-org). Banks receiving capital injections through the front door are generally allowed to pay dividends out the back door. And there are no public-purpose quid pro quos, such as a minimal lending requirement. So banks can just sit on the capital, which is what most of them have done, or use it to make acquisitions, as a few have.

Clearly, Mr. Paulson bent over backward to make the terms attractive to banks. He contended that wide participation was essential in order to avoid stigma. To that end, he even forced money on several bankers who didn’t want it. Naturally, the strong banks that didn’t want the money made that fact known to the markets immediately. Throwing taxpayer money where it was not needed wasted a precious resource.

So here we are, looking at an all-too-familiar story. The administration that brought you the Iraq war and the Katrina response is locking in another disaster before it leaves town. What to do?
Fortunately, the TARP legislation authorized a first tranche of $350 billion but wisely gave Congress a mechanism for blocking release of the second $350 billion. With the first tranche now committed, Mr. Paulson said he would soon request release of the second. Based on his performance to date, Congress should reject that request unless he agrees to spend most of the next installment on TARP’s two stated purposes.

Failing that, we can wait a month for the new Treasury secretary, Timothy Geithner.

===============

http://www.nytimes.com/2008/12/21/business/economy/21view.html?sq=missing%20the%20target&st=cse&scp=1&pagewanted=print

The Big Lie from the Financial Sector is that That Nobody Knew, and that the financial meltdown was a like Katrina, an Act of God that was not forseeable. They're lying, because many people, some back in the 90s, and certainly during the housing bubble, saw what was happending, and foresaw exactly what did happen.

The other Big Lie is that regulation can never prevent someone as clever as a Madoff, that crooks will always outsmart regulation, therefore NO REGULATION is needed. But again, people were calling Madoff a Ponzi scheme many years ago, and the SEC simply shrugged it off.

America is corrupt to the core and rigged/owned by capitalists and corps to their exclusive benefit.

[Extra Stout]

Any halfway-decent country would have left those bankers swinging at the gallows weeks ago.

[LnGrrrR]

http://news.yahoo.com/s/ap/20081222/ap_on_bi_ge/meltdown_secrets

WASHINGTON – It's something any bank would demand to know before handing out a loan: Where's the money going? But after receiving billions in aid from U.S. taxpayers, the nation's largest banks say they can't track exactly how they're spending the money or they simply refuse to discuss it.

... rest of the article available from the link above
:pctoss

Which is why I was against the bailout... as should have been anyone else who has read anything on politics in the last eight years. At least this time it's Republicans who are pissed off at the "It's an emergency! Do everything we say or else you are DOOOOOMMMMMMED!" tactic. lol

[Rohirrim]

I'm shocked.

[Blake]

hey, the CEOs need the 1 month long vacation packages that come complete with full body massages and hookers.

It's hard work trying to lobby for money they didn't earn. Get off their backs.

[smeagol]

No bailout = total meltdown of the American society (including boutons)

[Winehole23]

No bailout = total meltdown of the American society (including boutons)"Henny Penny, the sky is falling, the sky is falling!"

American society didn't melt down during the deflationary thirties. Why assume it would now? So we can bailout the greedy pirates who ran our economy into the rocks without any oversight or accountability?

Good plan.

[smeagol]

"Henny Penny, the sky is falling, the sky is falling!"

American society didn't melt down during the deflationary thirties. Why assume it would now? So we can bailout the greedy pirates who ran our economy into the rocks without any oversight or accountability?

Good plan.

American society cannot do without a banking system. It would be total caos. Society would disappear.

[Wild Cobra]

American society cannot do without a banking system. It would be total caos. Society would disappear.
The whole banking system was not in trouble. Only a few big ones. We should have let them fail, and let the little guys who did things right, take their places as top dogs!

I was for having the government back the smaller banks to give loans. Not throwing more money at then banks who had poor busness practices.

[Winehole23]

The whole banking system was not in trouble. Only a few big ones. We should have let them fail, and let the little guys who did things right, take their places as top dogs!

I was for having the government back the smaller banks to give loans. Not throwing more money at then banks who had poor busness practices.This was the RTC approach during the S&L bailout. Separate the banks into good and bad, then help the good and liquidate the bad. I wonder why that's not what we're doing now.

Maybe the USG is afraid their major political contributors will melt down, and is preserving the rentier class at an unprecedented cost on our dime.

[Wild Cobra]

Maybe the USG is afraid their major political contributors will melt down, and is preserving the rentier class at an unprecedented cost on our dime.
That's the way I see it. Congresses rich friends will go bankrupt, then they won't be able to funnel the money back to them for elections!

[Winehole23]

That's the way I see it. Congresses rich friends will go bankrupt, then they won't be able to funnel the money back to them for elections!Well, now they will. The USG can buy loyalty with bailout funds and compliance by withholding them. Conflict of interest is built into anything this big that isn't monitored and measured.

[smeagol]

All the big banks were (are) in trouble and most of the small ones too. When 75-80% of Americans start pulling their deposits from JPM, Citi, Wachovia, BoA, etc, that would've been basically caos, regardless of First Bank of Honolulu being sound.

You guys need to be realistic. Government intervention is the best of two evils.

[baseline bum]

All the big banks were (are) in trouble and most of the small ones too. When 75-80% of Americans start pulling their deposits from JPM, Citi, Wachovia, BoA, etc, that would've been basically caos, regardless of First Bank of Honolulu being sound.

You guys need to be realistic. Government intervention is the best of two evils.

Not government intervention with no strings attached and no accountability.

[Winehole23]

Not government intervention with no strings attached and no accountability.Yep. I love how there's always someone out there who says the jack-assed way our government is doing things now is the ONLY REASONABLE OPTION.

For the record, I am in favor of an RTC-style audit prior to disbursement, with tracking and oversight afterward.

[xrayzebra]

All the big banks were (are) in trouble and most of the small ones too. When 75-80% of Americans start pulling their deposits from JPM, Citi, Wachovia, BoA, etc, that would've been basically caos, regardless of First Bank of Honolulu being sound.

You guys need to be realistic. Government intervention is the best of two evils.

Yeah socializing banks is good. Wonder where there backbone was
when they wouldn't tell Washington to suck a lemon when told to
loan money to deadbeats. Or telling Bush and company to go suck a lemon
when they told the biggies that they were going to sign or not leave
the room.

Not all banks are in trouble. Many locals are doing quite well, thank you.
They stayed out of the crapola that Barney, Dodd, Fannie and Freddy

And now we are hearing rumblings of new mortgage activity starting.
Hmmmmm, you gotta wonder.
were peddling.

[LnGrrrR]

Yep. I love how there's always someone out there who says the jack-assed way our government is doing things now is the ONLY REASONABLE OPTION.

For the record, I am in favor of an RTC-style audit prior to disbursement, with tracking and oversight afterward.

No, but if you've watched Congress for the past few years you would've known them too incompetent and spineless to build real oversight into it. Even if they built it, they'd just crumble if the President said he wasn't going to follow the rules.

[smeagol]

Not government intervention with no strings attached and no accountability.

Agreed.

[Winehole23]

No, but if you've watched Congress for the past few years you would've known them too incompetent and spineless to build real oversight into it. Even if they built it, they'd just crumble if the President said he wasn't going to follow the rules.I hate it that you're right about this.

If Congress grew a spine, they'd end up with political responsibility they don't want. Look at the auto bailout: the Dems wanted to save Detroit, but in the end were content to let Bush take the hit for it, even though he usurped Congress's authority to make it happen.

Same with the TARP. Congress is content to let it be a plaything for Bush and King Henry.

[DarkReign]

Any halfway-decent country would have left those bankers swinging at the gallows weeks ago.

QFT

[Winehole23]

Any halfway-decent country would have left those bankers swinging at the gallows weeks ago.


Every normal man must be tempted at times to spit on his hands, hoist the black flag, and begin to slit throats