The Final Countdown

[Spacecadet]

Have you and NickyG ever thought about getting together? You could visit each others' bunkers and discuss strategies for overthrowing the government

and make lots of little Nicky Scrutinisers

[DiscoStu]

Lots of drivel

Have you and NickyG ever thought about getting together? You could visit each others' bunkers and discuss strategies for overthrowing the government

[oracleslave]

http://www.rabble.ca/columnists_full.shtml?x=77090

I made it to the 3rd line before my confused vacuous stare that I normally reserve for boring meetings took over and I gave up.

[Central-Scrutiniser]

Observation - Politcs/Econmics Subject - Plunder of USA Taxpayers Money


In the final days of the election, many Republicans seem to have given up the fight for power. But that doesn't mean they are relaxing.

If you want to see real Republican elbow grease, check out the energy going into chucking great chunks of the $700 billion bailout out the door. At a recent Senate Banking Committee hearing, Republican Senator Bob Corker was fixated on The Bailout: Bush's Final Pillage Economic Policy

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When European colonialists realized that they had no choice but to hand over power to the indigenous citizens, they would often turn their attention to stripping the local treasury of its gold and grabbing valuable livestock. If they were really nasty, like the Portuguese in Mozambique in the mid-1970s, they poured concrete down the elevator shafts.

The Bush adminsitration prefers bureaucratic instruments: "distressed asset" auctions and the "equity purchase program."

But make no mistake: the goal is the same as it was for the defeated Portuguese--a final frantic looting of the public wealth before they hand over the keys to the safe.

How else to make sense of the bizarre decisions that have governed the allocation of the bailout money?

When the Bush administration announced it would be injecting $250 billion into America's banks in exchange for equity, the plan was widely referred to as "partial nationalization"--a radical measure required to get the banks lending again.

In fact, there has been no nationalization, partial or otherwise. Taxpayers have gained no meaningful control, which is why the banks can spend their windfall as they wish (on bonuses, mergers, savings...) and the government is reduced to pleading that they use a portion of it for loans.

What, then, is the real purpose of the bailout?

I fear it is something much more ambitious than a one-off gift to big business--that this bailout has been designed to keep pillaging the Treasury for years to come.

Remember, the main concern among big market players, particularly banks, is not the lack of credit but their battered share prices. Investors have lost confidence in the banks' honesty, and with good reason. This is where Treasury's equity pays off big time.

By purchasing stakes in these institutions, Treasury is sending a signal to the market that they are a safe bet. Why safe? Because the government won't be able to afford to let them fail. If these companies get themselves into trouble, investors can assume that the government will keep finding more cash, since allowing them to go down would mean losing its initial equity investments (just look at AIG).


Now, with the new equity purchase program, Paulson has taken the discredited Fannie and Freddie model and applied it to a huge swath of the private banking industry. And once again, there is no reason to shy away from risky bets--especially since Treasury has not required the banks to give up high-risk financial instruments in exchange for taxpayer dollars.

To further boost confidence, the federal government has also unveiled unlimited public guarantees for many bank deposit accounts. Oh, and as if this wasn't enough, Treasury has been encouraging the banks to merge with one another, ensuring that the only institutions left standing will be "too big to fail." In three different ways, the market is being told loud and clear that Washington will not allow the country's financial institutions to bear the consequences of their behavior.

This may well be Bush's most creative innovation: no-risk capitalism.

There is a glimmer of hope. In answer to Senator Corker's question, Treasury is indeed having trouble dispersing the bailout funds. It has requested about $350 billion of the $700 billion, but most of this hasn't yet made it out the door. Meanwhile, every day it becomes clearer that the bailout was sold on false pretenses.

It was never about getting loans flowing.

It was always about turning the state into a giant insurance agency for Wall Street--a safety net for the people who need it least, subsidized by the people who need it most.

This grotesque duplicity is an opportunity. Whoever wins the election on November 4 will have enormous moral authority.

It can be used to call for a freeze on the dispersal of bailout funds--not after the inauguration, but right away. All deals should be renegotiated immediately, this time with the public getting the guarantees.

It is risky, of course, to interrupt the bailout.

The market won't like it.

Nothing could be riskier, however, than allowing the Bush gang their parting gift to big business--the gift that will keep on taking