Paulson, In Congress, With The Prepared Testimony
By Steve Hynd Friday Oct 03, 2008 1:00pmJonathan Schwarz at A Tiny Revolution tells a story I didn't know, one that would have made some difference to my opinions had I done so.
Back in 2000, when Hank Paulson was CEO of Goldman Sachs, he testified in front of the Security and Exchange Commission. Among other things, he lobbied the SEC to enact a "change to self-regulation" for Wall Street. He also urged them to change the "net capital rule" which governed the amount of leverage investment banks could use. The net capital rule was indeed changed in 2004, and is now blamed for the investment banks' collapse.
...Who murdered the American economy? It was the CEO, in the 13th Floor Conference Room, with the Prepared Testimony.
Paulson, in other words, was the point man for the finance industry's push to deregulate leverage rules, so that the big banks could increase their debt-to-net-capital ratios from 12 to 1 up to, in some cases, 40 to 1.
I had until now assumed that Paulson was nothing more than the usual run-of-the-mill right wing economist. "I'm alright, Jack". It appears he was far more dishonest to the American public than even that. He pushed then for the very thing that he knows now brought down the economy, and seems to have no intention of admitting this.
I've also been getting some schooling from my Newshoggers colleague Fester, who is a real brain on economic issues in a way I'm certainly not. He writes that the bailout:
...addresses a symptom, horrendously crappy balance sheets instead of the insolvency issues that permeate the global economy. The last of the cheap land and cheap oil booms created too many promises based on unreasonable premises and backed by wild policies and supported by skewed, perverse short term incentives. Those promises are failing because there is not enough money or reasonable accessible future income streams to maintain those promises.
This crisis is at its base an insolvency crisis, then a counter-party risk crisis, then a credit crisis and finally a balance sheet problem. We are addressing the top layer with crappy incentives. And that plan was put together in panic and haste without viable alternatives such as the Swedish model being advanced. So I don't think it will work.
And goes on to quote Ian Welsh at FDL, who also hates the "rescue" plan because, among other things, there's nothing to stop the big banks making new toxic waste to sell the Fed at prices they'll never get elsewhere. I think there's going to be a lot of that going on, but there's also going to be a smaller amount of bankers deciding they can make more money for themselves from using their own money to inject liquidity into the system than by letting the government do it at a cost in shares. That, on a far smaller scale than Fester or Ian or I would have liked, is the bit that will actually help unfreeze credit.
But still, like in the foreign policy arena which is my own favorite subject, there's a difference between "real" and "idealist" economics. Somehow, the Right always manages to put it's ideological fanatics in charge of policy with nary a murmur while the Left has to content itself with the "realists" who say we can't have what seems to us is obvious, that we're being "unrealistic".
It was obvious from word one that a plan that actually worked for the Common Man wasn't going to get backing on the Hill and even if by some miracle it did Bush would veto it. The financiers have not the least interest in your ass, it's all about theirs - and their $2 billion in bipartisan donations (44% to Dems, 56% to Repubs) since 1990 ensured that they were going to get theirs saved first.
Those who voted for the bailout have received consistently more from financial sector donations than those who didn't - in the case of House Dems by a massive margin.
In this election cycle, Democrats backing Treasury Secretary Henry Paulson's proposal have collected 78 percent more from the finance, insurance and real estate (or FIRE) sector than those in their caucus who opposed it and, over time, 88 percent more. In dollar figures, the 140 Democrats who supported the bailout proposal have received $792,744 over their careers from the FIRE sector and $188,572 in this cycle, on average. The 95 Democrats who voted against the bill have received $420,686 over their careers and $105,878 in the 2007-2008 cycle. (CRP's campaign finance data goes back to the 1990 election cycle, or the calendar year 1989.)
Given that, I always only pinned my hopes on Dems being slightly more moral and slightly less bought than Republicans - thus that Dems under pressure from the very few true progressive idealists would insist on including some handouts to the non-rich as part of a rescue plan that was always just for financiers. That's what happened and, it's very sad to say, that's as good as we're likely to get in the forseeable future.
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Watch Ralph Nader on any bailout here.
Paulson should be cuffed and perp walked.
For those who believe in the Sky Fairy who lives behind the clouds, I think that now would be a good time to really beg for some favors. As for the damned non-believers like myself, I dunno, we'll just have to see how this all plays out. But I have that gnawing knot in my stomach that tells me it ain't gonna be pretty.
I also find it hard to believe that this bailout isn't part of a final push toward the kind of "free-market paradise" that Milton Friedman and his acolytes have schemed for for decades. Bankrupting government, privatizing its functions, bankrupting its citizens to accustom them to these economic changes -- it's the shock doctrine in action. I think Naomi Klein's book is necessary to understanding what "our representatives" are doing to us.
How about a class-action lawsuit, every taxpayer should be included.
Neither Paulson or any other of the Wall Street idiots bet on the premise of their Ponzi like scheme being destroyed when home values declined. Instead, they bet on their own smug self righteousess and arrogance by assuming that home values would inevitably escalate and that meaningful oversight and sufficient financial reserves were unnecessary and in fact an impediment to stakeholder and investor return. Just trust us, they said, and all will be well and if yoiu still don't believe, we'll seduce you with the easy money that's available. Get on the gravy train, son, and profit now before it's too late.
Their gravy train and belief in inevitable escalation of value that drove their investment machine got derailed by the real world, which these greedy fools intentionally ignored. As the saying goes, past is prologue---and he who ignores history is doomed to repeat their folly. No lie stands forever, and people like Lehman, AIG, Bear Stearns, Indy Mac, etc simply got what they deserved---at taxpayer expense.
Paulson is Wall Streets hit man on the inside. Both he and Bernanke could have exercised their responsibility to protect the Treasury several years ago. They knew what was coming. The timing of this bailout was not a mistake. Not quite sure why we would focus on taking Paulson out now, he all ready robbed the bank. Unless we were going to put him on trial
http://salsa.democracyinaction.org/o/424/petition.jsp?petition_KEY=1414
Henry Paulson Must Go! No fox guarding the hen house!
Sign-up below to support ousting Henry "the fox" Paulson!
For 14 months, King Henry fiddled while our economy slowly burned. Then suddenly, Paulson told us if we don’t bail out his fat-cat buddies on Wall Street immediately—with $700 billion of our money and no strings attached—there would be a gigantic meltdown.
Oh, come ON...
Call my cynical and even misinformed, but from everything I've read, I've come to the conclusion that these types of financial "crises" are almost always ENGINEERED.
I believe these people are crooks, milking the wealth of the American people for all it's worth, then come along when "oops" things go bad, and have the miraculous insight to be able to "save" it again.
How convenient.
NYTs reports that $61B of an $85B guarantee has already been sucked dry from AIG's bailout...
http://www.nytimes.com/2008/10/04/business/04insure.html?_r=1&ref=busine...
"The American International Group said on Friday that it had already drawn down $61 billion of the $85 billion emergency bridge loan it received from the Federal Reserve two weeks ago, an announcement that startled credit ratings agencies.
What you are witnessing here good friends, is the pillaging of the piggy bank.
The money will be gone, very, very quickly.
The problems won't.
This is all about reimbursing the Saudis and Chinese who are holding worthless counterfeit money given to them by Bush. They are threatening to name names or dump their holdings. They want to be made whole with their worthless Fannie and Freddie bonds.
This is international subversion.
Remember, the people who pull the strings way up at the top are the *INTERNATIONAL* bankers.
Do you think they'll even blink before profiting immensely from this "crisis"? I'm extremely skeptical.
Still getting the people who caused the problem to provide the solution.
1) Create a problem.
2) Step in with "the" solution.
Impoverish, repeat.
NY Times article from 2 days ago covers the same territory:
NY Times (Oct 2 2008): Agency’s ’04 Rule Let Banks Pile Up New Debt
These capitalists could have invested in infrastructure, education, health care, alternative energy and made a respectable return on their dollar by financing these projects.
But instead they've played games with the money - OUR money - entrusted to them in the form of deposits, mortgages, insurance.
And they blew it - after they extracted their multi-million dollar payoffs.
Paulson got over half a billion.
Eric Hussein in Ottawa @ 8:
No doubt about it.
Scam, scheme, ripoff.
Create a bubble.
Suck all the cash you can from the bubble.
When it crashes go to the Treasury to bail out the mess.
Wait a few years.
Repeat.
See Stephen Labaton's story on this meeting in NYT datelined Oct. 2, 2008 (published yesterday's paper) Headlined "The Reckoning".
Also, it is the policy of Goldman Sachs to encourage its principals to move into public policy and public official positions after they have stayed 10 years and made loads of money. Paulson is the primary example. Also consider John Corzine (NJ governor), listen to NPR report on web.
dont worry! its okay! obamas going to vote against this and see they dont skin us! and . ooops never mind!
cheap credit and high leverage ratio was the catalyst
for this chain reaction. investors/investment banks went
hog wild buying these derivatives with more and more
borrowed money.
i'm not saying the people who took these loans shouldn't take some blame....but it's much more complicated than that, personally i feel it's being stretched. the real culprit is what's called the 'Shadow Financial System'..there is actually more money in derivatives than stocks. this dark system has no regulation....it's actually betting. they bet on the
subprime loans whether or not they would be paid on.
i saw an interview on cnbc of a guy who shorted the
subprime loans and made multi- millions. many investors bet wrong.
AIG was NOT acting like an insurance co. but as a
speculative investment bank/hedge fund. way too
much leverage/borrowing 25-30 times the amount of capital.
the problem is broad based from my reading....the housing element just part of the credit problem.
MountainMan23 @ 13:
Yes, this is easily the most damning report of the (rather large) lot.
So you are 'just now' figuring this out? Where have you been for the past 7 years? Since you admit to catching up catching on, please educate your candidates, Senator Barack Obama and Senator Biden
….I never heard anyone speculate that Obama might, against all the odds, rally to the “No to Bailout” cause. His Yes was pure. He told reporters in Clearwater, Florida last Wednesday that "issues like bankruptcy reform, which are very important to Democrats, is probably something that we shouldn't try to do in this piece of legislation." In addition, he said that his own proposed economic stimulus program "is not necessarily something that we should have in this package."
In the crunch, almost invariably, Obama does the wrong thing and in my opinion he always will. Just count out the moments of surrender: reauthorize the Patriot Act? Aye, from Obama. The “class action fairness act”, sought by Big Business for years. Aye from Obama. Capping credit card interest rates? No-o-o from Obama. FISA? Aye from Obama. With Robert Rubin at his side, his bailout vote was as sure as that of the harlot of the credit card companies, the six-term senator from Delaware, Joe Biden.
Normally, in these elections, one tries to peer forward into the future, to alert people to impending villainies, still dim in contour. Rare is it to have corrupt servility to the Money Power so brazenly displayed by the Democratic ticket merely a month before the ballot. We have just witnessed a class struggle where, for once, we had a huge popular coalition stretching all the way across the political spectrum. The coalition was there; the anger was there; the timing was perfect. “ The great appear great to us,” James Connolly wrote, “only because we are on our knees. Let us rise.” This time it was Paulson who was on his knees. Could not Obama, at this moment of extraordinary power, have extorted extraordinary concessions from these frantic bankers? He could, but he fled the task....
The only way to end this bi-partisan sell out is vote Green.
Too late now.. Our 'leaders' already passed the bill and it's been signed into law.. The crook Paulson now has unprecedented power.. Which 'leaders' ran with the idea and pushed to pass this??
From http://counterpunch.com/roberts10022008.html
No Shit!
This is what Ron Paul has been saying all along.
The Dems and Reps have both colluded in this. When will people realize this? 3rd Party time!
So how much financial burden does each individual shoulder now? About two million?
When they (I forget whether it was Paulson or Bernanke) were threatening that the economy would basically implode if this bailout plan was not passed, I got the distinct sense that someone was essentially holding the economic future of the US for ransom.
The Dems and the Re-thuglics ALL sold us down the river because they could. They don't give a god-damn about middle America.
They all have "I got mine" tattooed on their privileged asses.
*
tyree @ 16:
If he gets in, he'd better the hell do something to fix this.
*
Do not forget the media that sold us into this also! Last monday the media told us to be outraged that we'd have to bailout Wall Street. The bill failed, so the next day they don't really say bail out, they say rescue plan for Main Street!
Only now will we hear anything from the media about how bad this thing is, since it's already too late. This site included apparently..
this is a good interview with michael greenberger on
npr fresh air.....he expalins the 'betting' system that
went on in wall street financial institutions
http://www.npr.org/templates/story/story.php?storyId=89338743
Billy @ 21:
Precisely.
When a bank makes a modest profit from loaning money to a manufacturer, a farmer, a retailer, a home owner, THAT profit is in proportion to the REAL economy.
The obscene "profits" these financial institutions have been recording are all from churning the economy. Pump up a bubble then suck cash from the bubble until it crashes.
It is NOT profit from investment in the real economy.
Investment in the real economy could be managed by government bureaucrats earning modest government bureaucratic salaries.
Our national economy - like our national health care system - is too important to be entrusted to the private sector.
Eric Hussein in Ottawa @ 24:
With a ransom note that was no more than a couple of pages.
"Give us $700 Billion or the Economy crashes."
Trittydi @ 25:
Let's prevent double-dipping - tattoo it on their stinking foreheads !!
ok so what do us real people do ? get our money out of the bank ? get a gun ? what ?
big lenny in almaden @ 32:
I put mine in a credit union. I also own a gun.
Trittydi @ 26:
he will get right on it just you wait and see , soon as he settles in, maby even revisit his fisa vote , and reverse all them nasty votes he made , you betcha!
Jo @ 33:
Precious metals, like gold, will (obviously..) be going up.
But, please look before you leap. Due diligence is now more important than ever.
Josh @ 22:
Better yet, gathering ourselves to focus on and pass judgment upon those guilty, damaging individuals, independent of party affiliation. Then dismiss them in all areas of life. Void their purchase power by denying them service at all levels. Then they can group together in the dumps, live in makeshift shelters and cannibalize each other, as is their nature, and instead leave us alone to enjoy a life free of the burden of these cannibals-- R, D, 3rd party, where ever they are found.
I hope to see a wave of denial to these cannibals who eat human time, shortening our time for our earned hapiness. Guilty politicians don't have to go to jail, instead they are identified and blacklisted. Can't get served food or buy fuel. Because they will be locked into an internet social ostracism matrix, with faces and data posted like criminals are at the post office for lesser damaging individuals who ate human happiness on a lesser scale.
This is always going to be happening until the Fed is abolished and all banks are nationalized. The tail has been wagging the dog for far too long.
Bush wants to give Paulson more power than Ghengis Khan ever dreamed about.
At least if Ghengis really screwed up his gang would have strung him up. Democrats would be too polite.
Every one should go to their bank and close out their accounts now I bet that will get their attention
This is the NWO way.
BAILOUT BILL PASSED UNDER THREAT OF MARTIAL LAW VIDEO
http://www.disclose.tv/action/viewvideo/9738/Bailout_Bill_Passed_Under_T...
In House debate on the banker rescue bill, Rep. Brad Sherman told his fellow Congress critters the government will declare martial law and the stock market will drop 3,000 points if the bill is not passed.
The bailout plan is not only economic fascism, as Richard Viguerie has correctly noted, designed to loot the U.S. Treasury and reorganize and further consolidate elite control over the economy, but it is also a brazen effort to impose a martial law and dictatorship. Paulsons role as financial dictator, not answerable to Congress or the American people, fully compliments additional steps taken over the last few years.
As the Army Times reported last month, a battle-hardened homeland brigade is now going domestic after spending time in Iraq. It appears this illegal deployment (under Posse Comitatus) is designed to respond to public disorder as the economy is deliberately and cynically dismantled at the behest of our rulers who are now investing in the Treasury and the executive, with the complicity of Congress, dictatorial powers heretofore unheard of in America.
THE REAL REASON FOR THE BAILOUT
http://www.disclose.tv/action/viewvideo/9727/The_Real_Reason_For_The_Bai...
Its not about you. Its not about Main Street. Its not even about Wall Street.
No, its about Shanghai, London, Berlin and Sydney. And no, I'm not kidding.
USA OUTRAGED
http://www.disclose.tv/action/viewvideo/9728/USA_outraged___700_billion_...
Voters are rightly furious at the proposal to spend $700,000,000,000 that the government doesn't have to bail out Wall Street bankers who created the current economic crisis in the first place. But why then aren't we concerned about the trillions of dollars the Federal Reserve is pumping into the system? Or the trillions missing from the Pentagon? Or the quadrillion dollar derivatives bubble.
Anything that happened 5 seconds ago is Liberal Bias.
Paulson demanded de-regulation in order to bring about this exact fiscal devastation? Old News!
Historical context and background to any story is Liberal Bias. The ONLY way to avoid liberal bias is to present news in the most bare and immediate form possible.
Historical Fact = Liberal Bias!
Paulson isn't an economist.
I can't decide if that is good or bad.
I wonder how much of the bailout will get funneled back into campaign donations?
hmster @ 40:
Cry me a fucking river...
Josh @ 22:
I dunno, when is Paul going to put his money where his mouth is?
Cadaverous ghouls feeding off the taxpayers include Paulson, Cheney, Chertoff, Mukasey, Rove -- you can SEE it in their faces, the depth of the depravity. Then you've got the props and figureheads, all with appropriate masks altho those masks do slip...
The FBI is investigating Wall Street. Congress could call for the investigation of Paulson since they don't owe him anything any more, having handed over a mint of our blood sweat and tears!
Lawyers, where is the ultimate class-action Quo Warranto suit? Now is the time!
The 'rulers' of the America are Rapists.
Billy @ 35:
Yes, a heads up on buying precious metals. The only safe way to own the metals is to possess them. Gold is in less volume whether bullion or coins. Silver in bullion can be a little more bulky and the 90% junk silver (pre-65 coins) come in about 750 oz. bags.
If you buy on paper you may get screwed. There are plenty of good places to hide your stash. False walls in closets etc.
I think silver is a bargain now at about $11/oz. But if the company won't deliver, go elsewhere to buy.
Tyler Durden @ 45:
Ron Paul does put his money where his mouth is. He is a strict Constitutionalist who has millions invested in silver. "Only silver and gold coin shall be used for debts etc."
Abbybwood @ 49:
You obviously didn't quite understand the sarcasm of my comment.
Ron Paul talks a lot, but at the end of the day he is a good loyal GOP party member.
And BTW, how does a person that has worked for a few decades as a congressman justify having millions of dollars to invest on anything?
hmster @ 40:
Thanks for this post! I've been waiting for the real back story to come out... that the administration threatened congress to either do this bill or Bush would declare marital law and take control of the government under Executive Order #51.
Here you have a member of the House saying that is exactly what was going on.
This made a very brief ripple in the MSM and got quickly sucked out of the press. A lot of people don't know about this Executive Order that was issued by Bush:
http://en.wikipedia.org/wiki/Executive_Directive_51
The optimum phrase here is the definition of what a "national emergency" is:
Such an emergency is construed as "any incident, regardless of location, that results in extraordinary levels of mass casualties, damage, or disruption severely affecting the U.S. population, infrastructure, environment, economy, or government functions."
Bush always said his job would be easier if he was a dictator so he put together a plan to do it...
http://www.globalresearch.ca/index.php?context=va&aid=5816
Not only did he do it... he also has refused to let any member of congress see the "classified" portions of that plan including the ones with top security clearances... even the House of Representives Homeland Security Committee. Here is Congressman Peter DeFazio talking about this on the floor of congress when access to it was denied:
http://www.freepressinternational.com/2008/09/world-alert-congressman-de...
Tyler Durden @ 50:
Ron Paul talks a lot, but at the end of the day he is a good loyal GOP party member.
He'd have endorsed McCain if you were correct.
Brad @ 52:
He'd have endorsed McCain if you were correct.
I never talk economics with gynecologists!
hmster @ 40:
This clip from a few days ago (Sept. 30th) has a short piece of Brad Sherman speaking on CNBC:
http://www.youtube.com/watch?v=GqIFoBXGizc
Brad starts at 1:45 into the piece and speaks for 32 secs (all you really need to see, the whole thing is 9:31 long).
Tyler Durden @ 50:
And BTW, how does a person that has worked for a few decades as a congressman justify having millions of dollars to invest on anything?
It's my understanding the medical profession can be very lucrative.
Couple that income with Ron Paul's interest in economics, is it such a stretch to suggest maybe he might have made some wise investment decisions?
Or, that when you are over seventy years old, a few decades is not so insurmountable a time frame as you present?
The other problem with the Paulson-Pelosi plan is that to pay for his purchases, Paulson will create 700 billion dollars of new treasury bills. Investors are already running away from the money markets which trade business commercial paper and getting into treasuries for safety. The only counter to that trend is the low return on treasuries because too many people want them. Paulson's move by creating new treasuries will further tighten the credit squeeze on businesses and make the economic situation for main street worse.
Awesome post, Cernig.
As the taxpayers of America step in to help these assholes "de-leverage", it's important to know who helped them double down so radically.
another stunning aspect of this bill is the fact that the administration of doling out the funds
IS GOING TO BE OUTSOURCED. This is yet another step in the privatization of government
and is highly suspect imho.
What I don't understand is why red flags didn't go up everywhere when Paulson was okayed to develop a bailout plan. His being at the helm at Goldman-Sachs should have given everyone pause -- we should have known he was a big part of America's economic meltdown without knowing anything else about him. Haven't we learned our lesson yet? Bush never brings anybody on board who has any concern about American citizens at all -- he only knows cronies-in-lucre, incompetents, and thieves.
Tired of the mess @ 56:
Here are the problems with Paulson's Tarp Plan:
http://www.rgemonitor.com/roubini-monitor/253762/rge_conference_call_on_...
Some earmarks included in the Bailout Bill----
1.0 Wool research
2.0 Wooden arrows designed for use by children
3.0 Virgin Island and Puerto Rican Rum
4.0 Control of noxious and exotic weeds
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