Tag: Treasury Dept

Feeding Frenzy At Treasury

Well the NY Times has the article written by Mark Landler and David Kirkpatrick.

When the government said it would spend $700 billion to rescue the nation’s financial industry, it seemed to be an ocean of money. But after one of the biggest lobbying free-for-alls in memory, it suddenly looks like a dwindling pool.

Many new supplicants are lining up for an infusion of capital as billions of dollars are channeled to other beneficiaries like the American International Group, and possibly soon American Express.

Of the initial $350 billion that Congress freed up, out of the $700 billion in bailout money contained in the law that passed last month, the Treasury Department has committed all but $60 billion. The shrinking pie — and the growing uncertainty over who qualifies — has thrown Washington’s legal and lobbying establishment into a mad scramble.

The Treasury Department is under siege by an army of hired guns for banks, savings and loan associations and insurers — as well as for improbable candidates like a Hispanic business group representing plumbing and home-heating specialists. That last group wants the Treasury to hire its members as contractors to take care of houses that the government may end up owning through buying distressed mortgages.

The Congressional bailout law gave the Treasury broad authority to decide how to spend the $700 billion. Under the terms of the $250 billion capital purchase program announced last month, cash infusions are available to “qualifying U.S. banks, savings associations, and certain bank and savings and loan holding companies, engaged only in financial activities.”

That definition has grown to include private banks and insurers like Allstate and MetLife, which own savings and loans. It may also encompass industrial lenders like GE Capital and GMAC, the financing arm of General Motors, provided they win approval to reclassify themselves as a bank or savings and loan holding company.

Law and lobbying firms that specialize in government contracting fired off dispatches to clients and potential clients explaining opportunities in the new program. Capitalizing on the surge of interest, several large firms, including Patton Boggs; Akin Gump; P & L Gates; Fried, Frank, Harris, Shriver & Jacobson; and Alston & Bird, have set up financial rescue shops.

Like a shark feeding frenzy, lobbyists are scurrying around trying anything that will get a piece of the bailout pie.  And the people wait.

Where Has All The Money Gone?

Where has all the money gone?

Long time passing,

When will we ever learn?………..is that Bob Dylan I hear in the background?

In an unusually frank article published in Saturday’s New York Times, the newspaper’s economic columnist, Joe Nocera, reveals what he calls “the dirty little secret of the banking industry”–namely, that “it has no intention of using the [government bailout] money to make new loans.”

As Nocera explains, the plan announced October 13 by Treasury Secretary Henry Paulson to hand over $250 billion in taxpayer money to the biggest banks, in exchange for non-voting stock, was never really intended to get them to resume lending to businesses and consumers–the ostensible purpose of the bailout. Its essential aim was to engineer a rapid consolidation of the American banking system by subsidizing a wave of takeovers of smaller financial firms by the most powerful banks.

Nocera cites an employee-only conference call held October 17 by a top executive of JPMorgan Chase, the beneficiary of $25 billion in public funds. Nocera explains that he obtained the call-in number and was able to listen to a recording of the proceedings, unbeknownst to the executive, whom he declines to name.

“It is starting to appear,” the Times columnist writes, “as if one of the Treasury’s key rationales for the recapitalization program–namely, that it will cause banks to start lending again–is a fig leaf…. In fact, Treasury wants banks to acquire each other and is using its power to inject capital to force a new and wrenching round of bank consolidation.”

Early this month, he explains, “in a nearly unnoticed move,” Paulson, the former CEO of Goldman Sachs, put in place a new tax break worth billions of dollars that is designed to encourage bank mergers. It allows the acquiring bank to immediately deduct any losses on the books of the acquired bank.

In a nationally televised speech delivered September 24, in advance of the congressional vote on the bailout plan, Bush said it would “help American consumers and businessmen get credit to meet their daily needs and create jobs.” If the bailout was not passed, he warned, “More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account…. More businesses would close their doors, and millions of Americans could lose their jobs … ultimately, our country could experience a long and painful recession.”

One month later, the bailout has been enacted, and all of the dire developments–banks and businesses disappearing, the stock market plunging, unemployment skyrocketing–which the American people were told it would prevent are unfolding with accelerating speed.

While no serious measures are being proposed, either by the Bush administration, the Republican presidential candidate or his Democratic opponent, to prevent a social catastrophe from overtaking working people, the government is organizing a restructuring of the financial system that will enable a handful of mega-banks to increase their power over society.

Once again I ask, When will we ever learn?

Another Economic Stimulus Package

Lawmakers and officials moved toward forging a second fiscal stimulus bill after Federal Reserve Chairman Ben S. Bernanke endorsed the idea and the Bush administration dropped its opposition.

Bernanke warned legislators yesterday the credit crunch is “hitting home,” with Americans unable to get auto loans and companies denied cash, and recommended measures to help borrowers. White House Press Secretary Dana Perino said President George W. Bush was “open to the idea” of a new stimulus.

Bernanke told the Budget Committee yesterday that the danger of a “protracted slowdown” and a “weak” outlook for the U.S. economy into next year convinced him to support a new round of economic stimulus. A similar endorsement by Bernanke earlier this year helped clear the way for a $168 billion measure enacted in February.

The Bush administration is “open to the idea” of another economic stimulus package, though approval would depend on details drafted by Congress, Perino said. Proposals “put forward so far” by Democratic leaders in Congress “were elements of a package we did not think would actually stimulate the economy, so we would want to take a look at anything very carefully,” Perino said.

The first stimulus package will cost about $150 billion and then the bailout will cost more than $700 billion and now they may consider another package to assist the economy get back on its feet.  Wait a damn minute!  I was thinking that was what the first package was for and then the bailout were all suppose to get the economy rolling and now it will take more money?  Does anyone else smell a steaming pile of canine fecal matter?

Contractor Hired To Lead Bailout

The Bank of New York Mellon has been selected as the lead contractor in the government’s efforts to buy up toxic securities that have spawned fear in the financial markets, a mammoth task considered a key to the Treasury Department’s plan to restart the nation’s credit markets.

Under the contract announced yesterday, the bank will run the auctions used by the government to acquire the assets, including many linked to troubled mortgages. Bank of New York Mellon will then hold, track and value those securities.

A firm with a conservative business reputation and historic ties to the U.S. government, the bank is the custodian for $23 trillion in investments and has a lot of experience in financial auctions. Those attributes make it well-suited to the complex task it faces in the rescue plan, financial analysts said.

The contract award comes just a day after the Treasury Department compelled the Bank of New York Mellon to take a $2 billion infusion of federal cash in exchange for preferred stock. Eight other major banks were similarly strong-armed into joining the program.

Let me see, the bailout will be run by a group of people that owe their very existence to the government?  Sounds like a plan.  A bad plan, but at least they have a plan (sarcasm intended).

Who Is Neel Kashkari?

On October 6 US Treasury Secretary Henry Paulson named Neel Kashkari to head the Treasury’s new Office of Financial Stability (OFS). The OFS is charged with paying out $700 billion to Wall Street banks and other financial firms in exchange for their failed mortgage-backed assets, under the terms of the bailout signed into law by President Bush on October 3.

Kashkari’s identity is thus a matter of considerable public interest. Only 35 years old, Kashkari joined the Treasury in 2006 “as a Senior Advisor to US Treasury Secretary Henry M. Paulson,” according to his official Treasury Department biography. At the time, Paulson was giving up his job as CEO of Wall Street investment bank Goldman Sachs to join the Treasury.

The biography continues, “Prior to joining the Treasury Department, Mr. Kashkari was a Vice-President of Goldman Sachs & Co. in San Francisco, where he led Goldman’s IT Security Investment Banking practice, advising public and private companies on mergers and acquisitions and financial transactions.”

Despite his high rank, Kashkari has only a few years of experience in finance. After initially studying aerospace engineering at the University of Illinois, he worked at defense firm TRW on contract projects from the US space agency NASA, before switching careers and attending the Wharton School of Business in Philadelphia. He joined Goldman Sachs after graduating from Wharton in 2002.

In pushing the bailout, its supporters—particularly Democratic congressional leaders and presidential candidate Barack Obama—claimed there would be “transparency” and “oversight” safeguards. The nomination of Kashkari, however, exposes the fact that the financial elite will direct the entire process on behalf of its own interests.

The Rats Stick Together

The Treasury Department on Monday named a former Goldman Sachs executive to oversee spending for the $700 billion financial rescue plan.

The administration announced it had tapped Neel Kashkari, 35 — an assistant Treasury secretary for international affairs — to head the Treasury’s new Office of Financial Stability on an interim basis.

Kashkari helped draft the bailout legislation as one of Treasury Secretary Henry M. Paulson Jr.’s close advisers on the crisis. Kashkari joined the government after working at Goldman Sachs, the firm Paulson headed before joining the Bush administration in 2006.

I still have a problem with the guysthat made all the profits off the situation are the leaders of the bailout.  Think about it people, if you went to the doctor to have a mole removed and he amputated your penis, would you turn to him for further surgical advice?

Asset Management Firms To Join In The Bailout

To me this sounds like put the fox in to guard the hen house.

Treasury Secretary Henry Paulson is hiring as many as 10 asset-management companies to join the lawyers and bankers he is recruiting to kickstart the government’s new $700 billion bank-rescue program.

The Treasury began implementing the plan within an hour of Congress yesterday giving Paulson the powers he sought to combat the U.S. financial crisis. Paulson is seeking to assemble a team to determine which toxic securities to target, how to value them and how to buy them. BlackRock Inc., Pacific Investment Management Co. and Legg Mason Inc. are seeking to become money managers for the program, people familiar with the matter said.

So I ask, you want the taxpayer to trust the very people that caused this crisis to work on getting us out of it?  Really?  And I have land in Florida if you are interested.

Who Is Henry Paulson?

Soon to be King Henry!

Does anyone really know who he is?

I know that you have heard the name and you mat possibly know who he is, the Sec. of Treasury, but what else do you know about the guy that will have unlimited control of almost a trillion dollars?  I will bet not much.  That is about to change and you may thank the Professor for his diligence.

The plan to rescue the US financial industry arrogates virtually unlimited money and power over the financial affairs of the state to the office of Treasury Secretary Henry Paulson. Paulson is a figure with a long history of intimate connections to the political and financial elite.

In 1970, fresh from the Masters program of the Harvard Business School, Paulson entered the Nixon administration, working first as staff assistant to the assistant secretary of defense. In 1972-73, Paulson worked as office assistant to John Erlichman, assistant to the president for domestic affairs. Erlichman was one of the key figures involved in organizing President Richard Nixon’s notorious “plumbers” unit that carried out illegal covert operations against the president’s political opponents, including espionage, blackmail, and revenge. Ehlichman resigned in 1973, and in 1975 he was convicted of obstruction of justice, perjury, and conspiracy, and was imprisoned for 18 months.

Utilizing his connections, Paulson went to work for Goldman Sachs in 1974. In a 2007 feature, the British newspaper the Guardian wrote, “Not only was he well connected enough to get the job [in the Nixon White House], but well connected enough to resign in the thick of the Watergate scandal without ever getting caught up in the fallout. He went straight to Goldman back home in Illinois.”

Paulson rose through the ranks of Goldman Sachs, becoming a partner in 1982, co-head of investment banking in 1990, chief operating officer in 1994. In 1998 he forced out his co-chairman Jon Corzine “in what amounted to a coup,” according to New York Times economics correspondent Floyd Norris, and took over the post of CEO.

Since taking office, Paulson has overseen the destruction of three of Goldman Sachs’ rivals. In March, Paulson helped arrange the fire sale of Bear Stearns to JPMorgan Chase. Then, a little more than a week ago, he allowed Lehman Brothers to collapse, while simultaneously organizing the absorption of Merrill Lynch by Bank of America. This left only Goldman Sachs and Morgan Stanley as major investment banks, both of which were converted on Sunday into bank holding companies, a move that effectively ended the existence of the investment bank as a distinct economic form.

In the months leading up to his proposed $700 billion bailout of the financial industry, Paulson had already used his office to dole out hundreds of billions of dollars. After his July 2008 proposal for $70 billion to resolve the insolvency of Fannie Mae and Freddie Mac failed, Paulson organized the government takeover of the two mortgage-lending giants for an immediate $200 billion price tag, while making the government potentially liable for hundreds of billions more in bad debt. He then organized a federal purchase of an 80 percent stake in the giant insurer American International Group (AIG) at a cost of $85 billion.

There you are sports fans, I am sure that there is something I missed, but this is as much as I could find on short notice.  Now you decide if a trillion dollars should be controlled by one person, in essence.

Is It Socialistic?

During the past several months along the road to the White House, I have heard programs offered by Clinton and Obama as socialistic or as socialism, but are they really? The quick answer is NO. But I know all want to know why I say this. The term is used for the Boomer generation, for it has some residual fear reaction left to it. But as far as the younger generations, they would not know socialism if it walked up and bit them in the ass. Basically calling something ‘socialistic’ is a tired old tactic which needs to be retired and politicians and surrogates need to address the real problems faced by the people, most of all, problems of the working class.

But wait! The interventions by the Federal Reserve, and the US treasury department have been dramatic and unprecedented in many ways. Against hysterical and ignorant criticism from the free-marketers in their own party, Ben Bernanke and Henry Paulson appear to have drawn the correct conclusions, albeit some years after the they were due – that a measure of socialism is the only, repeat only, course that can avert catastrophe. The only question is: will it be enough socialism to stay the dragon of world-wide depression and the fires of war that would surely follow in its wake?

Bernake and Paulson have clearly been reading Hyman Minsky and and Charles Kindleberger – latter day closet Marxians and “long wavers” – and they GET IT: When markets fail, the chaos that follows is NOT self-correcting, and governments MUST act. This is a profound fact that neo-classical economic training – which pays virtually no attention to history – tends to ignore; thus many, but fortunately not all, economists simply cannot believe the scale of the dangers at hand, nor do they have the intellectual or scientific tools to evaluate them. I do not argue that mathematical models are not important, even mandatory in developing economic and social policy. But seeing the big picture requires careful attention to economic history, which gives abundant evidence that raw capitalism is NOT a stable system.

Recent history gives solid examples of how smart socialization is the only corrective. Sweden, for example, confronted financial collapse in the 1990’s by nationalizing its banks and absorbing the toxic bubble before selling the institutions back in a more carefully regulated environment, and sustained growth was the result. Japan, on the other hand, allowed its real estate market to collapse without intervention 20 years ago, and they have not recovered growth rates since.

Call it what you want, but when the government takes over the running of a company or industry, it is SOCIALISM! Sorry, critics but you cannot blame the Left for this…….it is a situation of your own making.

Foreign Banks Get A Piece Of The Pie

In a change from the original proposal sent to Capitol Hill, foreign-based banks with big U.S. operations could qualify for the Treasury Department’s mortgage bailout, according to the fine print of an administration statement Saturday night.

The theory, according to a participant in the negotiations, is that if the goal is to solve a liquidity crisis, it makes no sense to exclude banks that do a lot of lending in the United States.

Treasury Secretary Henry Paulson confirmed the change on ABC’s “This Week,” telling George Stephanopoulos that coverage of foreign-based banks is “a distinction without a difference to the American people.”

“If a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution,” Paulson said.

“That’s a distinction without a difference to the American people. The key here is protecting the system. … We have a global financial system, and we are talking very aggressively with other countries around the world and encouraging them to do similar things, and I believe a number of them will. But, remember, this is about protecting the American people and protecting the taxpayers. and the American people don’t care who owns the financial institution. If the financial institution in this country has problems, it’ll have the same impact whether it’s the U.S. or foreign.”

House Democrats plan to insist on adding protections for homeowners facing foreclosure. They also want to add a measure to help homeowners facing bankruptcy and an executive compensation restriction designed to prevent golden parachutes for the heads of troubled institutions.

Sen. Barack Obama (D-Ill.), who was supportive of the bailout concept in a statement released Friday, believes that “whatever gets done in Congress has to protect Main Street,” senior adviser Stephanie Cutter said on MSNBC on Saturday.

On “Fox News Sunday,” Paulson told Chris Wallace that he would resist the Democrats’ desired limits on executive compensation.

As written on the Politic website.