I was skeptical, and indeed, horrified at the thought of giving $700 billion dollars to the banks, but it turned out even worse than anyone thought...
National Public Radio's Tom Ashbrook discusses today how the billions disappeared into bank vaults; no one knows where the money went (some say it went to the Saudis who had invested in the banks) not a dime went for home owners,
Jim Hightower is even harsher. Bankers used the money to buy up small banks, which isn't good for consumers because it reduces competition and means bank fees will be higher than ever. The following is from Hightower's report. Paid subscription needed to read the full thing, so let me excerpt extensively.
Lawmakers meekly rushed out $700 billion for them, a taxpayer gimmie nearly 30 times larger than the one Detroit was seeking. What plan did the bankers present? What explanation did they give of how they'd spend our money?
None. They simply dispatched their designated consigliere, Treasury Secretary Hank Paulson (formerly the reigning prince of Goldman Sachs), to hand Congress a three-page ultimatum. It contained not a single specific or promise of results. It was, in effect, a hold-up note.
But that $700 billion was just for openers. It has not been widely reported, but the total Wall Street bailout--counting government loans, stock purchases, debt guarantees, and backdoor handouts by the Treasury and the Federal Reserve--is nearly $8 trillion. That's eight followed by 12 zeroes!
What have we gotten for this gargantuan giveaway? Zip. The rationale for indiscriminately pouring public funds into big banks, investment houses, insurance giants, hedge funds, and the like was that our money would "unclog" the financial markets, allowing credit to flow again to businesses and consumers-as though America is having a plumbing problem and our national treasury is a bottomless vat of Liquid Plumr.
But, guess what? It didn't work. Credit is still not flowing. As a result, an economic crisis has swiftly spread across the country, including a rash of business bankruptcies, construction shutdowns, massive job losses--and, yes, a credit crunch that is crushing auto sales, auto dealers and suppliers, auto makers, auto workers...and Detroit.
The reason that the Wall Street bailout has not worked is quite elementary: Congress and the White House attached no requirement whatsoever that the recipients of our money use it to make loans! It seems that Washington didn't feel that it should "interfere" in the decisions of the financial deities.
Country rubes attending their first carnival sideshow are not this gullible.
With no conditions put on the phenomenal taxpayer windfall they received, the wizards of Wall Street have chosen to spend it selfishly, rather than for any public purpose. They've already used billions to buy out some of their competitors, a perverted use of bailout funds that will reduce our banking choices and raise the bank fees we're charged. Other billions have gone to the banks' big investors, to executive pay, to pad the bottom line, or simply into bank vaults to be hoarded--while America remains starved for capital.
Even more amazing, the very same Congress that harrumphed about trusting Detroit automakers with taxpayer money was not even told where most of the $8 trillion Wall Street bailout went. Which banks got government backing, and how much did each get? That's a secret, Congress was told by the Bushites. What are they doing with the money? We can't tell you, say those who doled out the cash.
Moving from amazing to reckless audacity, Secretary Paulson has even taken the law into his own hands. Last September, he unilaterally, secretly, and illegally nullified a federal law because it was in the way of his unauthorized plan to help big banks take over smaller ones. Hank's autocratic decree allows banks to use offshore tax dodges that Congress banned 23 years ago. This executive maneuver provides an under-the-table tax subsidy for predatory banks wanting public financing to absorb their rivals--a subsidy that will cost our national treasury upwards of $140 billion even as it reduces bank competition.
This is a flagrant usurpation of Congress's constitutional power and a kleptocratic transfer of public wealth by executive fiat. Yet it was met with barely a meow from lawmakers.
Callers to the NPR show are topping each other with their eye-popping accounts of what can be done with $700 billion -- build a high-way across American 4 miles wide, connect every city by mag-lev trains. (Yes, and pay for universal health care? That can be done with a mere 50 billion...)