Geithner Gives Away 2 Trillion While Country Screams About A Few Hundred Million At AIG
Geithner's proving to be a much smarter man than Paulson. Paulson, say what you will, went to Congress for his 700 billion dollar daylight robbery. Don't like it? It was at least voted on. What Geithner is doing right now is similar to how a magician works. First he gets your attention on one thing "look, outrageous bonuses at AIG", then he does his trick while you're watching what he wants you to watch.
The whole AIG kerfuffle is little more than a red herring. The government could stop the bonuses if it chose:
a) They could ask Congress to pass a bill forbidding the bonuses from being passed and then give immunity to AIG and everyone else from any lawsuits.
b) They could just nationalize the company.
c) They could say to AIG "sure, you can do that. But we're going to have auditors crawl over your books and then publish every single detail, since taxpayers have a right to know. When the shareholders go over those books, they will have all the ammunition they need to take you to court. You'll spend the next 30 years losing every cent you have trying to defend yourself from shareholder lawsuits".
And I'm sure a clever financial lawyer could come up with many other ways. If the government didn't want those bonuses paid, they wouldn't get paid. Period.
But all this outrage serves a very useful purpose. At the same time as everyone is running around screaming about a few hundred million dollars, Tim Geithner has announced his TALF plan, in which he will loan up to 2 trillion dollars to private investors to buy up assets, allowing 19/1 leverage. If the assets lose value, the government will absorb the losses. If they gain value, private investors will get the profits. Heads private investors win, tails taxpayers lose. A 2 trillion dollar giveaway and a new leveraged bubble which will certainly cost taxpayers more than a few hundred million dollars.
Don't watch Geithner's right hand and a few hundred million bonuses at AIG, while his left hand robs you blind.
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Ian, this is trickle down economic supply-side economic theory resurrected from Reagan, and Milton Freedman. This is dead theory put on life supports.
http://eye-on-washington.blogspot.com
No doubt in this public private partnership that is being considered. the same old moronic idiocy will take place.
The banks that have the ' toxic assets ' will sell them for cents on the dollar and take further huge writedowns, despite the fact that in many cases the income stream is still close to 100%. Then those same banks will proudly announce that business going forward is robust, and the reason why will be because they are lending the money to the private investors who are actually buying the ' toxic assets '.
Those investors will sit back, use the income stream to service the borrowing , and gradually watch the ' toxic asset ' appreciate in value as confidence and the economy recovers. At which time they will exit the market by selling the now ' good assets ' back to the banks at 100 cents in the dollar.
The banks will be applauded for cleaning up their balance sheets, the governmet will be applauded for solving the problem, and the private investors will snigger to themselves at the gullibility of everyone as they walk away with billions in profits
Is there any mechanism in place to prevent those who have received TARP money from using that money to buy into TALF?
You are right about the sleight of hand, but you may be missing what they are actually trying to distract you from seeing.
View the following 25 minute video:
http://vimeo.com/3722293
This is the crime that the SEC refuses to prosecute. SEC Chairman Cox assured the two Senators that they were on this like a cat on a mouse, but it is unlikely that the SEC will do anything. Moreover, there is a good chance that when the regulatory regime is restructured, the crooks will write the new rules.
Just the two examples of Bear Stearns and Lehman Brothers account for almost as big or bigger thefts than AIG.
View this video
http://video.google.com/videoplay?docid=4490541725797746038
to see how Bloomberg News covers this story.
willt7311 what world have you been living in...The Members of Congress has never read a bill completely.
Maybe our congress folks should have read the bill in the first place. That is the real problem. There was a rush to pass the bailout without reading it and now this is the result.
So how do they fix it? The house passes another bill to tax the hell out of the bonuses received. Now we are on a slipper slope. They start here and before you know it all bonuses are taxed at 90%.
Stop voting for the incumbent no matter what party they belong to. These politicians on both sides have done nothing but make our situation worse and they certainly haven't done anything to make it better.
Exactly what I've been saying.
The outrage over the $165.million in bonuses (as justified as it is, and as much as I share it) is distracting us & keeping us from noticing the$175 BILLION which AIG has already used to pay off most of their counterparts (and partners) in the bailout - you know, the other guys who have received TARP money themselves!!
That's not what this was for - it was to get the economy rolling again, not to pay these corporations DOUBLE the losses they had from knowingly making very bad bets - with our money. Goldman Sachs especially - were paid off 100 cents on the dollar by AIG - while receiving TARP money & still having millions in reserve! This was the same corporation which nearly merged with AIG not too long ago, but didn't - because they knew AOIG wouldn't be solvent for much longer - and yet still 'invested' with them - and now are getting back not only every dime from AIG but BILLIONS of our tax money to boot!!
I do not want one more dime of American taxpayer money going to these corporations - 'too big to fail' my a$$!!!! Let them fail - more sensibly run businesses will take their place!
If a bank does not have millions (in most cases billions, really) in reserve, the bank is gone. It's a simple accounting rule. As we face a decrease in asset values in one column of our bank's balance sheets, we have to stuff them in another column with positive assets. If we don't the result will be failed banks and bank runs and the FDIC paying out trillions in deposits.
Come on, this is going on for months now, don't tell me you still haven't figured it out, yet.
Some people are so gullible.
Geitner is not out to shake down the American public FOR EVERY CENT WE HAVE.
What is this?
The sky is falling, we're all gonna die!
Very helpful.
This isn't your money to begin with. It's just money. Money can be created and it can be destroyed. Every time you take out a loan the Fed creates money for you. Every time you pay the loan back they destroy some of it.
No big deal. OK, so they don't teach that in high school. I get it. But by now everybody should have picked it up from the news and the internet how it works and why it is done this way. No?
Oh Ian, you have been spot on about this business since the beginning. I applaud your intelligence and diligence. It's all so out of control and wrong; I can't stand to know any more.
Good call, Ian.
In many ways, we are seeing how thoroughly the financial system (and the government officers who are charged with its oversight) are corrupted, and quite-blatantly criminal.
And yet... as the numbers that are being thrown-around get bigger and bigger and bigger, I do find myself wondering, just how long ago did those numbers lose any and all connection with reality?
We do not have a financial market: we have a casino hall. The Federal Government is supposed to be playing the role of the benevolent crouper that covers all of the bad bets. But... where is his "trillion dollar-bill" actually coming from, and why are we supposed to believe that it's in any way more "real" than any of the other "money" that is flowing so thickly around the table?
"The leprechaun has left the room. I repeat: the leprechaun has left the room."
What do you have left when you take the number "$2,000,000,000.00" and remove the "2?"
Hmmm....
If what we need is to get credit flowing, and we cannot trust Wall Street to do that, why not cut out the middle men? We have all of these post-offices. Why not have the postal service offer banking services (checking, savings, loans)?
This will get credit flowing again on directly onto Main Street, bypassing Wall Street corruption and entitlement.
Geitner and Summers are trying to paper over a system that seems rotten to the core. The toxic assets seem to have no bottom and the people who run these institution have proven they cannot be trusted with the bailout money.
In the same way there needs to be a government health care plan competing with the private sector insurance plans in order to bring down costs and insure everyone, the government can provide banking to directly compete with these corporations who have used bailout money to ship it overseas or pad their bottom lines.
We are facing a financial Katrina and we need to dramatic rescue operation of PEOPLE, not financial institutions and their CEOs
Actually you are WRONG the right has DISTRACTED you from Obama's BUDGET desgined to help average Americans. We always knew the bailout would be in the trillions because of the TOXIC ASSETS that they need to remove form the book.
Hey, Americans got themselves into this mess by buying homes for close to double their worth. By doing that they drained trillions of dollars from the world economy and exposed themselves and everyone who gave them money to exorbitant risks.
And now, all of a sudden, when the people who understand all of this and are trying to solve the problem by replacing the frozen assets in the system with money that can actually be used to run the economy, now all of a sudden it's their fault?
Please. YOU caused this problem, my friends and YOU have to pay for it. One way or another. The sooner YOU realize that, the sooner YOU will be able to get back to something like the life YOU used to have. But if you don't want to, we always can do what Japan did... put our economy on "Stuck" for the next two decades. Just look how much fun they are having with that strategy over there.
(Chuckle...) If we were talking about the few-thousand dollars that "the average person" earns and then hopes will keep him well-fed to his grave, then perhaps we could blame these "mistakes" upon ourselves. But an entire nation of individual people does not do, for themselves and by their own free choosing, what has now been done.
A very deliberate and well-crafted system of financial fraud has been perpetrated here, under the nose of (and with the collusion and the assistance of) the very government regulators who were supposed to be charged with preventing it. These frauds were fed through such a hall-of-mirrors multiplier that we now find ourselves calmly talking about "$2 trillion," and obediently believing that the Treasury Secretary can actually conjure-up that amount of money with only a wave of his executive hand.
A "bubble," though, fills the air with empty zeroes. Each of those bags of zeroes has some number in front of it, making the number appear to be "real" and "serious" and, of course, "stupendously large." The Fed can waltz right up to the poker-table and lay down 19-to-1 odds and promise that "nobody can lose."
The leprechaun has done it again. The money is "gone," because it was never there in the first place.
"But an entire nation of individual people does not do, for themselves and by their own free choosing, what has now been done."
Sure it does. Ever heard of collective effects? Cowboys call that a stampede. Who selected only the highest return investments in their 401k plans? Individuals did. Yet, the result was bubble after bubble. The collective is not smarter than the individual.
What do you think the total value of US real estate is? A fraction of a trillion? No, my friend with the fear of the large number, it is in the trillions. How long does it take average folks to pay back a home? 30 years. Why? Because the value of their home is five or six or ten times their income. And there you go. One miscalculation about the value of your home and you are in the slammer for a decade. And if everybody does that (and everybody did) the country is in the slammer for a decade.
"The money is "gone," because it was never there in the first place."
Huh? Sure it was and still is. It changed hands when millions of buyers gave millions of sellers twice as much for their home as it was worth. Or do you really think you only exchanged a handshake when you bought your and not real cash??? Now wouldn't that have been nice!
It doesn't matter how much the average person earns. For some buying a $100k home is a stretch that will financially ruin them just as easily as the $1.5 million McMansion that will put slightly more affluent folks in.
What you fail to take into account is that almost everyone was willing to take higher financial risks than were supported by reality. That is almost independent of income and clearly reflected in a uniform rise of home prices far beyond historic averages.
Or look at credit card debt. Same thing. Look at savings. No different.
Too many "you" pills? America got itself into the mess by a variety of means, mostly through corporate and government auspices coupled with erosion of income, aided by some appalling consumer naivety. For the most part, however, your "you's" are misplaced.
Are they? Maybe we will find someone we can blame this one on and then all the pain will magically go away. Maybe in another universe. In this one WE will have to pay the price collectively. Please let me know when someone comes up with a plan that says otherwise.
Excuse me? Japan has an unemployment rate of 4.5% which is much lower. The difference in Japan was that the banks had too a problem but most Japanese rent real-estate and not buy it.
The US is a total different system:
1) American's don't save money in good times and they live on credit cards
2) Japan is integrated in the Asian economies but America is only part of NAFTA
3) Japan has one of the highest reserves in the world in terms of holding dollars and euros. (China is No1)
4) Japan is export orientated but the US not. The largest service the US exports is the finance and IT industry and IT and software is getting outsourced and finance, we all know how it ended and the trust will take years to rebuild.
My understanding (limited as it may be) is that approx. $45 trillion in "credit default swaps" (bets) have been issued or insured by AIG. Issued to every foreign government on the face of the planet, completely unregulated. That had NOTHING to do with Geithner, or Obama. It happened on Bush's watch & under a Republican controlled congress (most of it). The current administration is doing everthing they can to keep everything from imploding, while the people who all helped create the mess sit & point fingers at every proposed solution. Nice...
I am not a financial guru nor do I play one on TV, but I personally like the idea of government backed loans as opposed to them just giving the money to the banks in the first place. The first 3 / 4 of a Trillion that just disappeared actually upsets me.
This 2 trillion in loosely secured loans is in my own simplistic mind are better than a giveaway, at least they are slightly secured.
Maybe the government could set up a program to allow small time investors to get in on this action. Think of it as War Bonds for the 21 st. century. Put some money up front now and in a few years you will get your money back with some kind of interest. If you could double my money in 5 or 10 years I would be interested and at 19 to 1 that would allow for a profit for the program.
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