Is Bush Profiting from this Mess? Thoughts on the Politics of the Economic Crisis

"Panic!!!! Panic!!!! Panic!!!! We have to act now!!! Now!!! Now!!! No time to think or try to understand!!!!! And, even if you did try to understand, it's all sooooooo very, very complicated!!!!! So just trust us!!!!! Trust us!!!! And panic!!!! Now!!! Now!!! Now!!!!"

Is this messaging causing anyone to take a step back and wonder just who is profiting from this crisis?

It should.

Because the reality is that some people are actually profiting from this crisis. And I don't mean John McCain's transparent attempt to use the situation to try to stop the shift in the momentum of the campaign toward Obama. I mean actual financial profit in the billions of dollars.

Let's take a look at just one - relatively small - example. Keep in mind that this example is only on the scale of $30 billion - rather than the $700 billion or even trillions of dollars that the proposed "bail out" is reportedly going to cost.

In July of this year, Merrill Lynch began its unraveling by selling its inventory of collateralized debt obligations (or CDOs) to Lone Star Funds. Lone Star Funds bought $30.6 billion of these mortgage securities for just $6.7 billion - that's 22 cents on the dollar.

What that means is that if Lone Star liquidates the collateral underlying these securities (read - in simplified terms - foreclosing on homes and reselling them at a portion of their stated value) and is able to recover just 27 cents on the dollar or more (which means selling the properties at 1/3 their stated value or above) then they will make at least $1.5 billion in profit.

I'll say that again: they foreclose on the homes, resell the properties, and stand to make at least $1.5 billion in profit.

Unlike a government regulatory agency, there is no incentive for a privately held equity firm like Lone Star to renegotiate these mortgages and try to keep people in their homes. No, their goal is short-term profit for their investors. Liquidate the "toxic assets" = foreclose on mortgages and sell the properties.

According to published reports, John Grayken, CEO and founder of Lone Star Funds, told the Oregon Investment Council during a fundraising pitch in January, "This is as good a distressed environment as we've seen in a long time."

Yes, you read correctly. John Grayken described the current economic situation as, "as good a distressed environment as we've seen..."

Significantly, there is - at most - only one degree of separation between Mr. Graken and President George W. Bush.

As BusinessWeek described him, John Graken is a "protégé of Texas billionaire Robert Bass" who "cut his teeth on deals for bad loans stemming from the U.S. savings and loan crisis before setting up Lone Star in the mid-1990's."

Does the name Bass ring any bells? Robert Bass is one of four brothers in the Bass family - a family that has longstanding personal, political, business and financial relationships with the Bush family.

The Bass family is reportedly one of George W. Bush's five largest financial supporters and has contributed hundreds of thousands of dollars - both personally and through political action committees - to George W. Bush's campaigns for Governor of Texas and for the Presidency. The Bass brothers were involved in bailing out George W. during a number of his early failed business endeavors, including Harken Oil in the 1980's and the Texas Rangers. In addition, Bass family members were major contributing and fundraising supporters of George W's father, President George H. W. Bush.

Now, since Lone Star Funds are privately held partnerships rather than publicly traded corporations, they are not required to make public the identity of their investors.

Nevertheless, the closeness of the relationships among the Bush and Bass families and Mr. Grayken begs the question: How much Bush family money - if any - is invested in Lone Star Funds and to what degree - if any - are our current President and his family or his friends profiting from the current crisis?

And, even more importantly, how much of the structure of this much larger bailout will also profit the uber-rich at the expense of the other 99.5% of us?

I'll write more on that later.

Comments

[moesyzlac]

It pains me to piont out that the only people doing the right thing in congress are the the bleeping conservatives, but thats only because they know Pelosi is an idiot, so is Reid, so is my very own Senator from my very own state, Patty Murray, so why not just take political cover? 2 things help the GOP here. 1. We the people don't want this. 2. Congressional Democrats will fall for anything.

P.s, I'm pretty sure my personal economy is about to crash.

[Leah McElrath Renna - Huffpost Blogger]

My understanding is that what the Republicans were saying in public (the "the people don't want this") and what they were actually holding out for in private were quite different things (cuts in capital gains taxes for the uberwealthy as part of the larger package).

[missionimpossible]

They are all in bed, some way, some how. Your article is very enlightening, and insightful. Great job!
PS: Leah, you need to get to the MSM on this asap, although by posting here, you may have already spread the "viral" message!

[ErnestineBass]

Bravo! One of the smartest, best-researched, follow the money pieces I've yet to read regarding this debacle.
Well done.

[Leah McElrath Renna - Huffpost Blogger]

Love it that you used the "follow the money" phrase! I almost titled this piece that, but wasn't sure how many would track the reference ;-)

[elbzee]

Uuuummmm, lemme guess... damned near all of it!!

[necie]

I suppose Bush sleeps just fine at night.....literally robbing American Citizens, the very citizens who put him (and his Daddy) into office, from their hard owned money...

Shame, Shame, Shame on you BUSH

[robotfog]

You should add "shame on the people who supported and voted for bush."

[Freedomscap]

Exactly.

[SpottedOwl]

Explain to me WHY Pelosi says "it has to pass" .....

[RobertHenryEller]

Wrong.

Shame on us for letting them get away with it.

We can still fix our mistake, however.

[deja669]

Excellent article and great research. Some way some how, it always leads back to Bush.

[Freedomscap]

Not surprised.

And, with the current bailout/bill, the Dems, including Barney Frank, Pelosi, Reid and maybe even Obama (we have to wait and see, exactly) are capitulating to the whims of Bush.

Bush is telling the Dems their provisions can't be included in the bill or he will veto the bill and then the Dems will be responsible for the collapse of the economy.

[janinei]

I don't even have the energy for shock and awe any more!

[Dynamohum]

Buck up patriot!! Have a cup of coffee, go for a jog, do not let yourself go numb. This is what they are counting on; everyone to be so numb that they don't notice or don't care what happens.

[apduncan1]

Are these the same bass brothers that tried to corner the Silver (Ar) market a while ago using Arab money?

We are in for a con job being played on us.

[bchandra]

It's not just Lone Star. Look a little colser and you will find that Sr Bush and 1st Cousin both worked for Lehman. I wonder how much their Golden Parachutes were worth??? We have got to get our heads out of the hole. They are robbing the country and leaving us with the bill.

[metalpipe]

I think this means I hold onto my gold bullion for a while longer. After they are done raping us for the last dregs at the bottom of our coffers, we will head straight into another great depression. The writing seems to be on the wall.

[brenner21]

People think fascism in America is impossible. Jack-booted U.S. soldiers goose stepping sounds laughable. However there is another historical precedent for dictatorship, an economic one. Mussolini's Italy was famous for "making the trains run on time." He also allowed the richest business people to "bail their companies out" of the effects of the Depression through a huge transfer of the people's tax money. Until the U.S. liberated Italy, big business was making more profits than in any other country.

[SimonAronoff]

Can someone PLEASE read this post directly into the camera at CNN? Oh wait, I forgot the U.S. media is corporate owned. Long live citizen investigative journalism!

[jcorrington]

I cant believe this astounding information has only 2 comments so far! I absolutely believe it. But I suspect everyone, like myself, are so consumed with outrage fatigue and frustration in the knowledge that we are powerless to effect anything anymore..

[BurnetO]

Very interesting.

I am boiling mad about the creation of this "crisis". We have seen this coming for a long time. You can't go on forever after you sell the family silver (our manufacturing/industrial base) and you borrow money every month in order to pay the interest on the money you already owe. And you burn up what's left in an illegal unnecessary war. Delusionary.

People don't get rich by being deluded. These monsters know exactly what they're doing. They are tying the hands of whoever the next president is with as many ropes as they can. They are consolidating a sheep-shearing of this country which will last beyond the days of our great-grandchildren. And stealing everything they can grab as they walk out the door.