Financial Crisis Bailout Riddled With Conflicts of Interest
The people with the same rapacious mindset that got us to this dangerous place at enormous cost to the nation and at huge profit to themselves are now being asked by Paulson to serve themselves up to another helping. According to Bloomberg, ("Treasury to Hire Asset Management Firms to Jumpstart Rescue," 10/4/08) the Treasury Department is hiring, well you guessed it, 10 asset management companies to become money managers for the program.
Among those pedaling hardest to be selected is the Pacific Investment Management Co. (PIMCO) having their PR flacks organize a lead puff piece on the business page of the New York Times ("Managing the Bailout: He'd Do It For Nothing," 9.25.08) braying "William H. Gross, the manager of the country's largest bond mutual fund has a solution: he is offering to sort through the toxic assets -- for free."
Free??! Well the last time Mr. Gross offered his advice free, at the build up and the height of the crisis with Fannie Mae and Freddie Mac he used his almost unfettered access to the airwaves of CNBC and virtually all the business press to further browbeat and frighten an already reeling public into a mindset to rush into bailing out Fannie and Freddie. Dire scenarios were offered about how their failure would impact just about everything from the spiraling housing market to our standing as an international financial center. While tens of thousands of homes were being foreclosed, evicting families all over America, Gross had access to Paulson himself (please see "Bailout Ballet: New York Times Reports on Hank Paulson/Pimco's Bill Gross Pas de Deux," 10.4.08).
And the result of this free advice? As documented before, a $1.7 billion payday, the largest ever for PIMCO. What Mr. Gross wasn't clear about, and what the somnolent talking heads on the airwaves never quite pressed home was the inherent conflict that PIMCO itself had been buying up Fannie and Freddie obligations on the cheap, and while millions of Americans were bleeding they, being the ultimate insiders, pushed it for all it was worth to a grotesque $1.7 billion bonanza on the back of American taxpayers.
Mr. Paulson, this is the nation's financial future you are dealing with.
Please leave that Wall Street mindset behind. That those who got us here would have another bite of the apple would be unforgivable.
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Increasing the stock's price is a conflict of interest for corporate executives
It is the corporate executive's responsibility to produce goods and services and provide employment. It is up to the market to determine share prices.
You've got it all ass backwards.
Heh. Well, you can --suggest-- to the Royal Exchequer, Lord Paulson, but you can't exactly --tell-- him what to do. Nor does he have to tell Congress. Nor can the Judiciary exert any influence over his decisions.
You have your good friends in Congress and the "bailout bill" to thank for that.
A whole lot of smoke-n-mirrors has been poured into this thing ... as though $700 Billion was actually a great-big-deal. It's not. (Congress is quietly approving a defense-spending bill of $612 Billion, and I'm quite sure the media will not cover the story at all.)
What this actually did was to give even-more unconstrained power to the Executive Branch, and they will waste no time whatsoever profiting from it. You're absolutely right that "this is the nation's financial future you are dealing with," but it's all about the money. And the folks who are making "all that money" are quite determined that no Branch of the United States Government will claim to be able to lift a finger to stop them.
All too true, but look at it this way: the mess will still be there when Obama becomes POTUS.
If you think things are bad now....
The parallels with 1929-1932 are scary, but at least the Dems will get in right away, instead of having to wait 4 years.
Just think: if the crisis had hit just 2 months later, McCain and Palin probably would have won. Then you would have seen a complete repeat of 1929-1932, except that Prez Palin would probably have suspended the 2012 election and declared martial law.
Not only that, but it was laden with an incredible amount of PORK!! The country has a major problem and these clowns keep stealing the taxpayers money. Vote them all out - let's start fresh!!
What is all of the shouting about? Where have you been? This is the game, fraud in pinstripes, that has always been played with great respectability and enjoys the support of the American public. John Gotti died in jail for less, much less. Watch Gordon Gecko's little speech on greed in the movie Wall Street and 20 years later he is still accurately describing the same game. Really, what did you expect? Outsiders at the feeding trough?
Why do you think the bail out grew by $150,000,0
As the stock market continues to free fall, despite the 800 billion dollar bailout, losses will go up in retirement funds. Already the AP report $2 trillion in losses. "Public and private pension funds and employees' private retirement savings accounts — like 401(k)'s — have lost some 20 percent overall since mid-2007." http://www
There's very good possibility Paulson let Lehman fail so as to rid Goldman Sachs of a competitor and Dennis Kucinich has been raising that as an issue consistently at these hearings..
That said what I have learned today is that there is a $63 Trillion dollar hole in the proverbial bucket..!
It may only be $55-57 Trillion..
We are totally screwed..!
Conservatives and their deregulation and gutting of agencies like The SEC have destroyed the entire international financial system..!
Simple as that..
Energy expert and former Secretary of the California Environmental Protection Agency Terry Tamminen says we could have taken another approach to the bail-out, that is, to help save the environment AND create jobs-- something similar to what President Roosevelt did in the Great Depression to put people back to work. Tamminen says that for just under $400 billion, we could eliminate the need for all of the oil we now import by investing in hydrogen fuel:
http://blo
Tamminen says this "sounds crazy at first blush until you realize that we already produce 3 trillion cubic feet of hydrogen in America every year, but use the majority of that to strip sulfur from petroleum to make gasoline instead of just putting the hydrogen right into our cars."
I like your comments. It seems as if there are many questions about the sequence of events, how staged was this? There was commentary this morning about Lehman, whether Lehman was allowed to fail so that the alarm bell could be rung, sort of a Gulf of Tonkin approach. Gross was surely out there in a big way, and I must admit, he came across to me as objective. I guess not.
I think we should be alarmed that a clique from Goldman Sachs is going to manage this bailout. To have any effect at all they must act quickly. How is an oversight board going to keep up with this? And what about the questions of--who decides who gets bailed out, which bank gets an equity infusion, etc.? And does this industry simply need to reduce its capacity?
I understand that the bailout strategy has already identified those insitutions which are still too big to fail including Citi, Goldman, Morgan Stanley, etc. As such, this bailout might be the worst thing that could happen--the smaller and regional companies fail while the large favored group becomes a bottomless pit, extending the problem. As an investor I wouldn't touch any of these banks with a ten foot pole.
As Steven Colbert once said, their interests aren't in conflict; they're perfectly aligned!
Bingo.
Obama will regret voting for the bailout plan. I know he didn't really have an option at the time, but it will come to haunt him if he wins. The same for McCain. The world economy is plummeting with or without it. As the "plan" becomes apparant, it will also become painfully obvious that the only people that will come out of this unscathed are the bastards that started it to begin with.
WHAT A COUNTRY!!!
How about helping the home owners directly by refinancing them back to the rates that they were able to afford? That way they can stay in their homes. Granted, they would still be worth less than what they were overvalued at but at least you would still have people paying off the principal on their homes instead of having these homes just sit there unpaid for. Even with smaller interest rates (say 2-3%) the banks would still make some money instead of nothing. Unfortunately, like many landlords here in NYC, they would rather force their current tenants out and have the apartment or commercial propery sit vacant for months, not making any money at all, than have a tenant either stay paying the current rent or a marginal increase.
What happened to making a fair profit? A few decades ago businesses were perfectly content to make a 5-10% profit. In the last 10-15 years that was simply not enough. 20-50% was the goal. At all costs. Lay everyone off, get rid of the old timers to lower salary and hire college kids to make big decision, move everything off shore. To heck with the economy!! We're making mula!!
This mortgages have been bundled and resold numerous times. The market cannot determine the value of these "securities". Heck, one can argue that they are worthless! I don't think any court would be interested in stepping in to try to undo this gordian knot. No telling how the market would react, if judges were FORCED to intervene. Just how many people/entities would need to give their consent? IF some object to plan/any part of the plan, could the plan proceed? Would there be strict guidelines to ensure uniformity and who/what would be in charge of coming up with the guidelines? Just how long will it take to train these judges? Yeah, this is one big mess we have yet to fully comprehend.
Hear, hear! This is exactly why so many people are against the bail-out; they suspect (rightly, as you point out) that it will be a windfall for the ba$tard$ that caused the problem in the first place. Thankfully, the next Congress can fold, although lobbyists will exert immense pressure on them to let it ride, or, even worse, double down on it.
To say that these scoundrels are foxes in charge of the hen house is to insult foxes.
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