In for a Penny, In for $2.98 Trillion

The good news on the government's "No Banker Left Behind" program is that according to the special inspector general's report on Tuesday, the total handout to date is still less than 3 trillion dollars. It's only 2.98 trillion to be precise, an amount six times greater than will be spent by federal, state and local governments this year on educating the 50 million American children in elementary and secondary schools.

The bad news is that even greater amounts of money are to be thrown down what has to be the world record for rat holes.

Where did the money go? Almost all of it went to the bankers and stockbrokers who got us into this mess by insisting that the complex-by-design derivatives they trafficked in should not be regulated by government since they were private transactions between consenting professionals. Sort of like a lap dance: If it doesn't work out, that's the problem of the parties involved and no concern of the government.

For the government to intervene would have created "legal uncertainty" in the derivatives market, an argument that a Republican-dominated Congress and President Clinton bought in authorizing the Commodity Futures Modernization Act in December of 2000. That law brought "legal certainty" to the market, a phrase that Lawrence Summers, then Clinton's secretary of the treasury and now Barack Obama's top White House economics adviser, deployed incessantly as a calming mantra as the financial derivatives market swirled out of control.

Now Summers and the other finance gurus who move so easily from Wall Street to Pennsylvania Avenue assure us that those professionals who made the toxic swap deals are too big to fail and must be entrusted with 3 trillion of our dollars to save themselves from disaster. And thanks to the laws they wrote, the bankers are likely to be covered for their socially destructive behavior by a get-out-of-jail-free card.

Well, maybe not all of them. A shudder must have run through the former Wall Street buddies of Bernie Madoff--once the highly respected chairman of the Nasdaq stock exchange--when Inspector General Neil Barofsky warned on Tuesday that "we are looking at the potential exposure of hundreds of billions of dollars in taxpayer money lost to fraud."

How naive. The fraud no doubt has occurred and will occur again, but the exposure part is more questionable, if by that is meant bringing the criminals to account. As opposed to welfare cheats who end up imprisoned over scams that involve hundreds of dollars, these guys have brilliant lawyers who tell them how to steal legally when it comes to billions in fraud.

But most likely the white-collar criminals, if they are high enough up the food chain, will not even be quizzed about their activities. As the independent Congressional Oversight Panel has reported, there has been no serious accounting of the bailout money. It took major pressure from a Congress reacting to an outraged public to discover that AIG, in addition to handing out hundreds of millions in bonuses to the very hustlers who created the firm's swindles, was a conduit for at least $70 billion in taxpayer money to reimburse the banks and stockbrokers who got us into this crisis with their bad bets.

No surprise there, given the incestuous world of finance, where the revolving doors between the Treasury Department, the Fed and executive offices in the industry have been swinging throughout both Republican and Democratic administrations. As a result, those orchestrating the bailout and those grabbing the money are for the most part friends and former colleagues, with enormous respect for each other but not for the American taxpayer and homeowner. Or for the autoworkers who had nothing to do with creating this problem but stand to lose their retiree health benefits and pensions if the Obama administration goes though with its threat to use bankruptcy to discharge GM and Chrysler from their obligations to their workers. Why float a company like AIG to the tune of $170 billion to keep that massive conglomerate from bankruptcy but balk at a much smaller commitment to keep GM solvent?

The money involved in the auto bailout is chump change compared with what Wall Street got, and it is far better spent. As opposed to the financial high rollers richly rewarded for crawling in and out of balance sheets, the folks who crawl in and out of cars along an assembly line are left with permanent aching backs and hard-won health care and retirement plans about to disappear through their company's bankruptcy. Where's their bonus package?

Comments

[mjc]

Truly devastating to know that no matter how many intelligent and knowledgeable voices are raised in doubt, warning against Geithner (and Obama) using this "plan" to put the financial system back on some sort of reality track, yours, Mr. Scheer, as well as Krugman and Stiglitz and David Brooks, for God's sake, they plunge ahead. I no longer think that anything progressive will come from this administration, in spite of the admiration and seeming successes of the G-20. The question becomes how long will this depression last? Not only did the housing bubble break but there are apparently 57,000 cars sitting in the Baltimore, ordered by ebullient Americans who finally were seeing their dream come true. The cars bearing another tribute to how duped the American public has been. The CEOs of the big banks, the American car industry, and guys like Bernie made it big; the rest of us..., not so much.

[RoloTomassi]

Thank you Robert, your voice is needed, so keep it up.

I read the articles on this site frequently, and I sense a sea-change coming....

The Obamaloons are starting to question their faith as the undeniable facts emerge--and despite what many may think, I do not relish that occurence; I too was hoping that this time it would be different.­...

[graffen48]

old crap and it will continue until people wake up and kick banks down off that artificial pedestal they've built . Don't you hate the condescending attitude they all have. It makes me want to pick up a pitchfork and do some googling. Forward, march!!!

[rawdawgbuffalo]

thats kind of catchy, after this GM will now be Government Motors - lol

http://rawdawgb.blogspot.com/2009/04/government-motors.html

[ProudLiberalDan]

God bless you, Mr. Scheer.

Now you should expect the inevitable character attacks from the Obamaniacs who are unable to intelligently debate the points you make and don't want their hero worship interrupted by pesky policy analysis or independent thought.

America needs your brave and independent voice.

[californiadreamer]

Thanks many times over for your precise and pointed beam of light shined on the current situation. That it is a small group of friends and brilliant legal advice that have led to a global economic crisis which affects the lives and livihoods of millions(billions?) of citizens of the world, makes it all the more outrageous. That so few could create such a disasterous weapon of financial mass destruction reminds me that only a few scientists worked on the bomb. What is galling and intolerable is that they appear to be getting away with it. It seems partly due to the perception that the American people don't really understand what's going and can be easily manipulated with a few programs that modify loans but really don't address the real necessity: principal reduction. As one commentator said, foreclosures will increase but the Obama administration is just kicking that problem down the road. Why??? What's the plan. Seems to me that the small group of friends have figured out how to get all their loss made good by the taxpayer and then somehow make a profit selling the toxic assets. I don't get it. Something is fishy. But it is a sad commentary when a small group of Americans at the top have no qualms about ruining the lives of their countrymen. I hope you continue to keep us posted on how we can fight back.

[hyjanks]

I guess the concept is you put in charge of curing our financial ills those same geniuses who championed the charade in the first place because they NOW know how to get out of it and prevent future occurrences because they've been there, done that.
I call it the "Chicken Feathers" theory: You look at the fox you just found outside the hen house and conclude, "Hmmm. You know, I should put this guy in charge of guarding the rest of my chickens 'cause he knows the ropes; he can convince other foxes from killing even more of my hens."
Problems is you're trusting the guy with feathers hanging from his mouth to stop killing your chickens while he's "protecting" your investment. And if there's enough chickens to go around, no doubt he'll stand by as other foxes take their "fair share".
I supported and voted for Obama because I thought he'd bring a new era to governance. Maybe this is true in most of his approaches to leadership, but this ain't one of them. He needs to go into that chicken coup with a broom, a scrub brush and some disinfectant, apply a lot of elbow grease and then install big, mean roosters who can kick some fox's ass.

[batguano]

Excellent as usual Robert. Astonishing isn't it? The very greedy scheemers who created the nightmare, are "too big to fail" are made whole and the victims/taxpayers who lost their homes, retirement and so much more are left holding the bag. The greedy manipulators still have their mansions, bonuses and bulging bank accounts, while the average ruck are evicted from their homes.
Both Repubs and Dems are responsible for this great swindle, and both are in the trough of slops up to their ears! Where are the indictments? Where is the Special Prosecutor? Where is the return to rigid control for the excesses of these greedy pathological swine?