Friday, October 31, 2008

The Bush Gang's Parting Gift: A Final, Frantic Looting of Public Wealth

The U.S. bail-out amounts to a strings-free, public-funded windfall for big business. Welcome to no-risk capitalism

Gripping op-ed piece in this morning's Guardian Online Edition, wherein columnist Naomi Klein comments upon the true ramifications of the U.S. Treasury Department's $700 billion banking industry bailout. We incorporate Ms. Klein's opening 'graphs below:
In the final days of the election many Republicans seem to have given up the fight for power. But don't be fooled: that doesn't mean they are relaxing. If you want to see real Republican elbow grease, check out the energy going into chucking great chunks of the $700bn bail-out out the door. At a recent Senate banking committee hearing, the Republican Bob Corker was fixated on this task, and with a clear deadline in mind: inauguration. "How much of it do you think may be actually spent by January 20 or so?" Corker asked Neel Kashkari, the 35-year-old former banker in charge of the bail-out.
When European colonialists realised that they had no choice but to hand over power to the indigenous citizens, they would often turn their attention to stripping the local treasury of its gold and grabbing valuable livestock. If they were really nasty, like the Portuguese in Mozambique in the mid-1970s, they poured concrete down the elevator shafts.
Nothing so barbaric for the Bush gang. Rather than open plunder, it prefers bureaucratic instruments, such as "distressed asset" auctions and the "equity purchase program". But make no mistake: the goal is the same as it was for the defeated Portuguese - a final, frantic looting of the public wealth before they hand over the keys to the safe.
Ms. Klein engages in some thought-provocative speculation about the real purpose of the bailout, taking into account the equity stakes the Treasury Department is acquiring as part of the bailout process:
This is where the treasury's equity pays off big time. By purchasing stakes in these financial institutions, the treasury is sending a signal to the market that they are a safe bet. Why safe? Not because their level of risk has been accurately assessed at last. Not because they have renounced the kind of exotic instruments and outrageous leverage rates that created the crisis. But because the market will now be banking on the fact that the US government won't let these particular companies fail. If they get themselves into trouble, investors will now assume that the government will keep finding more cash to bail them out, since allowing them to go down would mean losing the initial equity investments, many of them in the billions. (Just look at the insurance giant AIG, which has already gone back to taxpayers for a top-up, and seems likely to ask for a third.)
This tethering of the public interest to private companies is the real purpose of the bail-out plan: Paulson is handing all the companies admitted to the programme - a number potentially in the thousands - an implicit treasury department guarantee. To skittish investors looking for safe places to park their money, these equity deals will be even more comforting than a triple-A from Moody's rating agency.
Insurance like that is priceless. But for the banks, the best part is that the government is paying them to accept its seal of approval. For taxpayers, on the other hand, this entire plan is extremely risky, and may well cost significantly more than Paulson's original idea of buying up $700bn in toxic debts. Now taxpayers aren't just on the hook for the debts but, arguably, for the fate of every corporation that sells them equity.
Ms. Klein presents a quite clever and insightful analysis, we think, and we thus urge our readers to check out her full editorial here:

"The Bush gang's parting gift: a final, frantic looting of public wealth"

And don't forget to come back here with your comments.

12 comments:

Curmudgeon said...

The Bush gang.... hmmmmm... isn't there a synonym for that term, something a little shorter that means the same thing? Ah, yes. I remember now. It's Republicans.

The Walking Dead said...

Happy Halloween, Mr. Yellow Dog Pelosi Boy!

Bailout Trick or Treat?

RudiZink said...

Republican Rob Bishop "smelled a rat," and voted against it.

So did Democrat Jim Matheson.

The rest of our Utah congressional delegation cowtowed to the fear-mongers, cashed in their massive Banking Industry political contributions, and cast America's capitalist tradition downstream without even a paddle.

See? It is possible, even in our highly dysfunctional Congress, for independent-minded Utah legislators (Bishop & Matheson) to do the right thing... from either side of the party partison aisle.

sara said...

Different subject but very pertinent:

The Pointe movie theater on 12th Street has closed and the Pointe Theater in North Ogden on Washington Blvd has also had their phone disconnected..

Matthew Godfrey's downtown recruitment of Larry Miller's complex has done this.

Wait until more of the local businesses go under when Godfrey's Wal-mart opens on Wall Avenue.

Yep, this is real progress.

egg on your face said...

Is the Weber County Clerks office lying again? Does the Standard Examiner know?

danny said...

International shipping rates have fallen by 90% since last May. Think about that for a minute.

If you believe this will get worse before it gets better, and that foreign nations, especially third world exporters will feel it the worst (some going into default) take a look at the chart for

EEV

This goes up when emerging markets go down. If you don't want to buy it right now, you might like to watch it at least. Look at where it's been, and think about where it might go from here.

If you think about buying it, it will probably be the most volatile thing you will ever own (unless you ship freight on the high seas and have seen your rates fall by 90% in last few months, and owe money on your ships based on rates in May. Ouch.)

democrat said...

Sara

Typical Republicans take from the rich and give to the poor. Tax the little old ladies and give to the Miller's and the Huntsman's and Peterson's.

Curmudgeon said...

Tonight, the Curmudgeon household saw a new all time record set for trick or treaters arriving at our door. 155 of them from 6 pm to 9 pm. The core values of the Republic have survived, it seems, even eight years of Bush Republican rule.

And once again, we noted how unfailingly polite most of the kids were... from the very young to those pushing teendom.

Halloween is one of the great American holidays....

wow man said...

I find it interesting that the republicans are scared that Obama is going to start an unholy war and raid the federal reserve.

But it was OK when the republicans did it.

quade said...

republicans are great at creating fear. The fact that you have even heard that Obama is going to start an unholy war testifies to how good they are.

Evil men who are good at what they do.

curious 1 said...

So how soon after the election can we lumpcitizens expect the golf course will be up for sale. Think they might be waiting to see if Gidfreys friends and relatives are elected?

It will be an iteresting week accross the country. Hoping for a quick resolution to any voting irregularities. I did notice rules were posted against any political buttons, t-shirts, pamphlets this election. Of course no one questioned the voters with a bogus inquiry making them provisional voters this time in Ogden.

Curmudgeon said...

Curious:

Selling the Mt. Ogden Park does not depend on state legislative action. It would be a city government decision, if it happened. The state doesn't have the authority to sell it. The city does.

But it surely couldn't happen now, because Our Mayor Matthew Godfrey said he's taken sale of Mt. Ogden Park "off the table." He wouldn't say something that wasn't so, would he....?

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