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By Dave Lindorff
It may not be obvious today, and certainly it’s not how the corporate media reported it, but future historians are likely to look back at March 13, 2009 as the day that American imperialism began it’s inexorable decline. That’s the day that Chinese Premier Wen Jiabao announced that his country was “worried” about its holdings of over $1 trillion in US treasury securities, and warned that he wanted the US to assure China that it would maintain its good credit and “honor its promises” and “maintain the safety of China’s assets.”
There is no way that the US can accommodate Premier Wen and still finance and operate a global military system with over 1000 overseas bases, massive aircraft carrier battle groups, and with hundreds of thousands of men and women armed to the teeth with the latest high-tech military hardware, not to mention fight endless wars on the far side of the globe.
The TARP investment is a very special type of capital that is provided by the US Treasury and is segregated in the form of preferred stock. For the Boards of Directors of the 214 banks to pay out bonuses is nothing but an embezzlement of American citizens’ capital. It is now the obligation of the new Attorney General, Eric Holder, to arrest and indict every board member and senior management of every financial company that paid out the $18.4 billion bonus.
Bizarre, weird, grotesque, outrageous, crime committed by the super elite is being called normal business mistakes and corporate irresponsibility. That might sound like a brash comment to the completely uninformed, but if I could think of even more brash adverbs to describe the mainstream, established society in America I would. We Americans elected a Congress that gave $700 billion of welfare to banks that went broke. The executives of those banks ripped off that welfare.
It is simple minded stupidity on the part of the entire broadcast and print media to characterize flagrant crime (in the words of Mr. Cuomo) to be “corporate irresponsibility”. Only $3.6 billion of the $18.4 billion was embezzled by Merrill Lynch.
While Mr. Summers wants us to remember that we are a nation of laws when it comes to paying huge bonuses to A.I.G. executives, who will apply the law to former Bush administration officials who approved torture? If law dictates payment of bonuses, what law addresses money laundering? And is that law less important than the one that insures payment of bonuses? What could be more corrupt than asking banks that have been bailed out by the American taxpayer - expressly to address their loses from mortgage failures - if they approve of a foreclosure bill that would in turn bailout the taxpayer/homeowners themselves?
Still no end in sight to the corruption in Washington. While the Democrats now control both houses of Congress and the White House, the raging wildfire of corruption continues unabated.
A.I.G. bailed out to the tune of 165 billion taxpayer dollars and proceeds to pay executives what is now approaching 300 million in bonuses? The White House and Congress are "outraged, but can't do anything"?
$8 Billion dollars from CitiGroup to Dubai
$7 Billion dollars from Banks of America to China
$1 Billion dollars from JP Morgan/Chase to India
More information = Read more.
Bill would help schools, nonprofits teach financial literacy
By Les Blumenthal | McClatchy Newspapers
The numbers are startling. More than half of high school seniors have debit cards and nearly one-third have credit cards.
One-third of college students have four credits cards apiece when they graduate, and more than half of graduates have piled up $5,000 each in high-interest debt. The number of 18- to 24-year-olds who've declared bankruptcy has increased 96 percent in 10 years.
Surveys show that many of these young people also are financially illiterate: They don't understand such things as interest, minimum payments, credit reports, identity theft or that they may be paying off their school loans for years.
A.I.G. to Pay $100 Million in Bonuses After Huge Bailout
By Edmund L. Andrews and Peter Baker | NYTimes
Despite being bailed out with more than $170 billion from the Treasury and Federal Reserve, the American International Group is preparing to pay about $100 million in bonuses to executives in the same business unit that brought the company to the brink of collapse last year.
An official in the Obama administration said Saturday that Treasury Secretary Timothy F. Geithner had called A.I.G.’s government-appointed chairman, Edward M. Liddy, on Wednesday and asked that the company renegotiate the bonuses.
Administration officials said they had managed to reduce some of the bonuses but had allowed most of them to go forward after the company’s chief executive said A.I.G. was contractually obligated to pay them.
In a letter to Mr. Geithner, Mr. Liddy wrote: “Needless to say, in the current circumstances, I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them.”
The bonuses will be paid to executives at American International Group’s Financial Products division, the unit that wrote trillions of dollars’ worth of credit-default swaps that protected investors from defaults on bonds backed by subprime mortgages.
Newt Gingrich is right: "It is European socialism transplanted to Washington." How else to describe an economy in which the government controls the entire financial center and is now supplying life support for the auto industry? That's on top of the existing socialist economy run by the military-industrial complex, which, thanks to George W. Bush, now absorbs upward of 60 percent of the non-entitlement federal budget.
Although we still have a way to go to catch up with the good parts of the European system, including universal healthcare, high-quality public education and decent working conditions, we do have a system that is now as socialist in budget size as Europe's. That part I get when I listen to the right-wingers on Fox News bemoaning the reversal of the Reagan Revolution. But what I don't understand is how in the world they can blame this startling turn of events on Barack Obama.
The vast majority of money allocated so far on President Obama's watch is an extension of Bush's banking bailout, which has committed trillions to failed Wall Street conglomerates. I certainly don't want to defend the bailout and personally think the banks and stockbrokers deserve to go belly up, but what does that mess have to do with Obama, who was in college when the Reagan Revolution launched the deregulation that allowed Wall Street to run wild?
Many of the biggest mortgage lenders in the U.S. have engaged in widespread, systematic schemes that ripped off hundreds of thousands of families seeking to buy a home, refinance or foreclose, according to lawsuits filed on behalf of consumers.
Scores of class-action lawsuits, from the 1990s and up to today, detail the illegal and questionable practices used by mortgage-lending companies that pushed millions into bad mortgages, then into bad refinancing loans and then into foreclosures with unfair fees.
The lawsuits have been filed by private attorneys and state attorneys general, and on behalf of NGOs.
An auction of foreclosed homes in New York City on Sunday drew protesters who blamed banks for an epidemic of home losses and called for a moratorium on evictions and foreclosures.
Two dozen people marched outside a Manhattan convention center where Real Estate Disposition Corp was auctioning off several hundred foreclosed homes, chanting and carrying signs reading "Banks get bailed out, people get thrown out."
The group, Bail Out the People, plans to stage a major demonstration on Wall Street on April 3.
The International Monetary Fund warned on Tuesday that the world economy will likely contract this year in a "Great Recession" and African leaders said the financial crisis could undo hard-won social-economic gains.
"The IMF expects global growth to slow below zero this year, the worst performance in most of our lifetimes," IMF Managing Director Dominique Strauss-Kahn told African political and financial leaders in the Tanzanian capital.
"Continued deleveraging by world financial institutions, combined with a collapse in consumer and business confidence is depressing domestic demand across the globe, while world trade is falling at an alarming rate and commodity prices have tumbled," Strauss-Kahn added.
An AIG report to the Treasury Department last month warned that if the government didn't come to its rescue again, its collapse would trigger a "chain reaction of enormous proportion" that would "potentially bankrupt or bring down the entire system" and make it impossible for AIG to repay the billions it already owed the U.S. government.
Four days later, AIG was given $30 billion in federal aid on top of the $130 billion it had already received.
Too big to fail? 5 biggest banks are 'dead men walking'
By By Greg Gordon and Kevin G. Hall | McClatchy
America's five largest banks, which already have received $145 billion in taxpayer bailout dollars, still face potentially catastrophic losses from exotic investments if economic conditions substantially worsen, their latest financial reports show.
Citibank, Bank of America , HSBC Bank USA , Wells Fargo Bank and J.P. Morgan Chase reported that their "current" net loss risks from derivatives — insurance-like bets tied to a loan or other underlying asset — surged to $587 billion as of Dec. 31 . Buried in end-of-the-year regulatory reports that McClatchy has reviewed, the figures reflect a jump of 49 percent in just 90 days.
According to a report on home foreclosure issued Mar. 6, 2009 by the Congressional Oversight Panel charged with monitoring the use of bailout funds, the rate of home foreclosure is now three times its historic rate — "so large that it threatens the entire economy."
Panel chairwoman Elizabeth Warren joins Fresh Air to discuss the foreclosure problem — and what can be done about it.
The Congressional Oversight Panel was created in October 2008 to oversee the $700 billion Troubled Asset Relief Program (TARP). Warren was appointed chairwoman in the panel's first meeting. In December 2008, Warren criticized the bailout program for lacking a clear direction or approach.
The revised and upgraded unemployment figures released on Friday were nothing short of staggering: almost two million jobs lost in the past three months as the official unemployment rate rose to a quarter-century high of 8.1%. Nearly three million Americans are now officially unemployed for six months or more, while another 8.6 million are "working part time because they cannot find full-time employment." Just the previous day, the government released figures showing, not surprisingly, that food stamp recipients had also soared by another 700,000 in February -- 651,000 jobs had been lost that same month -- to a record total of 31.8 million.
While the nation’s economy flounders, business is booming for The GEO Group Inc., a private prison firm that is paid millions by the U.S. government to detain undocumented immigrants and other federal inmates. In the last year and a half, GEO announced plans to add a total of at least 3,925 new beds to immigration lockups in five locations. The Immigration and Customs Enforcement (ICE) agency and the U.S. Marshals Service, which hire the company, will fill the beds with inmates awaiting court and deportation proceedings.
What can $5 billion buy in Washington?
Quite a lot.
Over the 1998-2008 period, the financial sector spent more than $5 billion on U.S. federal campaign contributions and lobbying expenditures.
This extraordinary investment paid off fabulously. Congress and executive agencies rolled back long-standing regulatory restraints, refused to impose new regulations on rapidly evolving and mushrooming areas of finance, and shunned calls to enforce rules still in place.
Does anybody in the federal government know or could know “who, what, where and when” of the massive, complex, vertical, horizontal, global collapse of Wall Street and its planetary tentacles in over 100 countries abroad? Step forward if you exist! Uncle Sam needs you!
Is the multi-million dollar bailout of this financial mess and house of cards, this phantom wealth mummy hitting air beyond the federal governments’ salvage capability?
It is relatively easy to announce hundreds of billions of dollars of corporate rescue programs here and hundreds of billions of dollars of guarantees of corporate recklessness there and trillions of dollars of assorted stimulus, loan availabilities and foreclosure prevention initiatives in all directions. Now comes the rubber hitting the road.
A top UBS official told a Senate hearing on tax havens that the Swiss bank, which has been subpoenaed to turn over information on as many as 52,000 U.S. account holders, would not turn over the identities of possible U.S. tax cheats.
"UBS cannot disclose information to the IRS that would put its employees at serious risk of criminal prosecution under Swiss law," said Mark Branson, UBS' chief financial officer of wealth management.
"Because Swiss law prohibits UBS from producing responsive information located in Switzerland ... we believe that UBS has now complied with the summons to the fullest extent possible without subjecting its employees to criminal prosecution in Switzerland." Branson said.
Treasury Refuses to Identify Banks Taking $2.2 Trillion Taxpayer Bailout Bucks
Fed Refuses to Release Bank Data, Insists on Secrecy
By Mark Pittman and Craig Torres | Bloomberg
Here's how a typical TALF deal would work: A hedge fund uses $1 million of its own money and gets a $9 million loan from the Fed, payable after three years, to buy a $10 million asset-backed security, which finances consumer loans. Hoping that the market for these assets recovers, the hedge fund would hold the asset for three years.
If the security rises in value to $11 million, the investor would keep the profit, essentially doubling the initial investment. The government, meanwhile, would consider the deal a success because consumer lending was spurred.
If the value fell below $9 million, the hedge fund would lose its down payment but nothing more. The Treasury, using bailout funds approved by Congress, would cover the next set of losses, with the Fed ultimately on the hook for anything more.
There's a $700 trillion elephant in the room and it's time we found out how much it really weighs on the economy.
Derivative contracts total about three-quarters of a quadrillion dollars in "notional" amounts, according to the Bank for International Settlements. These contracts are tallied in notional values because no one really can say how much they are worth.
But valuing them correctly is exactly what we should be doing because these comprise the viral disease that has infected the financial markets and the economies of the world.
World Bank Group leaders said the United States and China should balance out their economic dysfunctions, which are paradoxically dissimilar.
Referring to the Group of 20 industrialized nations, World Bank Group President Robert Zoellick and its Chief Economist Justin Yifu Lin, in a report published in The Washington Post Friday, said "without a strong G-2, the G-20 will disappoint."
The United States, Lin and Zoellick said, "must rebalance saving and consumption. It cannot afford a return to the days of maxing out credit cards to finance unfettered consumption. It must regain control over expanding budget deficits, which are driven largely by entitlement spending," the article said.
The U.S. Financial System Is Effectively Insolvent
Nouriel Roubini | Forbes | Submitted by Peter Trottam
For those who argue that the rate of growth of economic activity is turning positive--that economies are contracting but at a slower rate than in the fourth quarter of 2008--the latest data don't confirm this relative optimism. In 2008's fourth quarter, gross domestic product fell by about 6% in the U.S., 6% in the euro zone, 8% in Germany, 12% in Japan, 16% in Singapore and 20% in South Korea. So things are even more awful in Europe and Asia than in the U.S.
"AIG is a huge, complex, global insurance company, attached to a very complicated investment bank hedge fund that built -- that was allowed to build up without any adult supervision, with inadequate capital against the risks they were taking, putting your government in a terribly difficult position," Geithner said. "And your government made the judgment back in the fall that there was no way that you could allow default to happen without catastrophic damage to the American people....On Monday, AIG announced a loss of $61.7 billion for the fourth quarter of 2008, the biggest quarterly corporate loss in U.S. history. The federal government simultaneously announced that it would once again restructure the terms of the AIG bailout, which began in September and had grown to a $152 billion total package."
By Dave Lindorff
The futility and stupidity of the Fed’s and the Obama administration’s policy of pumping ever more money into failing banks and insurance companies in a vain effort to get them lending again was demonstrated—if anyone was paying attention—by the collapse in auto sales this past month, with all the leading companies, Ford, GM and Toyota, reporting sales down by about 40%.
This fall off in car buying was despite record discounting by the auto industry, and offers of 0% financing.
Clearly, obtaining financing is not the reason people are not buying cars.
People are not buying cars because they are worried about having a job to enable them to pay back the loan.
Why is Geithner dithering? Because he is asking the wrong question. The question he is posing is: how can the government save Citigroup? The right question is: how can the government rebuild the banking system?
President Obama deserves immense credit for being willing to spend serious money to prevent recession from becoming depression. He has resisted pressures from fiscal conservatives to put budget balance first, or to make social insurance bear the brunt of spending cuts down the road. And he has used his gifts as a teacher to enlist the broad support of the American people for a far-reaching strategy of public investment.
These days, the way executives make money instead is in the form of bonuses for years where they bring in a lot of return (and often times for years they don't), but the threat of being fired for too much risk taking is minimal. The more risk you take, the more money everyone makes. And it's not the partner's money you're playing with anymore. You're playing with house money. No one is minding the store anymore....These executives did not actually fail. They succeeded wildly. It's just that they had a different goal - to take home as much money as they possibly could for themselves. Mission accomplished!
This is dated, but I decided to post it here for just that reason: "If we knew then, what they knew..." It's graph-intensive, and the source notes at the bottom of the screens are noteworthy, too, given the bailouts.
Here's a bit of background on Carlyle: