When will the US government stop the senseless bailout of failed financial institutions and their greedy insiders?
When will the US government demonstrate they value the taxpayers and the voters more than the “too big to fail” financial corporations?
When will the US government put the same amount of money towards people who pay the taxes and those that have lost the jobs, homes and their dignity of no fault of their own?
Jobless rates are rising higher and so are home foreclosures. President Obama argued that Bush’s “trickle down approach” has failed. So how is giving trillions to financial corporations to help the economy not a trickle down approach?
March 31 (Bloomberg) — The U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the longest recession since the 1930s.
New pledges from the Fed, the Treasury Department and the Federal Deposit Insurance Corp. include $1 trillion for the Public-Private Investment Program, designed to help investors buy distressed loans and other assets from U.S. banks. The money works out to $42,105 for every man, woman and child in the U.S. and 14 times the $899.8 billion of currency in circulation. The nation’s gross domestic product was $14.2 trillion in 2008.
President Barack Obama and Treasury Secretary Timothy Geithner met with the chief executives of the nation’s 12 biggest banks on March 27 at the White House to enlist their support to thaw a 20-month freeze in bank lending.
“The president and Treasury Secretary Geithner have said they will do what it takes,” Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said after the meeting. “If it is enough, that will be great. If it is not enough, they will have to do more.”
Commitments include a $500 billion line of credit to the FDIC from the government’s coffers that will enable the agency to guarantee as much as $2 trillion worth of debt for participants in the Term Asset-Backed Lending Facility and the Public-Private Investment Program. FDIC Chairman Sheila Bair warned that the insurance fund to protect customer deposits at U.S. banks could dry up because of bank failures.
‘Within an Eyelash’
The combined commitment has increased by 73 percent since November, when Bloomberg first estimated the funding, loans and guarantees at $7.4 trillion.
“The comparison to GDP serves the useful purpose of underscoring how extraordinary the efforts have been to stabilize the credit markets,” said Dana Johnson, chief economist for Comerica Bank in Dallas.
“Everything the Fed, the FDIC and the Treasury do doesn’t always work out right but back in October we came within an eyelash of having a truly horrible collapse of our financial system, said Johnson, a former Fed senior economist. “They used their creativity to help the worst-case scenario from unfolding and I’m awfully glad they did it.”
Federal Reserve officials project the economy will keep shrinking until at least mid-year, which would mark the longest U.S. recession since the Great Depression.
The following table details how the Fed and the government have committed the money on behalf of American taxpayers over the past 20 months, according to data compiled by Bloomberg.
===========================================================
--- Amounts (Billions)---
Limit Current
===========================================================
Total $12,798.14 $4,169.71
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Federal Reserve Total $7,765.64 $1,678.71
Primary Credit Discount $110.74 $61.31
Secondary Credit $0.19 $1.00
Primary dealer and others $147.00 $20.18
ABCP Liquidity $152.11 $6.85
AIG Credit $60.00 $43.19
Net Portfolio CP Funding $1,800.00 $241.31
Maiden Lane (Bear Stearns) $29.50 $28.82
Maiden Lane II (AIG) $22.50 $18.54
Maiden Lane III (AIG) $30.00 $24.04
Term Securities Lending $250.00 $88.55
Term Auction Facility $900.00 $468.59
Securities lending overnight $10.00 $4.41
Term Asset-Backed Loan Facility $900.00 $4.71
Currency Swaps/Other Assets $606.00 $377.87
MMIFF $540.00 $0.00
GSE Debt Purchases $600.00 $50.39
GSE Mortgage-Backed Securities $1,000.00 $236.16
Citigroup Bailout Fed Portion $220.40 $0.00
Bank of America Bailout $87.20 $0.00
Commitment to Buy Treasuries $300.00 $7.50
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FDIC Total $2,038.50 $357.50
Public-Private Investment* $500.00 0.00
FDIC Liquidity Guarantees $1,400.00 $316.50
GE $126.00 $41.00
Citigroup Bailout FDIC $10.00 $0.00
Bank of America Bailout FDIC $2.50 $0.00
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Treasury Total $2,694.00 $1,833.50
TARP $700.00 $599.50
Tax Break for Banks $29.00 $29.00
Stimulus Package (Bush) $168.00 $168.00
Stimulus II (Obama) $787.00 $787.00
Treasury Exchange Stabilization $50.00 $50.00
Student Loan Purchases $60.00 $0.00
Support for Fannie/Freddie $400.00 $200.00
Line of Credit for FDIC* $500.00 $0.00
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HUD Total $300.00 $300.00
Hope for Homeowners FHA $300.00 $300.00
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he FDIC’s commitment to guarantee lending under the
Legacy Loan Program and the Legacy Asset Program includes a $500
billion line of credit from the U.S. Treasury.
Yield Curve – difference between interest rate of borrowed money versus the interest rate earned on the same money lend out.
Essentially, AIG was allowed to hide a hedge fund in a solid insurance business.
AIG was a hybrid company hiding from different government agencies and was allowed to create exotic financial products went unregulated and therefore selected by economic terrorist to be used as a weapon of mass destruction.
Enormous risks were allowed to built up hidden from the American public within its four walls which once triggered will allow vast wealth to be transferred from the American people to these yet to be identified terrorists.
According to the Ray De Lorenzi, American Association for Justice at Justice.org: “…The Starr Foundation is one of the largest foundations in the United States. It is chaired by Hank Greenberg, CEO of AIG until 2005. AIG gave $23 million to U.S. Chamber through the Starr Foundation to push anti-regulatory efforts. The majority of this money, $15 million, was pledged in 2003 immediately after the passage of Sarbanes-Oxley to initiate a “capital campaign for educational and research programs.” Effectively, this money was to begin setting the groundwork to roll back post-Enron reforms…”
The money was given from Starr to U.S. Chamber’s own foundation, which freely moves money to the corporate arm. Of U.S. Chamber’s 17 foundation grants, seven came from a variety of corporations totaling $2.2 million. The remaining 10 grants to U.S. Chamber, equaling $24.25 million, all came from Greenberg and the Starr Foundation.15
Democratic House Representative Alan Grayson of 8th District Florida notice that AIG may need $500 billion more if yield curve moves by 1%. See video # 1 below.
AIG 2008 10K filing with SEC reveals this in plain sight but Bernanke and Geithner makes no mention of it to the American Taxpayer who owns AIG despite receiving the recent stress test results.
Bernanke and Paulson go before Congress and asks Congress for $700 billion and creates TARP which AIG takes $40 billion.
Geithner arranging additional lending facilities to AIG of $30 billion.
AIG has $1.6 trillion to “unwind” according to AIG CEO Liddy. But these are really paper losses. It’s not like AIG sold oranges and the oranges are rotten have to be thrown away. So where are all these hundreds of billions going? Watch video #2 of Democratic House Representative Carolyn Malony from New York’s 14th District. She says it’s going to foreign countries. Now how are foreign governments “systemic risks” to the United States? Sounds fishy? You betcha’!!! So why was the US Congress and the American Taxpayer rushed into this bailout strategy using “fear and scare” propaganda since Sep 2008? Hmmm…
Well, don’t feel alone. As United Technologies announced today that 11,600 jobs will be eliminated in 2009, these future unemployed will join the 12.5 million Americans who are currently unemployed as of the end of February 2009. Year to date figures shows 1.3 million jobs eliminated which is an average of 22,135 jobs lost every day.
In the midst of the economic decline, it appears that there is much debate about the causes of the recession and the government remedies to arrest job loss, foreclosures and restore confidence in our financial sector which is widely believed to be the epic center of the crisis.
Jim Puzzanghera of the LA Times wrote on March 9, 2009:
Some experts say what these ventures have done is make an AIG or a Citigroup that’s “too interconnected to fail.” And it’s not just the size that would matter. AIG’s interconnectedness with other companies, markets and economies is so huge and convoluted that it’s almost impossible to foresee what all the consequences of collapse would be.
The prime example of this problem is about $500 billion in unregulated credit default swaps held by AIG. Those complex financial instruments are essentially insurance policies taken out on mortgage-backed securities and other assets. The swaps were designed to pay out money to buyers who got caught in exactly the type of financial crisis taking place right now.
In essence, AIG was committed to insuring hundreds of billions, if not trillions, of dollars in investments. When the housing market crashed and the economy nose-dived, those investments tanked as well. And AIG was liable for the losses — a liability so large that it is now overwhelming the rest of the company, including the still-profitable parts.
What’s worse, because credit default swaps were unregulated and the layers of transactions so arcane that they are difficult to understand clearly, the true cost is essentially impossible to measure with certainty. Once the dominoes began to fall, no one knew where the process would end.
“People don’t know the exposure, so as a result there’s a huge premium on fear and the unknown,” said Kent Smetters, associate professor of insurance and risk management at the University of Pennsylvania’s Wharton School.
However, Ralph Vartabedian of the LA Times wrote on March 10, 2009:
But critics contend that what was originally proposed as an overwhelming gesture of government resolve to get banks on their feet now seems like an intravenous drip, barely sustaining the giant institutions that account for the majority of U.S. bank assets. As time goes on, the problems appear again to be deepening.
“Some of these banks are walking dead and should be closed,” said Sen. Richard C. Shelby of Alabama, a 20-year veteran of the Senate Banking Committee and its senior Republican. “We are propping up financial institutions that are insolvent and have already failed. The government has made a political decision to keep them going at the taxpayers’ expense.”
At the other end of the political spectrum, the AFL-CIO Executive Council voted unanimously last week to urge President Obama to nationalize problem banks as a way to stimulate and stabilize the financial system.
“Every day we delay is another day workers in this country feel the pain of a stagnant economy,” said Richard L. Trumka, secretary-treasurer of the labor organization, a powerful influence on the Democratic-controlled White House and Congress.
Despite, P. Parameswaran wrote of US Federal Reserve Chairman as saying,
“In the near term, governments around the world must continue to take forceful and, when appropriate, coordinated actions to restore financial market functioning and the flow of credit,” he told the Council on Foreign Relations, a think tank, in Washington.
Speaking ahead of a weekend meeting of the Group of 20 finance ministers and central bank chiefs in London, Bernanke said while fighting the current crisis, policymakers should embrace reforms to the financial architecture that could help prevent a similar turmoil from developing in the future.
“We must have a strategy that regulates the financial system as a whole, in a holistic way, not just its individual components,” he said.
“In particular, strong and effective regulation and supervision of banking institutions, although necessary for reducing systemic risk, are not sufficient by themselves to achieve this aim.”
Martin Crutsinger, AP Economics Writer reported today:
Treasury Secretary Timothy Geithner says that within the next couple of weeks the administration will unveil its plan for dealing with the toxic assets that lie at the heart of the current financial crisis.
Geithner says that the plan the administration has put together will provide low-cost government financing to private investors who are willing to purchase the bad assets that are currently clogging banks’ balance sheets.
It is clear that our despite the expectation of the US Government to always have the answers or solutions to the problems of society, it is abundantly clear that they don’t. As painful as it maybe to experience first hand the fumbling of government, it appears that finally that the government leaders who are charged with turning the economy around are beginning to focus in on the issues and causes which is good news. The first step to solving any problem is first identifying the problems and causes.
The Dow Jones Industrial Average rallied 380 points today as Citibank reported positive operating profits the first two months of this year. Perhaps, we’re beginning to see a glimmer of light in this dark and winding tunnel.
