tagged w/ AIG
AIG, the Wall Street insurance giant that was rescued from bankruptcy by billions in taxpayer bailouts, just reported nearly $20 billion in profit. But that big profit didn't come from being just the best insurance agency around. More than $17 billion came directly from federal tax giveaways.
After pumping more than $180 billion of taxpayer money into the company, the Treasury Department rewrote its own rules to boost AIG's stock -- and its executives' bonuses -- by eliminating the company's tax obligation. Now, the New York Times reports that AIG might not have to pay a cent in federal taxes for a decade or more.
Wall Street fat cats getting fatter off federal bailout money and dodging taxes with the help of special favors from friends in high places? In case you forgot what started the Occupy movement in the first place, that's it.
Treasury changed its rules to let AIG get away with this in 2008. It needs to change them back.
If you're angry at Wall Street, you probably remember AIG's name. In 2008, AIG was on the verge of collapse. Then the Treasury Department stepped in, using $182 billion in taxpayer dollars, to prevent the company from going under.
After taking the bailout money, AIG executives (the same ones who agreed to back Wall Street’s infamous credit default swaps without assessing the risks) were scheduled to receive eye-popping bonuses from their taxpayer bailouts. The Working Families Party organized a bus tour to the homes of AIG executives, and under the spotlight of global media scrutiny, they said they'd give the bonuses back.
But once the spotlight was off, most of them didn't.
They kept their bonuses and kept their tax breaks. But this kind of special treatment isn't fair. Join us in sending a message to Treasury Secretary Geithner, and tell him that AIG doesn't need the money.
Who benefits from this huge tax giveaway? AIG's top brass who are paid in stocks and the high-level traders who get seven-figure bonuses. The same people who made the decisions that led the behemoth organization to need a federal bailout in the first place.
So AIG's executives -- elite members of the 1% -- continue to get richer. And what about us? The federal government is missing tens of billions of dollars in tax revenue from AIG, and the Tea Party majority in the House demands that we pay for it in cuts to services for those who can least afford to lose them.
The Treasury Department, the keepers of our money, created this mammoth loophole in 2008, and can fix it without Congressional approval. We just need to remind Treasury Secretary Geithner that he works for us, not his Wall Street friends
Sign our petition to Treasury Secretary Tim Geithner demanding that he make AIG pay its taxes.
2. http://www.washingtonpost.com/wp-dyn/content/article/2009/12/22/AR2009122203788.htmlAIG, the Wall Street insurance giant that was rescued from bankruptcy by billions in... more
1 year ago
One of those recipients was Robert Benmosche, the CEO of AIG, you know, the firm that insured all of the toxic mortgage assets that the Wall Street thug banksters played supreme air hockey with, which caused the housing bubble and the ensuing economic collapse of 2008; the firm that received $180 billion in bailout money and is still 70% owned by the taxpayers.
http://veracitystew.com/2012/01/28/tarp-bailout-recipients-receive-huge-bonuses-video/One of those recipients was Robert Benmosche, the CEO of AIG, you know, the firm that... more
I am pretty sure I posted this last year, but it is well worth watching again. My friend who turned me on to this Video is an Agnostic. I was like Dude you would be the LAST person I would expect a Rod Parsley forward from.
He then went on to explain how Reverend Parsley breaks down the Federal Reserve in easy numbers and facts. Forget the guy is a Preacher and listen to the first 5 minutes. I guaranteed you will forward the Video to everyone you know!
The Powers that be KNOW as long as they can keep us arguing about BS like food stamps they can keep robbing us blind.I am pretty sure I posted this last year, but it is well worth watching again. My... more
There was a time when everyone thought CDOs are perfectly safe. That ended up being a tad incorrect. It resulted in AIG blowing up, recording hundreds of billions in losses and almost taking the rest of the financial world with it, leading ultimately to the first iteration of quantitative easing.
A few years thereafter, several blogs and fringe elements suggested that munis are the next major cataclysm and will likely require Fed bail outs (some time before Meredith Whitney came on the public scene with her apocalyptic call). It would be only fitting that the same AIG that blew up the world the first time around, end up being the same company that does so in 2011, and with an instrument that just like back then only an occasional voice warned is a weapon of mass destruction: municipal bonds.
AIG dropped over 6% today following some very unpleasasnt disclosures about its muni outlook, and corporate liquidity implications arising therefrom:
"American International Group Inc., the bailed-out insurer, said it faces increased risk of losses on its $46.6 billion municipal bond portfolio and that defaults could pressure the company’s liquidity."
So how long before we discover that Goldman has been lifting every AIG CDS for the past quarter? And how much longer after that until someone leaks a document that the company's muni strategy was orchestrated by one Joe Cassano?
Continue on at:
http://www.zerohedge.com/article/will-aig-implosion-20-lead-qe-30-0There was a time when everyone thought CDOs are perfectly safe. That ended up being a... more
" Of all forms of tyranny the least attractive and the most vulgar is the tyranny of mere wealth, the tyranny of plutocracy " - John Pierpont Morgan
"Everything predicted by the enemies of banks, in the beginning, is now coming to pass. We are to be ruined now by the deluge of bank paper. It is cruel that such revolutions in private fortunes should be at the mercy of avaricious adventurers, who, instead of employing their capital, if any they have, in manufactures, commerce, and other useful pursuits, make it an instrument to burden all the interchanges of property with their swindling profits, profits which are the price of no useful industry of theirs." --Thomas Jefferson to Thomas Cooper, 1814
"Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with a flick of the pen they will create enough money to buy it back again. However, take away from them the power to create money, and all the great fortunes like mine will disappear and they ought to disappear, for a better world to live in. But, if you wish to remain the slaves of bankers and pay the cost for your own slavery, let them continue to create money." - Sir Jostah Stamp, President of the Bank of England in the 1920's, the second richest man in Britain
''This great and powerful force-the accumulated wealth of the United States-has taken over all the functions of Government, Congress, the issue of money, and banking and the army and navy in order to have a band of mercenaries to do their bidding and protect their stolen property.'' - Senator Richard Pettigrew - Triumphant Plutocracy - Published, January 1, 1922
"A banker is a man who loans you umbrellas when the sun is shining and demands it back the moment it looks like rain." - Mark Twain" Of all forms of tyranny the least attractive and the most vulgar is the tyranny... more
By Gerard Ange'
THE SCAM OF AUSTERITY:
As we look around us today... we see a war zone. A war against the Middle Class ! A covert war that has been going on for years! A war with a battle plan. A plan to finance politicians like (Governor Scott Walker of Wisconsin ) to take over our Government and with an agenda to give the final death blow against Labor and the Middle Class.
WHAT WE SEE IS... A war to steal the money out of the hands and pockets of hard working families'. A war that takes food from children's mouths. A war that sucks the heat from our furnaces on the coldest winter's days.
THIS IS OUR REALITY.... THIS IS WHAT IS GOING... HERE & NOW!
I ASK THEN... Where is all that money going? Money doesn't disappear nor does it dematerialize. it had to go somewhere.
It went into the huge bank vaults of the bankers and, The 2% of the population who intentionally sucked all the money from our country and created all the job loss and the home foreclosures in the first place.
The same bankers and, the 2% of the population who were bailed-out by the US Tax Payers with over $700 Billion dollars.., from hard working people.
These same 2% and same Wall Street Bankers who took our Bail-Out money and didn't re-invest it in the people to create jobs as they had promised. But, they kept the money and continued to foreclose against families and then rewarded themselves with lavish million dollar bonuses as "job well done".
~ Proving again that: "TRICKLE DOWN ECONOMICS" was a Scam.!
These Bankers and, the 2% who now sit comfortably on piles money, now have all the time in the world to wait... Wait and watch as the citizens, families and workers squirm in pain and misery fighting poverty just for the basics in life... as they continue to lose their homes and jobs.
> IT IS TIME WE ALL ~ FOLLOW THE MONEY!
What we are seeing is a process leading this country down the same economic path as Turkey, Mexico, Greece. "A country with NO middle class!" A country with only the VERY RICH and The VERY POOR. What we are witnessing is the Resurgence Economic Principals dating back to the "PRE-INDUSTRIAL ERA"!
~ HENERY FORD CREATED THE MIDDLE CLASS IN AMERICA ~
Henry Ford in 1914 Set an Example for all of us to follow. Breaking with the long on-going "Industrial Era" Mentality ... When He Broke the Greedy On-Going Practice of Rich Industrialists: of paying their workers (a pittance!) ~ as little as possible...
Henry Ford made a bold deliberate move to "think outside the box" ! To pay twice the going labor rate to his workers. With an Idea so that this workers could then afford to buy his automobiles... His workers bought automobiles and more... houses and refrigerators and life got better for everyone... It was then...The Middle Class was born.
**Henry Ford's one bold act changed the world forever... And today has proven one very important economic principal for all us to follow into the future.
We see that there is a plan in the works to turn back the clock! To reverted back again to those old failed economic principals of the Industrial Age ~ Once again paying people as little as possible... (a pittance!) While "The New Industrialists" once again horde huge profits on the backs of poor exploited labor. These are greedy people, this slash and burn industrial age thinking is destructive to the global economy as it is to our families our neighbors and to the fabric of our society.
** The Future is before us: **
But before we can move forward... We must learn from the past.
We must act,,, to plant the seeds of the future and stimulate growth to grow a strong "global economy" an economy that gives "all workers" a fair "World Wage" And basic global worker's rights. Rights, that regulate and protect the global work force. We need to level the playing field world-wide for long-term global growth and stability. To put and end to the Greedy Destructive Short-Term Profits and Exploitation of Labor that is destroying the world around us.
THE LESSON LEARNED:
Henry Ford's proved by example that in order for a populous to contribute to the economy they must be paid a fair living wage. It is in everyones best interest! A fair " Wage" globally expands the market place for all goods stimulates all commerce allows all people to be better their lives and contribute to a healthy economy and future for all of us everywhere.
~In a Democracy it is important that we.. FLOAT ALL BOATS ~
More about Henry Ford & Trickle UP Economics
http://www.newamerica.net/node/8628By Gerard Ange'
THE SCAM OF AUSTERITY:
As we look around us today... we see a... more
Bloomberg News reports American International Group's "mortgage insurer does more business in Republican-leaning states, where it signs up more reliable customers than those in 'more liberal' areas, AIG chief executive Robert Benmosche said." Benmosche said, "Part of what we found out is that our model is about culture and it's about the attitude in the public. And what we find is where there's more of a tendency for people to be more liberal, more that the government is responsible for what happens to me." Bloomberg adds Benmosche "oversees an insurer propped up by more than $40 billion in government capital while competing mortgage guarantors operate without Treasury Department assistance."
http://www.washingtonpost.com/wp-dyn/content/article/2011/02/02/AR2011020206326.htmlBloomberg News reports American International Group's "mortgage insurer does... more
Goldman Sachs collected $2.9 billion from the American International Group as payout on a speculative trade it placed for the benefit of its own account, receiving the bulk of those funds after AIG received an enormous taxpayer rescue, according to the final report of an investigative panel appointed by Congress.
The fact that a significant slice of the proceeds secured by Goldman through the AIG bailout landed in its own account--as opposed to those of its clients or business partners-- has not been previously disclosed. These details about the workings of the controversial AIG bailout, which eventually swelled to $182 billion, are among the more eye-catching revelations in the report to be released Thursday by the bipartisan Financial Crisis Inquiry Commission.
The details underscore the degree to which Goldman--the most profitable securities firm in Wall Street history--benefited directly from the massive emergency bailout of the nation's financial system, a deal crafted on the watch of then-Treasury Secretary Henry Paulson, who had previously headed the bank.
"If these allegations are correct, it appears to have been a direct transfer of wealth from the Treasury to Goldman's shareholders," said Joshua Rosner, a bond analyst and managing director at independent research consultancy Graham Fisher & Co., after he was read the relevant section of the report. "The AIG counterparty bailout, which was spun as necessary to protect the public, seems to have protected the institution at the expense of the public."
Goldman and AIG both declined to comment.
When news first broke in 2009 that Goldman had been an indirect beneficiary of the AIG bailout, collecting the full value of some $14 billion in outstanding insurance polices it held with the firm, the officials who brokered the deal justified these terms as a necessary stabilizer for the broader financial system. As the world's largest insurance company, AIG's inability to cover its outstanding obligations could have threatened the solvency of the institutions holding its policies, asserted the Federal Reserve Bank of New York, which oversaw the deal.
Goldman fended off claims that the arrangement amounted to a backdoor bailout by asserting that none of the money from the AIG rescue landed in its own coffers. Rather, those funds went to compensate clients or institutions on the other side of its trades, Goldman said.
But the report from the financial crisis commission, obtained by The Huffington Post in advance of its release, appears to challenge that assertion: The report reveals another pot of money conveyed to Goldman--the $2.9 billion to cover trades the Wall Street investment house made for itself. That money went straight to the bank's bottom line, according to the report.
Over the last two years, Goldman has reported nearly $22 billion in profits, according to its official earnings statements. During those years, it has paid out $31.6 billion in compensation to its employees.
According to the report, the financial crisis commission first learned that the $2.9 billion in AIG funds landed in Goldman's account through an e-mail the bank sent to the panel on July 15, 2010 in response to questions.
Previously, Goldman executives had testified that the AIG bailout funds the bank collected went to compensate its clients and institutions that held the other side of its trades.
At a hearing on July 1, 2010--two weeks before Goldman sent the e-mail acknowledging how $2.9 billion in AIG funds wound up in its own account--the crisis panel questioned Goldman's chief financial officer, David A. Viniar and managing director David Lehman. Both said they knew nothing about AIG funds landing in the bank's private coffers, according to a transcript of the hearing.
The report concludes that Goldman collected the $2.9 billion as payment for so-called proprietary trades made for its own account--essentially successful bets on large pools of financial instruments.
"The total was for proprietary trades," the report asserts. "Unlike the $14 billion received from AIG on trades in which Goldman owed the money to its own counterparties, this $2.9 billion was retained by Goldman."
A spokesman for for the crisis commission said it would be premature to discuss the panel's findings.
"I have no comment on the commission's report until it is released on Thursday," said crisis commission spokesman Tucker Warren.
Goldman collected at least half the money at issue after AIG received the first round of a public bailout whose tab eventually swelled to $182 billion, according to the commission's report.
The winning bets that Goldman collected on through the AIG bailout are known as credit default swaps--essentially, a type of insurance, albeit one that operates in the shadows, beyond purview of regulators. The insurance giant wrote trillions of dollars worth of these policies during the real estate boom without setting aside sufficient cash to cover losing bets, positioning itself for potential catastrophic losses.
According to the crisis commission report, Goldman bought credit default swaps from AIG as a form of insurance on investments known as Abacus, which were pools of mortgage-linked securities. One such pool put Goldman cross-wise with federal regulators: Last year, Goldman agreed to pay $550 million in fines to settle securities fraud charges filed by the Securities and Exchange Commission.
According to the lawsuit, Goldman allegedly concealed the fact that it designed the basket of mortgage-linked securities to fail at the behest of another client who netted about $1 billion by betting against them. Goldman sold the same investments to other clients--mostly European banks--without disclosing their provenance, according to the SEC's lawsuit.
The crisis panel did not disclose whether this Abacus deal was among those on which Goldman collected a portion of the AIG bailout funds.
The AIG bailout, which paid holders of its insurance policies 100 cents on the dollar, was aggressively defended by federal regulators as a critical immunization against a potential financial pandemic as the insurance company teetered on the verge of collapse in the fall of 2008.
Treasury Secretary Timothy F. Geithner, who led the New York Fed at the time the AIG rescue was crafted, later told Congress that a collapse risked "large and unpredictable global losses with systemic consequences--destabilizing already weakened financial markets, further undermining confidence in the economy, and constricting the flow of credit." Both the New York Fed and Treasury declined to comment.
Analysts say such fears caused the officials who crafted the bailout to lean heavily toward speed and size, while failing to factor in fairness.
"At the time, the idea was the sucker could go down because there wasn't enough liquidity in the system, money wasn't moving, and you could see a domino effect,"
said Ann Rutledge, a principal at R&R Consulting in New York, which specializes in structured finance.
In reality, she contends, those fears were overblown: There was ample money in the financial system. Rather, individual institutions did not have enough cash on hand to survive their losses, she asserts. But the fear of a broader liquidity crisis was used as justification for what now appears to have been a backdoor means of bailing out Goldman, said Rutledge.
The details in the commission's report leave Goldman "naked," she added. "It doesn't have the fig leaf of a systemic risk argument. Normally what happens when you have a sophisticated institution that's doing stupid credit stuff is you let them eat it, but that didn't happen in the bailout."
http://www.huffingtonpost.com/2011/01/26/goldman-sachs-aig-backdoor-bailout_n_814589.htmlGoldman Sachs collected $2.9 billion from the American International Group as payout... more
Bailed-out insurer American International Group took another step toward winding down its U.S. government support on Monday by securing $4.3 billion of bank credit lines, and company shares surged.
http://www.indiareport.com/India-usa-uk-news/reuters/Business/71471Bailed-out insurer American International Group took another step toward winding down... more
Wanna know who made hundreds of millions destroying our country?
The "Inside Job" an excellent movie that exposes a good portion of what was happening and who was responsible for our current economic state.
I'll say this in President Obama's defense, we elected him to go swim in a fishbowl full of sharks with more money and more power than him. The more we support him, the more he can do for us, plain and simple.Wanna know who made hundreds of millions destroying our country?
The "Inside... more
NEW YORK (CNNMoney.com) -- AIG said Thursday it has reached agreement on a plan that it will end its multi-billion dollar bailout from the federal government and provide for the full repayment to U.S. taxpayers.
The insurer outlined various measures for repaying its debt, including the repayment of $20 billion in senior secured debt owed to the Federal Reserve Bank of New York's credit facility.
After the credit facility is repaid in full, the company said the U.S. Treasury will exchange its $49.1 billion of preferred shares into common AIG shares.
Also, AIG said it will facilitate the "orderly exit" of the Federal Reserve Bank of New York's interest in two special purpose vehicles totaling $26 billion. The insurer said it draw down up to $22 billion through the Troubled Asset Relief Program to purchase these interests from the bank.
AIG took another step towards paying back its government bailout earlier Thursday, announcing an agreement to sell its Japan-based units for $4.8 billion.
The insurer said it is selling its Star Life and AIG Edison Life companies to Newark, N.J.-based Prudential Financial (PRU, Fortune 500). Prudential's previous bid for an Asian life insurance unit was rejected by AIG earlier this year.
AIG's (AIG, Fortune 500) stock rose more than 2% in pre-market trading.
The U.S. government currently owns a 79.8% majority stake in the insurer.
"This is a pivotal milestone as we deliver our long-standing promise to repay taxpayers and we thank the American people for their support," said AIG Chief Executive Robert Benmosche. To top of pageNEW YORK (CNNMoney.com) -- AIG said Thursday it has reached agreement on a plan that... more
The idea of secret banking cabals that control the country and global economy are a given among conspiracy theorists who stockpile ammo, bottled water and peanut butter. After this week’s congressional hearing into the bailout of American International Group Inc., you have to wonder if those folks are crazy after all.
Wednesday’s hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials.
We’re talking about the Federal Reserve Bank of New York, whose role as the most influential part of the federal-reserve system -- apart from the matter of AIG’s bailout -- deserves further congressional scrutiny.
The New York Fed is in the hot seat for its decision in November 2008 to buy out, for about $30 billion, insurance contracts AIG sold on toxic debt securities to banks, including Goldman Sachs Group Inc., Merrill Lynch & Co., Societe Generale and Deutsche Bank AG, among others. That decision, critics say, amounted to a back-door bailout for the banks, which received 100 cents on the dollar for contracts that would have been worth far less had AIG been allowed to fail.
That move came a few weeks after the Federal Reserve and Treasury Department propped up AIG in the wake of Lehman Brothers Holdings Inc.’s own mid-September bankruptcy filing.
Saving the System
Treasury Secretary Timothy Geithner was head of the New York Fed at the time of the AIG moves. He maintained during Wednesday’s hearing that the New York bank had to buy the insurance contracts, known as credit default swaps, to keep AIG from failing, which would have threatened the financial system.The idea of secret banking cabals that control the country and global economy are a... more
by Amanda Anderson, Media Consortium blogger
Editor’s Note: Zach Carter is out this week, but we’ve compiled a rundown of the biggest economy-related stories, including the rise of foreclosure mills and why social security isn’t in jeopardy. Zach will be back next Tuesday, so stay tuned!
Who needs ethics when you’ve got foreclosure mills?
Want to make money quickly, but don’t want ethics to get in the way? Big banks are outsourcing their foreclosure duties to fraudulent law firms, known as foreclosure mills, and getting away with it. Zach Carter explains the latest get rich quick scheme for AlterNet. Foreclosure mills are ethically questionable law firms that process legal documents for foreclosures. They tend to have an emphasis on quantity, not quality. Carter writes:
Big banks are not outsourcing their foreclosure processing to shady law firms with a history of breaking the law for a quick buck. These foreclosure scammers forge documents, backdate signatures, slap families with thousands of dollars in illegal fees and even foreclosure on borrowers who haven’t missed a payment.
Andy Kroll chronicles the evolution of foreclosure mills for Mother Jones. Kroll also exposes a notorious Floridian law firm founded by David J. Stern that is using every trick in the book—including backdating documents and illegally charging clients massive fees—to profit from the foreclosure crisis:
While rushing foreclosures isn’t illegal, Stern’s fledgling firm was promptly accused of something that is: gouging people who are trying to get out of default. In October 1998, Tallahassee attorney Claude Walker filed a class-action lawsuit involving tens of thousands of claimants, alleging that Stern had piled excessive fees on families fighting to keep their homes. (Walker, who visited Stern’s offices in 1999 to collect depositions, described the place as “a big warehouse” where hordes of attorneys holed up in tiny, crowded offices “like hamsters in a cage.”)
Don’t blame Social Security for the deficit
Fact: Social Security benefits will be able to be paid, in full, through 2037.
Fact: 75% of Social Security benefits will be able to be paid thought 2084.
Fact: There is a huge surplus in Social Security trust fund- $2.5 trillion. So why the big push to trim the program? In an interview with The American Prospect, Rep. Ted Deutch (D-FL) explains his proposed legislation that will actually expand benefits:
Ninety-five percent of the people in our country [already] pay Social Security tax on 100 percent of their income. The bill provides both contribution and benefit fairness: Even as people are going to be paying in more, they’re going to receive more benefits. Doing that, by the way, will also ensure the solvency of Social Security, which is terribly important.
The Fed’s failure and the AIG Bailout: A brief history
In The Nation, William Greider explains how the Federal Reserve Board gambled with American taxpayers’ money by not considering alternatives to the AIG bailout. Grieder highlights a report from the Congressional Oversight Panel, which “provides alarming insights that should be fodder for the larger debate many citizens long to hear—why Washington rushed to forgive the very interests that produced this mess, while innocent others were made to suffer the consequences.”
In short, the Fed acted “under the business-as-usual expectations of the private financial system, while skipping lightly over the public consequences.”
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.by Amanda Anderson, Media Consortium blogger
Editor’s Note: Zach Carter is... more
FORTUNE -- The Ohio Attorney General's office announced today that a class of three pension funds it represented in fraud complaints against AIG (AIG, Fortune 500) have settled with the federally-owned insurance giant for $725 million.FORTUNE -- The Ohio Attorney General's office announced today that a class of... more
Listen to Paul De Graaff who is the Corporate Security Officer for AIG Operations & Systems Division speak about AIG's strategy from a security perspective, and the importance of having the right technology at the right place.
http://leadershiptraining.podomatic.com/entry/2010-07-07T18_51_20-07_00Listen to Paul De Graaff who is the Corporate Security Officer for AIG Operations... more
by Zach Carter, Media Consortium blogger
Image courtesy of Flickr user SEIU International under Creative Commons LicenseOn Thursday, the U.S. Senate passed a financial reform package that includes a handful of important reforms, but it won’t fundamentally change the relationship between banks and society. Wall Street still has a vice grip on our economy, and lawmakers still find it very difficult to stand up to bigwig financiers.
The real fight for our economy will involve future legislative battles with bankers. Winning those battles will require sweeping action by engaged citizens. The good news is, critical progressive mobilization is already happening. Public outcry helped fuel the fire for Senate reform. Rep. Barney Frank (D-MA), has said that the Wall Street reform bill he pushed through the House last year would have been much stronger in today’s atmosphere of outspoken economic unrest.
Focus on the Fed
So what’s good about the bill the Senate just passed? As Annie Lowrey explains for The Washington Independent, the Federal Reserve’s emergency lending programs will finally be subjected to public scrutiny.
The Fed served as the U.S. government’s chief bailout engine during the crisis. It injected trillions of dollars into the banking system without any oversight. We still don’t know who got the vast majority of that money, or what collateral the Fed accepted in return. There are all sorts of potential scandals, ranging from sweetheart deals the Fed cut with hedge funds to the trillions of dollars in loans to megabanks with no strings attached.
Of particular interest are the “Maiden Lane vehicles”—programs the Fed devised to purchase or guarantee assets from Bear Stearns and AIG. These were explicit bailouts for individual firms. We know almost nothing about the Bear Stearns bailout, and what little we do know about the AIG bailout is unsavory to say the least— big bonuses for AIG’s employees, with little or no effort to limit the impact on taxpayers.
There are still a handful of important fights as the House and Senate iron out the differences between their respective versions of the bill. As I emphasize for AlterNet, a host of major issues are still on the table, including consumer protection rules and fixing the derivatives casino. These changes could be gutted entirely or dramatically strengthened during negotiations between the House and Senate.
The final bill will not dramatically alter Wall Street. As Roger Bybee explains for In These Times, the Democratic leadership has been trying to both establish meaningful reforms and simultaneously maintain its campaign finance relationship with megabanks. Republicans have almost universally attempted to block any reform altogether.
Regulators will get a handful of important new tools, including the authority to shut down complex banks on the verge of collapse, the ability to monitor derivatives and a have new set of powers to protect consumers. That’s all good, but we’ll still be living with too-big-to-fail behemoth banks that engage in reckless trading and exploit consumers.
That means that the real business of fixing the financial system is still to come. And, as Christopher Hayes emphasizes for The Nation, that business is not going to be accomplished without serious, organized progressive activists putting pressure on political leaders to act in the public interest, rather than the interests of the corporate class.
When the country suffered a trauma that massively discredited the establishment rulers, the Democratic Party became the establishment. And progressive groups in DC, under stern White House orders not to cause trouble (don’t show up at his door! he’s a donor! we might nominate him for something!), descended into what one organizer calls “grotesque transactionalism” . . . . If we’re going to get reform on the scale we need, bank lobbyists and members of Congress alike have to be confronted with the terrifying thought that the system from which they profit might just be run over—that 700 angry protesters might show up on their lawn.
As Hayes details, Bank of America lobbyist Gregory Baer woke up last Sunday with exactly that– 700 protesters in his front yard. That kind of pressure gets results. It took Franklin Delano Roosevelt seven years to enact his New Deal financial reforms. Earlier in the 20th Century, it took more than a decade for public opinion to align itself with the corporate crackdowns pushed by Republican President Theodore Roosevelt. It’s reasonable to expect the fight for fair finance to take more than two years, and important to fight hard for it.
The minimum reforms are already clear. Essentially, we need to bring banking back to the model that persisted from the 1930s into the 1980s—an era with no serious financial crises or bailouts. Our current financial woes stem from the systematic dismantling and deregulation of this system over the past 30 years.
But we also need to learn from more recent economic experiments. As Ellen Brown notes for Yes! Magazine, the state of North Dakota has been largely insulated from much of the fallout from the financial crisis of 2008. Part of the reason for the state’s relative stability lies in the fact that it operates its own bank.
North Dakota’s direct supervision of one institution among the hundreds of banks that operate in the state has helped insulate it from the credit storm on Wall Street. The state has its own engine of credit, and can keep funds flowing to businesses that need it, even in the middle of a crisis.
The prospect of state-run banking may seem radical, but it isn’t. It’s a practical proposal based on the established, real-life success of the Bank of North Dakota. As Brown notes, five other states have legislation pending that would create their very own banks—Massachusetts, Virginia, Washington, Illinois and Michigan, while Hawaii recently approved a study to determine the usefulness of a bank run by that state.
The financial reform bill the Senate just passed was a good start, but we’ve got a long way to go. We’re not going to get there without a committed community of progressive activists who demand that the economy serve society, not only entrenched corporate interests.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.http://www.themediaconsortium.org/2010/05/25/weekly-audit-want-economic-justice-then-it... more