Bailout Blues

Arrgghhh!! I fell for it again…I read another Naomi Klein piece! I’ve stopped reading Shock Doctrine months ago because I couldn’t stand feeling so awful about how “the system” works, yet, the Rolling Stones magazine in my backpack tempted me one night on a subway ride home. (Don’t get me wrong, I do appreciate Klein’s insights…sometimes, I just feel I need something positive to supplement it…where’s the thanksgiving turkey?)

So, since we’re all about spreading , I thought I’d share this article with a fair warning of ‘you will feel disgusted’. Must read with a punching bag beside you...(aha! that’s what we need in this office)
http://www.rollingstone.com/politics/story/24012700/the_new_trough/print

Quick Take:
About how the bailout money is being administered.

Catchy phrase: Has the Treasury partially nationalized the private banks, as we have been told? Or, is it the Treasury that has been partially privatized by Wall Street, with its massive rescue plan now entirely in the hands of a private bank it is directly subsidizing?

I think it does not get mentioned enough that government stakes on recipients of bailout money are in the form of preferred stocks or warrants – securities which do not come with voting privileges.

Here’s a paragraph representative of the entire article:

"There is no obligation for banks to lend the money one way or the other,"
Jennifer Zuccarelli, a Treasury spokeswoman, tells Rolling Stone. "But the banks
have the understanding" that the money is intended for loans. "We're not looking
to control their operations."

Unfortunately, many of the banks
appear to have no intention of wasting the money on loans. "At least for the
next quarter, it's just going to be a cushion," said John Thain, the chief
executive of Merrill Lynch. Gary Crittenden, chief financial officer of
Citigroup, had an even better idea: He hinted that his company would use its
share of the cash — $25 billion — to buy up competitors and swell even bigger.
The handout, he told analysts, "does present the possibility of taking advantage
of opportunities that might otherwise be closed to us."
And the folks at
Morgan Stanley? They're planning to pay themselves $10.7 billion this year, much
of it in bonuses — almost exactly the amount they are receiving in the first
phase of the bailout. "You can imagine the devilish grins on the faces of Morgan
Stanley employees," writes Bloomberg columnist Jonathan Weil. "Not only did we,
the taxpayers, save their company...we funded their 2008 bonus
pool."

It didn't have to be this way. Five days before Paulson
struck his deal with the banks, British Prime Minister Gordon Brown negotiated a
similar bailout — only he extracted meaningful guarantees for taxpayers: voting
rights at the banks, seats on their boards, 12 percent in annual dividend
payments to the government, a suspension of dividend payments to shareholders,
restrictions on executive bonuses, and a legal requirement that the banks lend
money to homeowners and small businesses.

In sharp contrast, this
is what U.S. taxpayers received: no controlling interest, no voting rights, no
seats on the bank boards and just five percent in dividend payouts to the
government, while shareholders continue to collect billions in dividends every
quarter. What's more, golden parachutes and bonuses already promised by the
banks will still be paid out to executives — all before taxpayers are paid back.