Bailout Protest, NYC!

Updated: These photos were taken by Jeremy Scahill who attended the protests against Bush's bailout in New York City. I especially like the sign that says "Jump! You Fuckers".

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Protesters confront corporate execs staring out the windows at the streets:

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"Greed Kills" ... "Paulson, Rescue My Two Kids From Their College Loans" ... "Bush & Co., Bailout the Real People, Not Your Rich Pals":

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"4.0 GPA, $90,000 in Debt, No Job ... Where's My Bailout?":

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Nationalization of the lending industry

After we socialize the banks, can we please work on healthcare? I mean, AIG is now 80% owned by the citizens of the US, we're working nationalizing on the entirety of mortgage lending institutions, so why not the one the people want and need? Single-payer healthcare now!

By the way, does this mean the housing industry is also socialized? Just asking because it seems like lately banks are giving homes away like account-opening incentives. They seem to have so many!--Pete.
Here's an article from today's Counterpunch:

The Paulson-Bernanke Bailout Plan
Will the cure be worse than the crisis?
By Michael Hudson

Saturday’s $700 billion junk mortgage bailout is the largest and worst giveaway since a corrupt Congress gave land grants to the railroad barons a century and a half ago. If it goes through, it will shape the coming century by giving finance unprecedented power over debtors – homebuyers, industry, state and local government, and the federal government as well.

But what threatens to be even worse is the government’s move to let the financial sector make even higher, unprecedented gains by working its way out of negative equity to “make taxpayers whole” by repaying the government’s bailout by bleeding the economy at large. nticipating congressional capitulation in this license to engage in predatory credit, the latest Sunday evening surprise is that Treasury Secretary Henry Paulson’s own firm, Goldman Sachs, is to become bank holding company picking up the financial wreckage now that the government is covering the bad loans and investment gambles Wall Street has made.

What Mr. Paulson did not say in his weekend TV interviews, organized as what he hoped would be a series of victory laps. Neither he nor Fed Chairman Ben Bernanke nor any other Wall Street spokesman has acknowledged that the government has helped promote today’s $46 trillion debt bomb. This enormous overhead consists of the product that banks are selling – interest-bearing debt that is being added to real estate, corporate industry and personal income to price the U.S. economy out of world markets.

We have heard nothing about how Wall Street lobbyists have succeeded in killing the financial cops on Wall Street – and done the same with the consumer cops on Main Street. There is no public recognition of the fact that more money in tax cuts went to the top 1% than the bottom 80% combined.

So how much credence should we give the newest proposals for the United States to commit economic suicide by turning over the powers of government in effect to Wall Street? When they talk about “making taxpayers whole,” what really is their game?

Read the rest (it's really good!)

It's official! Markets no longer "free". More socialism for the endangered wealthy.

One bailout begets another
Vancouver Sun

Thursday, September 18, 2008

CREDIT: Stan Honda, Agence France-Presse; Getty Images Media gather outside the offices of of troubled insurer AIG.

No doubt some bookie on Wall Street is taking bets on which institution will be the next beneficiary of a government bailout.

Perhaps next up is Washington Mutual, America's biggest savings and loan company, which may need $24 billion in mortgage guarantees to survive long enough to find a buyer -- if it can. Maybe it will be Morgan Stanley or Goldman Sachs, both venerable Wall Street investment dealers investors appear to have lost faith in. Or it could be one of the hundreds of regional banks that are likely to join IndyMac Bancorp of California and Columbian Bank & Trust Co. of Kansas on the scrap heap of financial institutions mauled by the subprime mortgage monster.

With its "tough love" rescue of American International Group this week, Washington has clearly committed itself to further interventions. The $85-billion aid package, which will give the U.S. government an 80 per cent stake in the ailing insurance giant, was defended on grounds that a disorderly failure would further destabilize markets, result in higher borrowing costs, reduce household wealth and weaken economic performance. A similar rationale was used to save investment dealer Bear Stearns by engineering its takeover by JP Morgan in a deal that leaves U.S. taxpayers on the hook for up to $29 billion of the defunct firm's bad investments.

It seems like only yesterday that the government, after assuring the world they were adequately capitalized, took over Fannie Mae and Freddie Mac, which hold about half the mortgage debt in the U.S., an amount estimated at more than $5 trillion. That risk will now be borne by American taxpayers.

That bailout was easy for bureaucrats to justify. After all, the two mortgage companies were created by the U.S. Congress with a mandate to make it easier to realize the dream of home ownership for Americans. The notion that they were ever private entities was largely illusory. What's more, China's central bank holds more than $340 billion of Fannie and Freddie securities so a collapse of the institutions was unthinkable from a foreign policy perspective.

Lehman Brothers Holdings, which was pushed into Chapter 11, was the odd man out. U.S. Treasury Secretary Henry Paulson's "adamant" refusal to use government money to save Lehman was a one-off. Although Lehman's derivative entanglements are spread far and wide, the government's assessment was that it could be allowed to fail without jeopardizing international relationships -- and without triggering systemic economic collapse. This was political expediency more than fiscal pragmatism.

But as more institutions line up for government aid, determining which deserve a handout -- and which can be allowed to fail -- is bound to become increasingly arbitrary and problematic. Why, for instance, should financial services companies receive government assistance while manufacturing firms are ignored (notwithstanding the $25 billion in loan guarantees the big three U.S. automakers are lobbying for)?

By offering bailouts, governments invite moral hazard by freeing financial institutions from any consequences of their reckless behaviour, failures of due diligence and greed.

Some argue that more regulation is required to prevent a repeat of today's credit crisis; that it would never have happened had rules been in place to restrict mortgage-backed securities and their offspring.

But it is difficult to see how any regulatory regime could have contained the global market for financial derivatives.

The fact is that capitalist economies produce winners and losers. Every few years, the weak are weeded out in a stock market crash, a commodities bust, a technology meltdown, a credit crunch, a banking crisis or some other episode of financial distress. Economist Hyman Minsky argued that persistent financial and economic instability is normal in a capitalist economy. Financial systems, he said, are inherently susceptible to bouts of speculation that, if they last long enough, end in crises. His view, considered heretical by a majority of economists in the past, has gained legitimacy through the last few decades of upheaval.

Government intervention only delays the inevitable shakeout -- a cleansing process economist Joseph Schumpeter dubbed creative destruction -- and squanders tax dollars to prop up companies that have made the wrong bet at the wrong time and deserve their fate.

It should be made clear to private companies that they are entitled to reap the rewards of success but must suffer the consequences of failure.

online

Do you think governments should bail out private firms in financial distress?

Go to vancouversun.com/editorial to answer Yes or No.

© The Vancouver Sun 2008

Government steps in again, bails out AIG with $85B

Socialism, or state capitalism, is getting very, very popular in these dark economic times. The people, for their part, are very proud to help out these grand and noble institutions of American magnanimity. During times of abject poverty among the dispossessed, these beneficent money changers have always stepped in and provided whatever was needed without asking for a return, knowing that their very existence - their charters - were held in trust by the people of this nation.

Wait...

Oh no, I think that was a dream I had. There was also something about a fish and a bicycle as well as a pig's eye. Sorry, carry on. Just the private sector gladly robbing us yet again with the help of their friends in government. See, socialism works - for the wealthy, anyway.--Pete

By Jeannine Aversa, Ieva M. Augstums and Stephen Bernard, AP Business Writers Government saves AIG with $85 billion loan, takes 80 percent stake in battered insurance giant WASHINGTON (AP) -- Another day, but not just another bailout. This one's a stunning government takeover.

In the most far-reaching intervention into the private sector ever for the Federal Reserve, the government stepped in Tuesday to rescue American International Group Inc. with an $85 billion injection of taxpayer money. Under the deal, the government will get a 79.9 percent stake in one of the world's largest insurers and the right to remove senior management.

AIG's chief executive, Robert Willumstad, is expected to be replaced by Edward Liddy, the former head of insurer Allstate Corp., according to The Wall Street Journal, citing a person it did not name. Willumstad had been at the helm of AIG since June.

A call to AIG to confirm the executive change was not immediately returned.

It was the second time this month the feds put taxpayer money on the hook to rescue a private financial company, saying its failure would further disrupt markets and threaten the already fragile economy.

AIG said it will repay the money in full with proceeds from the sales of some of its assets. It will be up to the company to decide which assets to sell and the timing. The government does, however, have veto power.

Under the deal, the Federal Reserve will provide a two-year $85 billion emergency loan at an interest rate of about 11.5 percent to AIG, which teetered on the edge of failure because of stresses caused by the collapse of the subprime mortgage market and the credit crunch that ensued. In return, the government will get a 79.9 percent stake in AIG and the right to remove senior management.

AIG shares sank $1.34, or 36 percent, to $2.41 in morning trading Wednesday. They traded as high as $70.13 in the past year.

The government's move was similar to its bailout of Sept. 7 of mortgage giants Fannie Mae and Freddie Mac, where the Treasury Department said it was prepared to put up as much as $100 billion over time in each of the companies if needed to keep them from going broke.

The Fed said it determined that a disorderly failure of AIG could hurt the already delicate financial markets and the economy.

It also could "lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance," the Fed said in a statement.

The decision to help AIG marked a reversal for the government from the weekend, when it refused to use taxpayer money to bail out Lehman Brothers Holdings Inc. Lehman, which filed for bankruptcy protection Monday, collapsed under the weight of mounting losses related to its real estate holdings.

The White House said it backed the Fed's decision Tuesday.

"These steps are taken in the interest of promoting stability in financial markets and limiting damage to the broader economy, " White House spokesman Tony Fratto said.

After meeting with Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke in a late-night briefing on Capitol Hill, Congressional leaders said they understood the need for the bailout.

"The administration is approaching an unprecedented step, but unfortunately we are living in unprecedented times. Hearing of these plans, you have to stop to catch your breath. But upon reflection, the alternatives are much worse," said Sen. Charles Schumer, D-N.Y.

In a statement late Tuesday, AIG's board of directors said the loan will protect all AIG policy holders, address concerns of rating agencies and buy the company time to sell off assets.

"We expect that the proceeds of these sales will be sufficient to repay the loan in full and enable AIG's businesses to continue as substantial participants in their respective markets," the statement said. "In return for providing this essential support, American taxpayers will receive a substantial majority ownership interest in AIG."

New York officials said the deal helps stave off a fiscal crisis for the state. AIG is based in New York.

"Policy holders will be protected, jobs will be saved," New York Gov. David Paterson said Tuesday night.

In an interview on ABC's "Good Morning America" program Wednesday, former longtime AIG CEO Maurice "Hank" Greenberg was asked whether critics are being fair who say the situation at AIG and the financial markets generally happened because of greed, bad business practices and corruption.

"No, I think it's an unfair appraisal," said Greenberg, who was replaced as CEO three years ago as part of an accounting probe. "You know, there are many things that contributed to this unfortunate episode. after I left the company, all the risk management procedures that we had in place were obviously dismantled. I can't explain that. There's a new board of directors. One should be asking that board of directors what they did and why."

Greenberg said he has lost "my entire net worth. Literally, my entire net worth.'

"Worked 40 years building the greatest insurance company in history, one that everyone in the world envied who was in this industry. I'll get by, but my heart goes out for the thousands and thousands of employees and their families who shareholders and not only in the united states but worldwide. That is a tragedy," he said.

The Fed's move was part of a concerted push to help calm jittery markets and investors around the world.

On Tuesday, the Fed decided to keep its key interest rate steady at 2 percent, but acknowledged stresses in financial markets have grown and hinted it stood ready to lower rates if needed.

The central bank also pumped $70 billion into the nation's financial system to help ease credit stresses. In emergency sessions over the weekend, the Fed expanded its loan programs to Wall Street firms, part of an ongoing effort to get credit flowing more freely.

The stock market, which Monday posted its largest point loss session since the Sept. 11 attacks, recovered Tuesday after the Fed's decision on interest rates. The Dow Jones industrials rose 141 points after losing 500 points on Monday.

AIG's shares swung violently, though, as rumors of potential deals involving the government or private parties emerged and were dashed. By late Tuesday, its shares had closed down 20 percent -- and another 45 percent after hours.

The problems at AIG stemmed from its insurance of mortgage-backed securities and other risky debt against default. If AIG couldn't make good on its promise to pay back soured debt, investors feared the consequences would pose a greater threat to the U.S. financial system than this week's collapse of the investment bank Lehman Brothers.

The worries were heightened Monday after Moody's Investor Service, Standard and Poor's and Fitch Ratings lowered AIG's credit ratings, forcing AIG to seek more money for collateral against its insurance contracts. Without that money, AIG would have defaulted on its obligations and the buyers of its insurance -- such as banks and other financial companies -- would have found themselves without protection against losses on the debt they hold.

Socialism for the wealthy, capitalism for the poor

It's been readily apparent to anyone with an education that socialism is alive and well and entrenched deeply wthin the private sector, which admittedly sounds like an oxymoron.

Major corporate loss is always socialized and the citizenry is always penalized for the obscene excesses and the attendant economic disasters of the wealthy classes.

It is only profit that is privatized.--Pete


By ZACHARY A. GOLDFARB, DAVID CHO and BINYAMIN APPELBAUM, Washington Post

For years I've watched well-meaning low income housing organizations like LISC put poor and moderate income people into homes they couldn't afford. I wonder how much of the banking crisis stems from failed mortgages made by the nonprofit sector. (not nearly as much as the private sector, idiot, but I guess you had to lay some of the the blame elsewhere, the current economic failure being as catastrophic as it is, right? Gotta wonder why it was the non-profits you were watching so closely when the real action was being perpetrated by your heroes, the money changers!--Pete)

WASHINGTON - The Bush administration on Saturday prepared to take over the troubled housing finance companies Fannie Mae and Freddie Mac, after concluding the companies don't have enough capital to continue to play their crucial role funding home mortgages.

Under the plan, engineered by Treasury Secretary Henry Paulson, the government would place the two companies under "conservatorship," a legal status akin to Chapter 11 bankruptcy. Their boards and chief executives would be fired and a government agency, the Federal Housing Finance Agency, would appoint new chief executives.

The action, which would be one of the most sweeping government interventions in private financial markets in decades, is planned for today, according to several sources.

Authorities see Fannie Mae and Freddie Mac as crucial to the recovery of the housing market. They have funded 70 percent of home loans in recent months. A reduction in their activities could send mortgage rates that ordinary home buyers pay soaring and result in a new, deeper crisis for the already reeling housing market.

Moreover, regulators are trying to prevent Fannie Mae and Freddie Mac's problems from triggering a new wave of failures among banks, which hold vast reserves of bonds and preferred shares issued by the two firms.

The administration is not expected to say how much the bailout ultimately will cost, in part because it does not know how much the Treasury will be able to ultimately sell the assets for. It could be politically uncomfortable to put a price tag on a huge bailout, only two months before the presidential election. The Congressional Budget Office said two months ago that it was impossible to say how much a bailout would cost, but estimated $25 billion based on the companies' projected losses at the time.