The Washington Post reported that those “fiscal conservatives” in the Bush administration managed to slip by a stealth $140 billion tax break for the financial industry in the fog on the financial bailout:
The financial world was fixated on Capitol Hilll as Congress battled over the Bush administration's request for a $700 billion bailout of the banking industry. In the midst of this late-September drama, the Treasury Department issued a five-sentence notice that attracted almost no public attention. But corporate tax lawyers quickly realized the enormous implications of the document: Administration officials had just given American banks a windfall of as much as $140 billion.By way of comparison, during the campaign Obama proposed spending $150 billion over ten years to help wean our economy from fossil fuels. That sounds like a lot of money, but it is the equivalent of a mere “five sentence notice” providing the financial industry with yet another massive tax break. “How are we going to PAY for all of Obama’s proposals?,” reasonable people ask. Another financial industry tax break … not so much.
Another way of thinking of Obama’s decade-long transformation of America’s energy economy: The cost of bailing out ONE insurance company that is not even subject to federal regulation. It was reported yesterday that the cost of bailing out one company – ONE COMPANY – AIG has now reached $150 billion. Because of its counterparty exposure on derivatives that the federal government was prohibited from regulating:
The federal government announced on Monday an overhaul of its bailout of the insurance giant American International Group, saying it would purchase $40 billion of the company’s stock, after signs that the initial bailout was putting too much strain on the company. …When the reorganized deal is complete, taxpayers will have invested and lent a total of $150 billion to A.I.G., the most the government has ever directed to a single private enterprise.Some might say, if a company is too big to fail … it is too big. But that would be interfering with the “free market.”
Oh, and did I mention that HALF of the bailout funds going to the nine biggest banks – funds that were supposed to free up the credit markets and get banks lending again – will be paid out to shareholders as dividends over the next three years:
U.S. banks getting more than $163 billion from the Treasury Department for new lending are on pace to pay more than half of that sum to their shareholders, with government permission, over the next three years.The government said it was giving banks more money so they could make more loans. Dollars paid to shareholders don't serve that purpose, but Treasury officials say that suspending quarterly dividend payments would have deterred banks from participating in the voluntary program.Critics, including economists and members of Congress, question why banks should get government money if they already have enough money to pay dividends -- or conversely, why banks that need government money are still spending so much onTreasury Secretary Paulson’s primary concern throughout this crisis, apparently, has been to avoid making the federal bailout too painful for bank shareholders. If the big, bad Democrats in Congress hadn’t insisted on equity in exchange for bailout funds, Paulson would have just given the banks a disguised equity infusion by overpaying for bad assets. For example, we wouldn’t want to “penalize” bank executives for the rewards they have “earned” for their brilliant risk-management strategies:
Financial giants getting injections of federal cash owed their executives more than $40 billion for past years' pay and pensions as of the end of 2007, a Wall Street Journal analysis shows.The government is seeking to rein in executive pay at banks getting federal money, and a leading congressman and a state official have demanded that some of them make clear how much they intend to pay in bonuses this year.But overlooked in these efforts is the total size of debts that financial firms receiving taxpayer assistance previously incurred to their executives, which at some firms exceed what they owe in pensions to their entire work forces.And you don’t even want to KNOW where the $2 TRILLION in Fed bailout funds are going. (If you are having trouble comprehending these sums, just think of it as roughly one Iraq War.) Even if you DID want to know, they aren’t telling (presumably because it might cause you to “lose confidence” in the recipients – so you can just lose confidence in the entire system, instead). From Bloomberg:
The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral. Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.I feel like I’m coming off as some kind of raging populist. But, seriously, when President Obama takes office and starts talking about things like extending unemployment benefits and children’s health insurance and other economic stimulus measures, we’re going to have to endure a lot of hand-wringing over the cost of those initiatives. Because the recipients don’t have the ability to bring down the global financial system. But let’s put the cost in perspective.
No wonder Obama was elected. Chris Rock summed it up:
"[Bush has] made it hard for a white man to run for president. People are saying, 'After Bush, I'm not sure we can take another chance on a white guy."