The Tea Party movement brought us more than a few Republicans who described themselves as “libertarian”, only to advance the agenda of the televangelist lobby once they were elected to office. Beyond that, the “tax reform” they espouse applies only to corporations and the wealthy, with the middle class left to pay the difference to the Corporate Welfare State.
The 2012 Presidential campaign is now wide-open with the entry of an authentic libertarian, who has jumped into contention for the Republican nomination. Although Ron Paul (a former Presidential nominee, representing the Libertarian Party in the 1988 election) has been receiving more than a little encouragement to make another White House bid (he won the straw poll at the Conservative Political Action Conference – CPAC) his age is a huge obstacle. As Congressman Paul approaches his 76th birthday, many consider him too old for the job.
April 21 brought us the entry of Gary Johnson, a former Governor of New Mexico, into the race for the Republican Presidential Nomination. At age 58, he is an active triathlete, who successfully climbed to the summit of Mt. Everest in 2003. This guy brings loads of excitement into the race and is likely the only Republican who could defeat Barack Obama. Gary Johnson’s support from outside the ranks of the Republican Party extends – not only to Independent voters – but to Democrats. That’s right. Gary Johnson could actually win the votes of a significant number of Democrats – something no other Republican could accomplish. Republicans are going to have to take Johnson very seriously. Nevertheless, Gary Johnson will surely make the televangelist lobby sick with his hardcore libertarian views.
Some recent articles about Johnson are the stuff of Bill O’Reilly’s worst nightmares. For example, an April 20 piece by Christian Heinze for The Hill included this tidbit about the new candidate:
He’s running for the Republican presidential nomination on a platform that calls for withdrawals from Afghanistan and Iraq – a position that’s anathema to the party’s ruling class. He also supports abortion rights and, most controversially, favors legalizing marijuana.
See what I mean? Johnson has the guts to speak out for the changes which many Democratic voters would like to see – and which Barack Obama would never even bother to include among his trademark, false campaign promises.
Republican pundits regularly emphasize the importance of a candidate’s history of success in the business world, which is perhaps why they are now fretting that the party could be stuck with Donald Trump as its 2012 nominee. Willard Romney’s inherited wealth gave him the opportunity to participate in the private equity business (Bain Capital) which he left in 1999 to become CEO of the 2002 Olympic Games in Salt Lake City. As a result, Romney has been able to contrast that background against the qualifications of his political opponents, who have generally spent their adult lives at the public trough. Gary Johnson presents a fresh challenge to Romney in the area of business credentials. Johnson started his own construction business in the 1970s and became a self-made millionaire.
As a two-term Governor of New Mexico, Johnson didn’t hesitate to veto bills. He used the veto pen more than 750 times and kept the state budget under control.
Johnson’s view of the 2012 budget proposed by Congressional Republicans is not likely to win him any new friends in the party’s establishment. Here is what we learned from The Hill:
He claims the biggest threat to U.S. security is the nation’s debt, and to show how serious he is about fighting it, he says Rep. Paul Ryan’s (R-Wis.) proposed budget actually isn’t serious enough.
“It takes too long, and only get us a quarter of where we should be many years down the road,” he said.
One of the more informative essays about Gary Johnson was written by Niall Stanage for Salon on May 5, 2010. That piece points out how Johnson doesn’t have much use for Rush Limbaugh or Jesus, which could cause him some trouble with the Republican base – many of whom have trouble differentiating between those two individuals. Worse yet, the people at Fox News probably pulled out their hair after reading this:
Ask Johnson what he thinks of Barack Obama, for instance, and rather than the stream of vitriol that might issue semi-automatically from the lips of some party colleagues, he answers: “You can’t help but like him.”
Obama, he says, “touched” him with his rhetoric during the 2008 campaign, though he adds that the president has proven disappointing and disingenuous since then.
After reading that remark, I was on the verge of giving Gary Johnson my unqualified endorsement. Let’s see how he does on the campaign trail.
The 2012 Presidential race just became really interesting!
Comments Off on Federal Reserve Bailout Records Provoke Limited Outrage
On December 3, 2009 I wrote a piece entitled, “The Legacy of Mark Pittman”. Mark Pittman was the reporter at Bloomberg News whose work was responsible for the lawsuit, brought under the Freedom of Information Act, against the Federal Reserve, seeking disclosure of the identities of those financial firms benefiting from the Fed’s eleven emergency lending programs.
The suit, Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, (U.S. District Court, Southern District of New York) resulted in a ruling in August of 2009 by Judge Loretta Preska, who rejected the Fed’s defense that disclosure would adversely affect the ability of those institutions (which sought loans at the Fed’s discount window) to compete for business. The suit also sought disclosure of the amounts loaned to those institutions as well as the assets put up as collateral under the Fed’s eleven lending programs, created in response to the financial crisis. The Federal Reserve appealed Judge Preska’s decision, taking the matter before the United States Court of Appeals for the Second Circuit. The Fed’s appeal was based on Exemption 4 of the Freedom of Information Act, which exempts trade secrets and confidential business information from mandatory disclosure. The Second Circuit affirmed Judge Preska’s decision on the basis that the records sought were neither trade secrets nor confidential business information because Bloomberg requested only records generated by the Fed concerning loans that were actually made, rather than applications or confidential information provided by persons, firms or other organizations in attempt to obtain loans. Although the Fed did not attempt to appeal the Second Circuit’s decision to the United States Supreme Court, a petition was filed with the Supreme Court by Clearing House Association LLC, a coalition of banks that received bailout funds. The petition was denied by the Supreme Court on March 21.
Bob Ivry of Bloomberg News had this to say about the documents produced by the Fed as a result of the suit:
The 29,000 pages of documents, which the Fed released in pdf format on a CD-ROM, revealed that foreign banks accounted for at least 70 percent of the Fed’s lending at its October, 2008 peak of $110.7 billion. Arab Banking Corp., a lender part- owned by the Central Bank of Libya, used a New York branch to get 73 loans from the window in the 18 months after Lehman Brothers Holdings Inc. collapsed.
As government officials and news reporters continue to review the documents, a restrained degree of outrage is developing. Ron Paul is the Chairman of the House Financial Services Subcommittee on Domestic Monetary Policy. He is also a longtime adversary of the Federal Reserve, and author of the book, End The Fed. A recent report by Peter Barnes of FoxBusiness.com said this about Congressman Paul:
. . . he plans to hold hearings in May on disclosures that the Fed made billions — perhaps trillions — in secret emergency loans to almost every major bank in the U.S. and overseas during the financial crisis.
* * *
“I am, even with all my cynicism, still shocked at the amount this is and of course shocked, but not completely surprised, [that] much [of] this money went to help foreign banks,” said Rep. Ron Paul (R-TX), . . . “I don’t have [any] plan [for] legislation … It will take awhile to dissect that out, to find out exactly who benefitted and why.”
In light of the fact that Congressman Paul is considering another run for the Presidency, we can expect some exciting hearings starring Ben Bernanke.
Senator Bernie Sanders of Vermont became an unlikely ally of Ron Paul in their battle to include an “Audit the Fed” provision in the financial reform bill. Senator Sanders was among the many Americans who were stunned to learn that Arab Banking Corporation used a New York branch to get 73 loans from the Fed during the 18 months after the collapse of Lehman Brothers. The infuriating factoid in this scenario is apparent in the following passage from the Bloomberg report by Bob Ivry and Donal Griffin:
The bank, then 29 percent-owned by the Libyan state, had aggregate borrowings in that period of $35 billion — while the largest single loan amount outstanding was $1.2 billion in July 2009, according to Fed data released yesterday. In October 2008, when lending to financial institutions by the central bank’s so- called discount window peaked at $111 billion, Arab Banking took repeated loans totaling more than $2 billion.
“It is incomprehensible to me that while creditworthy small businesses in Vermont and throughout the country could not receive affordable loans, the Federal Reserve was providing tens of billions of dollars in credit to a bank that is substantially owned by the Central Bank of Libya,” Senator Bernard Sanders of Vermont, an independent who caucuses with Democrats, wrote in a letter to Fed and U.S. officials.
After the financial crash of 2008, it grew to monstrous dimensions, as the government attempted to unfreeze the credit markets by handing out trillions to banks and hedge funds. And thanks to a whole galaxy of obscure, acronym-laden bailout programs, it eventually rivaled the “official” budget in size – a huge roaring river of cash flowing out of the Federal Reserve to destinations neither chosen by the president nor reviewed by Congress, but instead handed out by fiat by unelected Fed officials using a seemingly nonsensical and apparently unknowable methodology.
As Matt Taibbi began discussing what the documents produced by the Fed revealed, he shared this reaction from a staffer, tasked to review the records for Senator Sanders:
“Our jaws are literally dropping as we’re reading this,” says Warren Gunnels, an aide to Sen. Bernie Sanders of Vermont. “Every one of these transactions is outrageous.”
In case you are wondering just how “outrageous” these transactions were, Mr. Taibbi provided an outrageously entertaining chronicle of a venture named “Waterfall TALF Opportunity”, whose principal investors were Christy Mack and Susan Karches. Susan Karches is the widow of Peter Karches, former president of Morgan Stanley’s investment banking operations. Christy Mack is the wife of John Mack, the chairman of Morgan Stanley. Matt Taibbi described Christy Mack as “thin, blond and rich – a sort of still-awake Sunny von Bulow with hobbies”. Here is how he described Waterfall TALF:
The technical name of the program that Mack and Karches took advantage of is TALF, short for Term Asset-Backed Securities Loan Facility. But the federal aid they received actually falls under a broader category of bailout initiatives, designed and perfected by Federal Reserve chief Ben Bernanke and Treasury Secretary Timothy Geithner, called “giving already stinking rich people gobs of money for no fucking reason at all.” If you want to learn how the shadow budget works, follow along. This is what welfare for the rich looks like.
The venture would have been more aptly-named, “TALF Exploitation Windfall Opportunity”. Think about it: the Mack-Karches entity was contrived for the specific purposeof cashing-in on a bailout program, which was ostensibly created for the purpose of preventing a consumer credit freeze.
I was anticipating that the documents withheld by the Federal Reserve were being suppressed because – if the public ever saw them – they would provoke an uncontrollable degree of public outrage. So far, the amount of attention these revelations have received from the mainstream media has been surprisingly minimal. When one compares the massive amounts squandered by the Fed on Crony Corporate Welfare Queens such as Christy Mack and Susan Karches ($220 million loaned at a fraction of a percentage point) along with the multibillion-dollar giveaways (e.g. $13 billion to Goldman Sachs by way of Maiden Lane III) the fighting over items in the 2012 budget seems trivial.
The Fed’s defense of its lending to foreign banks was explained on the New York Fed’s spiffy new Liberty Street blog:
Discount window lending to U.S. branches of foreign banks and dollar funding by branches to parent banks helped to mitigate the economic impact of the crisis in the United States and abroad by containing financial market disruptions, supporting loan availability for companies, and maintaining foreign investment flows into U.S. companies and assets.
Without the backstop liquidity provided by the discount window, foreign banks that faced large and fluctuating demand for dollar funding would have further driven up the level and volatility of money market interest rates, including the critical federal funds rate, the Eurodollar rate, and Libor (the London interbank offered rate). Higher rates and volatility would have increased distress for U.S. financial firms and U.S. businesses that depend on money market funding. These pressures would have been reflected in higher interest rates and reduced bank lending, bank credit lines, and commercial paper in the United States. Moreover, further volatility in dollar funding markets could have disrupted the Federal Reserve’s ability to implement monetary policy, which requires stabilizing the federal funds rate at the policy target set by the Federal Open Market Committee.
TheCenterLane.com offers opinion, news and commentary on politics, the economy, finance and other random events that either find their way into the news or are ignored by the news reporting business. As the name suggests, our focus will be on what seems to be happening in The Center Lane of American politics and what the view from the Center reveals about the events in the left and right lanes. Your Host, John T. Burke, Jr., earned his Bachelor of Arts degree from Boston College with a double major in Speech Communications and Philosophy. He earned his law degree (Juris Doctor) from the Illinois Institute of Technology / Chicago-Kent College of Law.