I always enjoy it when a commentator appearing on a talk show reminds us that President Obama has become a “tool” for the Wall Street bankers. This theme is usually rebutted with the claim that the TARP bailout happened before Obama took office and that he can’t be blamed for rewarding the miscreants who destroyed our economy. Nevertheless, this claim is not entirely true. President Bush withheld distribution of one-half of the $700 billion in TARP bailout funds, deferring to his successor’s assessment of the extent to which the government should intervene in the banking crisis. As it turned out, during the final weeks of the Bush Presidency, Hank Paulson’s Treasury Department declared that there was no longer an “urgent need” for the TARP bailouts to continue. Despite that development, Obama made it clear that anyone on Capitol Hill intending to get between the banksters and that $350 billion was going to have a fight on their hands. Let’s jump into the time machine and take a look at my posting from January 19, 2009 – the day before Obama assumed office:
On January 18, Salon.com featured an article by David Sirota entitled: “Obama Sells Out to Wall Street”. Mr. Sirota expressed his concern over Obama’s accelerated push to have immediate authority to dispense the remaining $350 billion available under the TARP (Troubled Asset Relief Program) bailout:
Somehow, immediately releasing more bailout funds is being portrayed as a self-evident necessity, even though the New York Times reported this week that “the Treasury says there is no urgent need” for additional money. Somehow, forcing average $40,000-aires to keep giving their tax dollars to Manhattan millionaires is depicted as the only “serious” course of action. Somehow, few ask whether that money could better help the economy by being spent on healthcare or public infrastructure. Somehow, the burden of proof is on bailout opponents who make these points, not on those who want to cut another blank check.
Discomfort about another hasty dispersal of the remaining TARP funds was shared by a few prominent Democratic Senators who, on Thursday, voted against authorizing the immediate release of the remaining $350 billion. They included Senators Russ Feingold (Wisconsin), Jeanne Shaheen (New Hampshire), Evan Bayh (Indiana) and Maria Cantwell (Washington). The vote actually concerned a “resolution of disapproval” to block distribution of the TARP money, so that those voting in favor of the resolution were actually voting against releasing the funds. Earlier last week, Obama had threatened to veto this resolution if it passed. The resolution was defeated with 52 votes (contrasted with 42 votes in favor of it). At this juncture, Obama is engaged in a game of “trust me”, assuring those in doubt that the next $350 billion will not be squandered in the same undocumented manner as the first $350 billion. As Jeremy Pelofsky reported for Reuters on January 15:
To win approval, Obama and his team made extensive promises to Democrats and Republicans that the funds would be used to better address the deepening mortgage foreclosure crisis and that tighter accounting standards would be enforced.
“My pledge is to change the way this plan is implemented and keep faith with the American taxpayer by placing strict conditions on CEO pay and providing more loans to small businesses,” Obama said in a statement, adding there would be more transparency and “more sensible regulations.”
Of course, we all know how that worked out . . . another Obama promise bit the dust.
The new President’s efforts to enrich the Wall Street banks at taxpayer expense didn’t end with TARP. By mid-April of 2009, the administration’s “special treatment” of those “too big to fail” banks was getting plenty of criticism. As I wrote on April 16 of that year:
Criticism continues to abound concerning the plan by Turbo Tim and Larry Summers for getting the infamous “toxic assets” off the balance sheets of our nation’s banks. It’s known as the Public-Private Investment Program (a/k/a: PPIP or “pee-pip”).
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One of the harshest critics of the PPIP is William Black, an Economics professor at the University of Missouri. Professor Black gained recognition during the 1980s while he was deputy director of the Federal Savings and Loan Insurance Corporation (FSLIC).
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I particularly enjoyed Black’s characterization of the PPIP’s use of government (i.e. taxpayer) money to back private purchases of the toxic assets:
It is worse than a lie. Geithner has appropriated the language of his critics and of the forthright to support dishonesty. That is what’s so appalling — numbering himself among those who convey tough medicine when he is really pandering to the interests of a select group of banks who are on a first-name basis with Washington politicians.
The current law mandates prompt corrective action, which means speedy resolution of insolvencies. He is flouting the law, in naked violation, in order to pursue the kind of favoritism that the law was designed to prevent. He has introduced the concept of capital insurance, essentially turning the U.S. taxpayer into the sucker who is going to pay for everything. He chose this path because he knew Congress would never authorize a bailout based on crony capitalism.
Although President Obama’s hunt for Osama bin Laden was a success, his decision to “punt” on the economic stimulus program – by holding it at $862 billion and relying on the Federal Reserve to “play defense” with quantitative easing programs – became Obama’s own “Tora Bora moment”, at which point he allowed economic recovery to continue on its elusive path away from us. Economist Steve Keen recently posted this video, explaining how Obama’s failure to promote an effective stimulus program has guaranteed us something worse than a “double-dip” recession: a quadruple-dip recession.
Many commentators are currently discussing efforts by Republicans to make sure that the economy is in dismal shape for the 2012 elections so that voters will blame Obama and elect the GOP alternative. If Professor Keen is correct about where our economy is headed, I can only hope there is a decent Independent candidate in the race. Otherwise, our own “lost decade” could last much longer than ten years.