Paulson € ™ s â € œbait-and-switch bailout €
Itâ € ™ s only a few weeks since Congress has signed off on Treasury Secretary Henry Paulson ™ € s big $ 700 billion bailout plana € "the Troubled Asset Relief Program (TARP). Â What we have to show for it? Â Nobody knows. What € ™ s more, we now face a deadlock complex financial thatâ € ™ s just as messy as the fiasco of origin. A and the situation is even more dangerous because Paulson stops not pass.
As you know, the original plan was to buy 700 billion dollars of toxic securitiesâ € "the deteriorating residential mortgage defaults that began on financial meltdown. simply put, taxpayers buying $ 700 billion dollars of assets no one else touch, ostensibly to get frozen credit markets back in But the plan motion. toxic loan never seen the ground.  couldn € ™ t move far or fast enough to provide immediate relief Paulson promised.
Instead, the Treasury announced it had developed a new plan aimed at thawing frozen credit markets. The new plan: money paid directly into major banks in adopting a little known clause in Sec. 113 (E) (1) of the TARP legislation, which economists call the â € œStock injection alternative €
Paulson promised that the injection of shares actually served a € €  œrescueâ banks, but instead of owning assets fragile, the government € "the € taxpayersâ" would become shareholders the privileged banks themselves. This means that the taxpayer would be promised a return (from preferred shares pay interest), and those who have ordinary shares would take the early successes. Thus, taxpayers would be more protected and less likely to lose money.
Amid this maneuvering back and forth, people began whispering that perhaps Paulson donâ € ™ t really know what to do. First Heâ € ™ argued that the purchase of toxic mortgage investments made banks in difficulty, especially those whose failure could jeopardize domestic systems or financial world has been the only possible solution failures. bank And he tenaciously opposed suggestions that the Congress could change its plan.Â
Then, after the first $ 350 billion had been released, he unexpectedly voltage devices in what some felt too broad and too vague direction.
Paulson had spent 85 billion dollars to bail out insurance giant on, AIG. But even after a congressional hearing and admitted the scandalous companyâ ™ € s sumptuous mess station business, AIG still had the audacity to return to the depression of the money and another round of $ 40 billion.
If anyone in the Treasury to keep track of where these dollars were paid, they arenâ € ™ t let on. In fact, banks have received money has done little to thaw credit for U.S. companies or consumers.  banks seem to be more willing to lend to each other, judging by lower LIBOR rate. But the unconditional nature of the rescue plan has led some to use the money in ways Congress can not have intended. For example, PNC Bank, based in Pittsburgh, PA, used a portion of its funds allocated to the acquisition of branches Centurion in its market area.
Credit cars and car loans next in line
In a drift further away from the intent of Congress, Mr. Paulson said he wanted to expand the program to rescue the credit markets not bank as those who have claims on credit cards, car loans and student loans. American Express, with a pinch of Goblin Treasury, was seen as a bank, and qualified food at the trough with companies like others. GMAC arm loans from General Motors, and other units carmakersâ € ™ loans are standing in line as well.
In the rescue plan Paulson's original request permission Czar as essential to move money around, without being subject to review by a court or a administrative agency. His first â € Trust œjust mea € Donâ € ™ proposal does fly. Congress has assured the public that any plan they have Approved would be integrated into the monitoring.
But in early November, not only has the White House did not appoint an inspector extraordinary general at the head of monitoring efforts, Congress has yet to appoint members of a congressional oversight committee five people. In fact, a comprehensive plan seems nonexistent.
A lot of money had blown the door, but nobody had taken the bothered to consult the Congress on any details. Finally, legislators stepped up to the plate.
On November 18 Paulson issues facing difficult by the members of the House Committee on Financial Services where he shared the table with Fed Chairman Ben Bernanke. In addition to criticism of the poor management questions, pointed questions reminded everyone that the money was TARP owners for helping to cope with the foreclosure an idea strongly supported by the FDIC chairman Sheila Bair.
Paulson argued that TARP was intended to stabilize financial markets and the flow of credit, not serve as a panacea for all our economic problems. And he dismissed questions about future plans, saying he had not intend to distribute the second half of the € 700 billion program to "let the deal with the Obama administration, he said.
A Secret 2 trillion face
Back in mid-October, the Federal Deposit Insurance Corporation has announced a new $ 2000000000000 programa three years € "the temporary liquidity guarantee Program. The program aimed to build confidence and encourage liquidity in the banking system. This is in addition to the $ 250,000,000,000 plan preferred stock, we already mentioned.Â
Perhaps you might be curious about the details surrounding this case two billion dollars, a little transparency perhaps? Well, do mind. Fed Chairman Ben S. Bernanke said the central bank would not disclose details of these loans of taxpayer funds because â € œstigmatize banks that need the € money.â
The American taxpayers deserve an explanation consistent on what happened with all the money spent so far, like whoa € ™ s how to, how, and they had promised why. oversight and transparency, but Bernanke € ™ Itâ € ™ s statement is another example of an entire country being left in the dark without real answers.
Now more than ever, Americans must have confidence that their government is to make intelligent decisions as they sort out this financial fiasco. The best way to inspire confidence is for Congress to do what he said he would: provide oversight strict bailout process. They would do well to start from the beginning, keeping an eye on Paulson, a man who seems to want to make the rules as.
Perhaps the fiasco of rescue was best summed up entirely during the Congress hearings, when Gary Ackerman (R-NY) discussed in the eyes Paulson and said: â € œYou seem to be flying an airplane 700 billion dollars by the seat of your pants. It seems to be the second scheme greatest bait-and-spend that history has ever seen, other than the reasons given to us to vote for the invasion of Iraq. "
This is hardly the final chapter of the story. Â You can find updates on our website: www.financialspeculation.com.
About the Author
Jose Roncal is co-author of “The Big Gamble: Are You Investing or Speculating” which Donald Trump endorsed as “a great read”. Many of the author’s articles related to finance and the global economic crisis can be found at financialspecuation.com
