Bush Administration Presides Over Largest Redistribution of Wealth in History
From taxpayers’ wallets into the coffers of Wall Street firms, the Bush Administration has presided over the largest redistribution of wealth in American history. $2.9 trillion has already been committed and it looks like more government bailouts are still being contemplated.
- $2 trillion in loans from the Fed with no disclosure of the identity of the firms receiving the loans or the collateral provided
- $700 billion for the Troubled Asset Relief Program that has been reallocated toward purchasing preferred equity in banks
- $200 billion in emergency reserves for Fannie Mae and Freddie Mac–backed by a balance sheets that Freddie Mac admits are worth less than zero.
- $30 billion in guarantees for Bear Stearns debt as part of the JP Morgan merger
Now, Congress is talking about authorizing another $25 billion for the automakers.
Even more troubling is that many banks are hoarding the cash received from the government, using it to fund M&A activity, or sending it out to executives and employees in the form of bonuses.
It is time for the Wall Street welfare to end. During the campaign, Barack Obama talked about rebuilding the economy from the bottom-up. By applying the same logic to the financial crisis, the government can most efficiently leverage its capital and maximize the likelihood of a profitable recovery for taxpayers. Instead of investing behind companies with terrible balance sheets, funds should be allocated to guarantee start-up loans to new local and regional banks, with clean balance sheets, that can better serve businesses and consumers. That is the most effective way to create competition among lenders to offer funds to borrowers and penalize instead of reward the companies that are responsible for the current crisis.
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Filed under: economy
I appreciate the thought in this article, and I especially appreciate the links to related information. However, the most opinionated and inflammatory paragraph says “Even more troubling is that many banks are hoarding the cash received from the government, using it to fund M&A activity, or sending it out to executives and employees in the form of bonuses.” There isn’t a single citation or reference for those claims. You might be right, but I’d urge you to substantiate those claims as clearly as you substantiate the other claims.
Likewise, your recommendation for what should be done comes without citation. Although this crisis is quite large and unique, there are lots of good ideas worth citing as possible approaches.
it’s important to remember that when money is given to “firms” it is actually given to the stockholders of the firms becuase it directly increases their stocks value and therefore is a direct injection of wealth to those stockholders.
it’s very important to remember that companies and firms are not actual things - they are simply legal ownership structures and in the end after all the levels of obfuscation someone does in fact actually own them and profit from them.
So when the government gives money to a company it is directly giving money to the people who own it whether that be a Saudi king or Warren buffett.
It is an absolute and direct exchange of government dollars into the pockets of private citizens.
Yes, and this nonsense will continue until the Federal Reserve is ABOLISHED. The Fed is a parasite that is living off the lifeblood of the U.S. taxpayer and giving nothing back in return. If Obama really want s to kick start the economy, he can start by dismantling the Fed, but it won’t be easy.
Good ideas! I never heard the one about creating new banks being floated before, although I wonder how that could be done without, a) the same players getting their hands on a clean balance sheet backed by real assets, that’s like giving a junkie a brand new house stocked with dope and needles, or, b) the existing big institutions finding ways to quash the new, unwanted competition.
Just sayin’. I’m no expert in these matters, but I know enough to know we just took it in the keister, without even dinner and a movie first.
Of course its a huge boondoggle, it is another obvious and ham handed power grab by Bush and Company before leaving office. The crooks who make up the GOP and DNC parties dont want to admit that this entire “crisis” was planned and executed by the very companies receiving the results of the rescue pan. Whan war is no longer an option to drive gross amounts of money into the right peoples hands they will stoop to out and out theft.
I for one called every “representative” I have and told them not to support a bailout -its not necessary, it isnt solving the problem and the money is being wasted. The solution to our current crisis is the creation of jobs at the grasssroots level, elimination of the huge debt load employees and small business are forced to carry just to survive in America and the prevention of products created using overseas labor from being sold here, either your provide high paying jobs that allow a person to live or your products are not welcome here. yes we live in a global economy but i don’t want to live the life of a Chinese factory worker.