“Everyone is in favor of free speech… but some people's idea of it is that they are free to say what they like, but if anyone else says anything back, that is an outrage.” ― Winston Churchill
In short, GM is using government money to pay back government money to get more government money. And at a 2% lower interest rate at that. This is a nifty scheme to refinance GM’s government debt–not pay it back!
GM boasts that, because it is doing so well, it is paying the $6.7 billion five years ahead of schedule since it was not due until 2015. So will there be an accelerated payback of the rest of the $49.6 billion investment? No. That goal has been pushed back, as it turns out.
RTWT
Though our example takes the concept to a whole new level.
Government Motors took lots of money from your left pocket. Then it took some more from your right pocket and put that into your left pocket. GM even added interest taken from your children’s pockets, and has been bragging about it in TV ads.
Now, don’t you feel better? You’ve been paying the general government to administer this loan, and they’ve gotten results.
It’s just like the misleading ads from the bank formerly known as GMAC.
Joe Nocera, writing in the New York Times yesterday, explains why Wall Street is to blame for the financial crisis: A Wall Street Invention Let the Crisis Mutate
Every time you pick up another rock along the winding path that led to the financial crisis, something else crawls out. Subprime mortgages were sold as a way to give low-income people a chance at homeownership and the American Dream. Instead, the mortgages turned out to be an excuse for predatory lending and fraud, enriching the lenders and Wall Street at the expense of subprime borrowers, many of whom ended up in foreclosure.
The ratings agencies, which rated the complex investments that were built with subprime mortgages, turned out to be only too happy to be gamed by firms that paid their fees — slapping AAA ratings on mortgage bonds doomed to fail. Lehman Brothers turned out to be disguising the full reality of its horrid balance sheet by playing accounting games. All over Wall Street, firms pushed mortgage originators to churn out more loans that were doomed the moment they were made.
In the immediate aftermath, the conventional wisdom was that Wall Street had simply lost its head. It was terrible, to be sure, but on some level understandable: Dutch tulips, the South Sea bubble, that sort of thing.
“…that sort of thing.” Mr. Nocera must think the Dutch government was subsidizing tulip buyers who couldn’t afford the flowers, because one sort of thing he fails to mention is government regulation. It’s the main “sort of thing,” and I do not mean there was too little. Without the government policies structured to punish banks if they did not lend to people who could not pay, synthetic C.D.O.’s would never have existed. Compounding that was the direct Federal intervention via Fannie and Freddie, as well as the lying about their stability:
“These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”
-Rep. Barney Frank, D-MA
When Mr. Frank said this, George Bush was President. Frank was the ranking Democrat on the Financial Services Committee. He was not alone in defending the sub-prime debacle.
“I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing.”
-Rep. Melvin Watt, D-NC
Mr. Watt was reacting to a Bush Administration proposal to increase oversight on Fannie & Freddie. It might well have affected the “ability” of some to buy houses they couldn’t afford and which have been repossessed since.
It wasn’t just Wall Street urging the Fed to keep the housing bubble going, either:
Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.
The corporatist whores and the vote buyers all asked for Federal intervention on top of Federal intervention – and they got it. Mr. Nocera could have written a complete article if he had acknowledged this.
Ally Bank is probably as well known for paying overmarket interest rates on CDs with no early withdrawal penalties as it is for its commercials featuring cute children who are cruelly deceived by a smarmy adult. The commercials are very good, here is one example.
“Even kids know it’s wrong to hold out on somebody. Why don’t banks?”
Good question. Here’s what Ally Bank is holding out on you in those commercials: Ally Bank used to be GMAC Bank. It is still owned by GMAC, an institution in which the Federal government owns a controlling interest – via the TARP bailout. GMAC has already received government bailout funds totaling over $12 billion and Federal loan guarantees for about $8 billion more.
At the end of October GMAC asked the Obama administration for another TARP bailout installment of $5.6 billion.
At Ally Bank’s website they do acknowledge their GMAC heritage: “We are Ally Bank, built on the foundation of GMAC Financial Services.”
The foundation of GMAC Financial Services?!? The ruins, maybe. If they’d said, “We are Ally Bank, rising Pheonix-like from the ashes of GMAC Financial Services through the beneficence, hard work and forebearance of US taxpayers,” I would give them credit for honesty. They do not make any such acknowledgment. I think all taxpayers’ names should be required by law to appear in the credits following any future Ally Bank commercials. This requirement would stop the commercials.
The Ally Bank website goes on to say:
We’re a bank that values integrity as much as deposits. A bank that will always be open, accountable, and honest. Yes, honest. We won’t deal in half-truths, kindatruths, or truths only buried in fine print. That’s because we don’t have anything to hide. We’re always going to give it to you straight.
Apparently, they forgot the last lines, “We need another $5 billion. Ignore that GMAC guy behind the curtain with his hand in your pocket.”
Ally Bank is willing and able to take on excessive risk because Uncle Sugar the Federal Government owns a controlling interest. Ally Bank is using your money to pay for the commercials and for high CD interest rates. But hey, the government-owner is regulating GMAC precisely, right down to the salaries of its employees. What could go wrong?
We have seen the benefits of this kind of “regulation” before. To recapitulate: Interest rates were held artificially low by the Federal Reserve, Fannie Mae and Freddie Mac were supported by Barney Frank in their complicity with the “collateralized securities” market, and ACORN intimidated private banks under the aegis of the Community Reinvestment Act – all of which resulted in the risky loans that created the real estate bubble. Now that GMAC is absolutely regulated via Federal ownership, they feel quite free to take on more risk than the market will bear. Why not? They’re using your money. They can behave like they’re Fannie or Freddie.
The American Bankers Association has an idea about problems that might arise:
“This aggressive deposit strategy is particularly egregious when it is used by a troubled bank in which the government holds a controlling interest,” said ABA president and CEO Edward Yingling in a May 27 letter to Federal Deposit Insurance Corp. chief Sheila Bair. “Such a bank is significantly shielded from investor and market influences that might otherwise act as a brake on risky financial strategies.”
[The FDIC, BTW, is getting close to asking for its own bailout. -DH]
“Even kids know it’s wrong to hold out on somebody. Why don’t banks?” What kind of bank runs deceptive ads on your dime and then runs to the Fed for several billion more taxpayer dollars? A government owned and run bank, that’s what kind of bank.
Shun Ally Bank. And complain to your Congressclunkers that as regulators they are incompetent corporatist cronies. They should shun bailouts. And re-election.
…or without representation period, if you think about it.
Jeff Jacoby in the Boston Globe: Lawmakers, read the bills before you vote
…Steny Hoyer thought it was hilarious.
Hoyer, a Maryland Democrat, is the majority leader in the House of Representatives. At a news conference last week, he was talking about the healthcare overhaul being drafted on Capitol Hill, and a reporter asked whether he would support a pledge committing members of Congress to read the bill before voting on it, and to make the full text of the legislation available to the public online for 72 hours before the vote takes place.
That, reported CNSNews, gave Hoyer the giggles: The majority leader “found the idea of the pledge humorous, laughing as he responded to the question. ‘I’m laughing because . . . I don’t know how long this bill is going to be, but it’s going to be a very long bill,’ he said.”
Then came one of those classic Washington gaffes that Michael Kinsley famously defined as “when a politician tells the truth.” Hoyer conceded that if lawmakers had to carefully study the bill ahead of time, they would never vote for it. “If every member pledged to not vote for it if they hadn’t read it in its entirety, I think we would have very few votes,” he said. The majority leader was declaring, in other words, that it is more important for Congress to pass the bill than to understand it.
Do you think elected officials should be held accountable for the legislation they pass? I do, and I think it would be good if they were held accountable for ignorance. Anyone who admits they didn’t read legislation they voted for should be ipso facto stripped of office.
Such a rule would certainly moderate a hasty legislative process to the approximate reading speed of Maxine Waters, and it would definitely wipe the smile off Steny Hoyer’s smug mug. For accountability, we could have tests immediately following the vote to see if they had read the bill. Three successive grades below a “C” and the recall vote is automatically authorized in their home state. Who knows, long term it could also result in much simplification.
Hoyer says he has no expectation that his party will read the Health Care Nationalization bill and implies he doesn’t care if anybody else gets to read it either. Truly, this arrogance should be punished.
We know our “representatives” didn’t read TARP, they didn’t read the Stimulus bill, they didn’t read the Supplemental Spending bill, and they didn’t read the Carbon Tax bill (1300 pages not even published until after debate started).
The Majority Leader thinks that’s amusing. I don’t. I think it clear evidence of taxation without representation. When taxes are imposed by legislators who have no idea what they are voting on it mocks the concept of representation.
Do you think you’re being represented when the leadership laughingly encourages nonfeasance while practicing malfeasance?
Even Barney Frank, when he votes for something, reserves the right to change his mind because, “we were at the end of a very long mark-up on a very important Bill dealing with stopping predatory lending, and it did not get the attention I should have given it. I looked at it. I thought it was OK. I didn’t read it carefully.”
He can’t even bring himself to say “I didn’t give it the attention I should have,” but if Barney gets a mulligan, so should the voters. Aside from the fact that the amendment he didn’t read would have defunded ACORN, it is confusing that he thinks he should have read it at all: He is perfectly fine with voting for many things he’s never read. And no wonder, it makes his job easier later if a bill is unclear or incoherent.
Frank and Boston bank defend bailout help
House Financial Services Committee chairman Barney Frank yesterday confirmed a report that he asked a Treasury Department official to consider giving bailout money to Boston’s troubled OneUnited Bank – which ended up getting a $12 million federal loan – but Frank said the action was a legitimate effort to protect the only minority-owned bank in Massachusetts.
…OneUnited was dealing with an investigation by bank regulators. In October, federal and state regulators entered into a “cease and desist” order with OneUnited, citing problems with inadequate capital, a failure to provide adequate supervision, and the bank’s “excessive compensation, fees and benefits to its senior executive officers.” The bank, for example, was required to stop paying expenses related to a California beach home and to stop providing a bank-owned Porsche SUV to executives.
Frank’s defense was not that the bank was well managed but unlucky, or that it passed a stress test, or that not bailing it out threatened the US financial system. No, he justified his intervention based on skin color. He was not alone.
Waters Helped Bank Whose Stock She Once Owned
…Mr. [Sidney] Williams [husband of Rep. Maxine Waters] continued to hold varying amount of the company’s stock. In the lawmaker’s most recent financial-disclosure form, dated May 2008 and covering the prior year, Ms. Waters reported that her husband held between $250,000 and $500,000 worth of the bank’s stock.
Mr. Williams also received interest payments from a separate holding at the bank, also worth between $250,000 and $500,000.
…In January, Ms. Waters acknowledged she made a call to the Treasury on OneUnited’s behalf. The bank’s capital, which was heavily invested in shares of Fannie Mae and Freddie Mac, was all but wiped out with the federal takeover of the two mortgage giants, and the bank was seeking help from regulators.
OneUnited eventually secured bailout funds under the government’s $700 billion Troubled Asset Relief Program, which was set up later that month.
Ironic, no, that this bank needed a bailout because they believed Congressman Frank when he loudly insisted there was no cause for worry about Fannie or Freddie, institutions he promoted past on the same “minority” basis? “Minorities” who, more often than not, ended up screwed by Frank’s policies.
And it goes on…
Sen. Inouye makes phone call, bank gets bailout money
When the bank bailout money was being distributed, Sen. K. Inouye discovered that the bank he helped establish and in which he had invested most of his personal wealth was not on the list, it took a phone call or two to fill its coffers.
Gov. Ritter Steered Stimulus Money To Ex-Employer
Colorado Gov. Bill Ritter has awarded some of the state’s first stimulus money to his former employer in a no-bid contract.
Ritter hired his former law firm, the Washington-based Hogan & Hartson, in a no-bid contract to review stimulus spending, The Denver Post reported Friday. It said the firm was paid $40,000 in stimulus money through June.
FAA Approves Plan to Give Stimulus Funds to Airport Named After Murtha
The Washington Post reported last month on more than $150 million in federal funds that Murtha directed to the airport, which has six arriving and departing flights per day. Among the improvements, Murtha directed the Pentagon to give the airport a new, $8 million, state-of-the-art radar tower that has not been used since it was built in 2004, and $30 million for a new runway and tarmac so the airport could handle large military planes and become an emergency military base in case of crisis.
Fed up yet?
…and an apology from the State of New York, the State of Connecticut, Congress, the President and the Department of the Treasury.
Letter to the New York Times.
The following is a letter sent on Tuesday by Jake DeSantis, an executive vice president of the American International Group’s financial products unit, to Edward M. Liddy, the chief executive of A.I.G.
DEAR Mr. Liddy,
It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context:
I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in – or responsible for – the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.
After 12 months of hard work dismantling the company – during which A.I.G. reassured us many times we would be rewarded in March 2009 – we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.
I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.
You and I have never met or spoken to each other, so I’d like to tell you about myself. I was raised by schoolteachers working multiple jobs in a world of closing steel mills. My hard work earned me acceptance to M.I.T., and the institute’s generous financial aid enabled me to attend. I had fulfilled my American dream.
I started at this company in 1998 as an equity trader, became the head of equity and commodity trading and, a couple of years before A.I.G.’s meltdown last September, was named the head of business development for commodities. Over this period the equity and commodity units were consistently profitable – in most years generating net profits of well over $100 million. Most recently, during the dismantling of A.I.G.-F.P., I was an integral player in the pending sale of its well-regarded commodity index business to UBS. As you know, business unit sales like this are crucial to A.I.G.’s effort to repay the American taxpayer.
The profitability of the businesses with which I was associated clearly supported my compensation. I never received any pay resulting from the credit default swaps that are now losing so much money. I did, however, like many others here, lose a significant portion of my life savings in the form of deferred compensation invested in the capital of A.I.G.-F.P. because of those losses. In this way I have personally suffered from this controversial activity – directly as well as indirectly with the rest of the taxpayers.
I have the utmost respect for the civic duty that you are now performing at A.I.G. You are as blameless for these credit default swap losses as I am. You answered your country’s call and you are taking a tremendous beating for it.
But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments, and that you didn’t defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut.
My guess is that in October, when you learned of these retention contracts, you realized that the employees of the financial products unit needed some incentive to stay and that the contracts, being both ethical and useful, should be left to stand. That’s probably why A.I.G. management assured us on three occasions during that month that the company would “live up to its commitment” to honor the contract guarantees.
That may be why you decided to accelerate by three months more than a quarter of the amounts due under the contracts. That action signified to us your support, and was hardly something that one would do if he truly found the contracts “distasteful.”
That may also be why you authorized the balance of the payments on March 13.
At no time during the past six months that you have been leading A.I.G. did you ask us to revise, renegotiate or break these contracts – until several hours before your appearance last week before Congress.
I think your initial decision to honor the contracts was both ethical and financially astute, but it seems to have been politically unwise. It’s now apparent that you either misunderstood the agreements that you had made – tacit or otherwise – with the Federal Reserve, the Treasury, various members of Congress and Attorney General Andrew Cuomo of New York, or were not strong enough to withstand the shifting political winds.
You’ve now asked the current employees of A.I.G.-F.P. to repay these earnings. As you can imagine, there has been a tremendous amount of serious thought and heated discussion about how we should respond to this breach of trust.
As most of us have done nothing wrong, guilt is not a motivation to surrender our earnings. We have worked 12 long months under these contracts and now deserve to be paid as promised. None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house.
Many of the employees have, in the past six months, turned down job offers from more stable employers, based on A.I.G.’s assurances that the contracts would be honored. They are now angry about having been misled by A.I.G.’s promises and are not inclined to return the money as a favor to you.
The only real motivation that anyone at A.I.G.-F.P. now has is fear. Mr. Cuomo has threatened to “name and shame,” and his counterpart in Connecticut, Richard Blumenthal, has made similar threats – even though attorneys general are supposed to stand for due process, to conduct trials in courts and not the press.
So what am I to do? There’s no easy answer. I know that because of hard work I have benefited more than most during the economic boom and have saved enough that my family is unlikely to suffer devastating losses during the current bust. Some might argue that members of my profession have been overpaid, and I wouldn’t disagree.
That is why I have decided to donate 100 percent of the effective after-tax proceeds of my retention payment directly to organizations that are helping people who are suffering from the global downturn. This is not a tax-deduction gimmick; I simply believe that I at least deserve to dictate how my earnings are spent, and do not want to see them disappear back into the obscurity of A.I.G.’s or the federal government’s budget. Our earnings have caused such a distraction for so many from the more pressing issues our country faces, and I would like to see my share of it benefit those truly in need.
On March 16 I received a payment from A.I.G. amounting to $742,006.40, after taxes. In light of the uncertainty over the ultimate taxation and legal status of this payment, the actual amount I donate may be less – in fact, it may end up being far less if the recent House bill raising the tax on the retention payments to 90 percent stands. Once all the money is donated, you will immediately receive a list of all recipients.
This choice is right for me. I wish others at A.I.G.-F.P. luck finding peace with their difficult decision, and only hope their judgment is not clouded by fear.
Mr. Liddy, I wish you success in your commitment to return the money extended by the American government, and luck with the continued unwinding of the company’s diverse businesses – especially those remaining credit default swaps. I’ll continue over the short term to help make sure no balls are dropped, but after what’s happened this past week I can’t remain much longer – there is too much bad blood. I’m not sure how you will greet my resignation, but at least Attorney General Blumenthal should be relieved that I’ll leave under my own power and will not need to be “shoved out the door.”
Sincerely,
Jake DeSantis
Mr. DeSantis could also have mentioned that efforts like his saved hundreds of millions of dollars toward averting a “total [economic] collapse,” in the President’s words. This is the same President who employed that rhetoric to insist the Stimulus Bill approving the AIG bonuses be passed without being read.
It is dangerous and despicable that senior politicians no longer feel constrained by the rule of law. They have acted as little more than a mob, making it up as they go along.
Principle, ladies and gentlemen of the GOP, principle. Principle is what is needed from the Republicans in the House to stop the looting. Today the Democrats propose to loot a few fat-cats we’ve been told to depise. Their leader has proposed to loot all of us. Connect the dots! It’s not complicated.
The Democrats are about to confiscate bonuses legally paid to a few employees of AIG which they, the Democrats, voted to approve. The Democrats may now find it necessary to succumb to a fit of populist pique because they really need to shift the blame, but Republicans in the House ALL voted against the bill Pelosi wrote at the instruction of the White House and with the collusion of Chris Dodd – and that none of them read – so we now need more than vague mouthings from Republican House leadership where members are instructed to “vote their conscience;” we need the honorable members to actually have a conscience: One that acknowledges contract law and the Constitution. And think of this: Beyond the basic rule-of-law thingy some of us expect you to follow, letting the Democrats “fix” their SNAFU with this totalitarian gesture is also a political mistake.
A unified GOP House vote would stop this theft because it needs a 2/3 majority to pass. Nancy Pelosi is coming for the AIG bonus recipients. Next she will come for you. Remember, she voted for the AIG bonuses before she voted against them, but she’s never expressed any outrage about FoO Franklin Raines, who got $50 million in bonuses for destroying Fannie Mae while he was busy helping to create the sub-prime mortgage crisis.
The House attempt to tax away 90% of legally contracted payments to specific individual citizens looks like a Bill of attainder to me.
A bill of attainder (also known as an act or writ of attainder) is an act of legislature declaring a person or group of persons guilty of some crime and punishing them without benefit of a trial. Bills of attainder are forbidden by Article I, section 9, clause 3 of the United States Constitution.
Some legal experts think so. I hope someone sues so we can find out. Maybe the ILJ.
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It turns out the GOP “Leadership” wasn’t, and 85 House Republicans supported the theft: Getting Our Pound of flesh. Put the 85 on the “Requires Primary Challenge” list. They voted their conscience, after all.
Think kindly of the 6 Democrats who voted “no”: Melissa Bean, Ill.; Larry Kissell, N.C.; Michael E. McMahon, N.Y.; Walt Minnick, Idaho; Harry E. Mitchell, Ariz., and Vic Snyder, Ark. We can’t find nearly enough Republicans dedicated to limited government, and maybe these people are. If so, they deserve re-election.
Find how your Congressman voted here. I found Mike Rogers.