 Lame Duck Teasury Secretary Henry Paulsen insisted on talking again today, as did his boss, sending the markets south, as happens every time either of these clods drops jaw. Meanwhile, the latest brand new proposal out of George Bush's Washington sounds as lame as the first two three ten. And as usual, it's focused on handouts to Paulsen's friends in the banking industry. The idea is artfully cloaked in the pretense of "helping Main Street":
The Federal Reserve and Treasury moved today to boost consumer spending and lower home mortgage rates, committing up to $800 billion to make it easier for households to borrow money for cars, tuition bills and new homes as part of a broad effort to rekindle economic growth.
The new program puts the balance sheet of the country's central bank behind two critical but troubled parts of the economy -- consumer spending and housing. It is largely separate from the $700 billion Troubled Asset Relief Program, administered by the Treasury Department and focused on shoring up the country's financial system. Ah, that sounds lovely. But what this really is, is a bailout of wealthy investors:
A Treasury news release noted that in 2007, about $240 billion in car, student and other consumer loans had been packaged by the companies that issued them into larger securities and sold to investors, who then benefit from the flow of payments from borrowers. That system of packaging and reselling loans keeps money flowing to banks and other lenders, allowing them to make even more money available to consumers.
However it all but stopped over the past two months, leading to rising interest rates, a downturn in lending -- and a risk that economic growth could be dragged down even further.
The Fed said it would provide up to $200 billion to investors who put the money toward consumer loans in the form of credit cards, auto loans and student loans, as well as some forms of small business lending. In other words, Uncle Sam is about to write a big, fat check to erase the risk that big investors took when they bought junk credit card and mortgage debt. Then, magically relieved of the burden of that bad paper, banks will suddenly decide to start lending packagable money again. Tada! But wait, there's more:
The Fed's consumer lending program is partially backed by $20 billion from the TARP, which will be used to absorb losses on the program up to that amount. The Fed loans to investors will earn interest and also a fee from those who take advantage of it.
Paulson said the initial $200 billion "is a starting point" and could grow over time.
In addition to consumer spending, the Fed announced it would buy up to $100 billion in mortgages held by Fannie Mae, Freddie Mac and the Federal Home Loan Bank in an effort increase the flow of money into the housing markets and lower interest rates. The Fed will also buy another $500 billion in bundles of mortgage-backed securities issued by the agencies. The fact that TARP money is wrapped up in this is just one problem. The federal government is clearly going to have to become the spender of last resort, given that consumers aren't secure enough in our jobs to start buying things (or gassing up) any time soon. But for the government to use tax money to eliminate investment risk, and to bail out big investors, is criminal. Oh, and the banks that have been getting these shovels full of your money? They've been using them to bail out THEIR investors too, by paying dividends (something they plan to keep doing for the next three years), and they've been using their TARP money to pay bonuses to their executives, and even (hello, Citibank and Wells Fargo,) to buy other banks. I'd like to see the Big Three automakers even think about doing anything like that.
Meanwhile, the administration continues to reject a reasonable proposal from the head of the FDIC, which would directly help struggling homeowners stay out of foreclosure, while protecting taxpayers, all at a cost of just $40 billion -- a fraction of the $7 trillion estimated cost of all these serial bailouts of the rich.
The Paulsen regime's eagerness to hand out taxpayer cash to the investor class on their way out the door is so brazen, it's like a bank robbery in broad daylight, with the police holding open the vault door. And Paulsen and Bush used alarmism, and threats of a "Great Depression II" to scare Americans into going along with the $700 billion (and climbing) bank bailout. Meanwhile, the U.S. auto industry, with 3 million "regular folks' jobs" in the balance, isn't worthy of help. Fancy that.
From the Iraq money pit to the Bush tax cuts for the top 1 percent income earners to the Wall Street bailout, the Bush administration has been one, eight year long mugging; a reverse Robin Hood spree in which we, the middle class working people, are being robbed blind, right before our eyes, in order to give to the rich.Labels: Bush administration, economic crisis, Henry Paulson, TARP, the Bush bailout, the Bush recession, Wall Street, worst president ever |
