Screw the Federal Reserve.

Another reason to grind our teeth in the direction of the Federal Reserve, courtesy of a report appearing in Bloomberg, as discussed by Yves Smith in the blog Naked Capitalism [emphasis mine]:

It had generally been assumed that the AIG payouts of 100% on credit swaps (when the insurer was under water and bankrupt companies do not satisfy their obligations in full) was the result of some gap in oversight plus traders at AIG exercising discretion (they were unhappy about bonus rows and had reason to curry favor with dealers, who were potential employers).

The article [appearing in Bloomberg] makes clear that AIG had been negotiating to settle on the swaps prior to getting aid from the government, and was seeking a 40% discount. The Fed might not have gotten that much of a discount, but there was clearly no need to pay out at par.

This massive backdoor subsidy to the likes of Goldman, DeutscheBank was authorized by Geithner while he was at the New York Fed. [...]

[T]he fact that this was a backdoor rescue means the Fed is acting as an extra budgetary vehicle of the Treasury. This is a violation of the Constitution and shows how patently false the Fed’s claims of independence are. [...] The real issue is that the Fed BY DESIGN bailed out banks, including foreign banks, through a device not authorized by Congress.

Links: Is Obama finally getting his populist on?

Obama, the Trust-Buster? Obama and congressional Democrats taking on the Insurance Industry? And insisting upon a 'public option'? [DownWithTyrrany]

All of this, plus Obama and the Democrats slashing executive pay for acceptors of TARP money? [The Washington Post]

Contrary to what Washington DC chattering-class idiots might contend, a Democratic, Obama-led Populist Turn is a good thing!!

Link: Frontline's "The Warning" will detail the roles of Rubin, Greenspan, Summers & Geithner in enabling financial crisis.

More information and "sneak peak" video hyperlinks can be found at the blog DownWithTyranny,

whose author writes:

[...] Tonight at 9PM PBS is debuting The Warning by Mark Kirk. I heard him being interviewed on the radio this morning. It promises to be a blockbuster of a program and if you ever wonder how all these highly paid smart guys dragged the whole country-- if not much of the world-- into ruin, you really ought to try to watch. Kirk's goal is to open the black box and unearth "the hidden history of the nation's worst financial crisis since the Great Depression." [...]

Propaganda Alert: Wall Street's grip on media. Or: Access journalism, the elimination of dissent & the recoveryless recovery.

The re-ascendancy of Goldman Sachs, et al., was made possible by US taxpayers -- who weren't, by the way, consulted about it -- having forked-over billions and billions of dollars, in accordance with TARP and related measures, enacted in the moment of crisis (in 'extraordinary circumstances'!!!) as necessary for the very preservation of the United States economy.

And yet, despite the fact that the vast majority of US citizens are getting massively screwed by this state of affairs (and, let's face it, most of us are struggling right now just to make ends meet...it's not just the ultra-poor that are getting screwed, but the middle class), we hear nothing about this fact. It's reported or even so much as mentioned by no prominent media, including the declining 'traditional' press and the massive entertainment organizations that call themselves 'cable news'. And scarcer still is any piece of reporting that points out explicitly the fact that the small cadre of super-wealthy bankers are enriching themselves at the expense of the middle class. (And don't even get me started on the pitiful state of social services for poor people!)

So: why are the media nothing more than stenographers for the banking industry's public relations specialists?

To learn more, have a look at the spirited commentary of Naked Capitalism's Yves Smith: MSM Reporting as Propaganda (No One Minds Our New Financial Lords and Masters Edition).

In this piece, the author grapples with some of the sinister trends in financial news coverage (and in news coverage in general) and tries to sort out what accounts for the fact that the news reporting of the "mainstream" media are not just 'slanted', but -- and this is not hyperbole -- downright dysfunctional. In other words, propaganda. Here's a taste (I have emphasized certain passages using boldface):

Access journalism has created what is in many respects a controlled press. And that matters because people are far more suggestible than most of us wants to admit to ourselves.

Let us start with the cheerleading in the media over Wall Street, and in particular, Goldman earnings. Matt Taibbi, in “Good News on Wall Street Means… What Exactly?,” tells us why this is so distorted:

It’s literally amazing to me that our press corps hasn’t yet managed to draw a distinction between good news on Wall Street for companies like Goldman, and good news in reality.

I watched carefully the reporting of the Dow breaking 10,000 the other day and not anywhere did I see a major news organization include a paragraph of the “On the other hand, so fucking what?” sort, one that might point out that unemployment is still at a staggering high, foreclosures are racing along at a terrifying clip, and real people are struggling more than ever. In fact the dichotomy between the economic health of ordinary people and the traditional “market indicators” is not merely a non-story, it is a sort of taboo — unmentionable in major news coverage.

The press has been on a downslope for at least a decade, as a result of strained budgets and vastly more effective government and business spin control (and it was already pretty good at that, see the BBC series, The Century of the Self, via Google video, for a real eye-opener). I met a reporter who had been overseas for six years, opening an important foreign office for the Wall Street Journal. He was stunned when he came back in 1999 to see how much reporting had changed in his absence. He said it was impossible to get to the bottom of most stories in a normal news cycle because companies had become very sophisticated in controlling their message and access.

I couldn’t tell immediately, but one of my friends remarked in 2000 that the reporting was increasingly reminiscent of what she had grown up with in communist Poland. The state of the US media became evident to me when I lived in Australia during the run-up and the first two years of the Gulf War. I would regularly e-mail people in the States about stories I thought were important and I suspected might not be getting much play in the US. My correspondents were media junkies. 85% of the time, a story that had gotten widespread coverage in Australia appeared not to have been released in the US. And the other 15%, it didn’t get much attention (for instance, buried in the middle of the first section of the New York Times). And remember, Australia was an ally and sent troops to the Iraq. [...]

Please do read the rest.

Talkin' Dirty Secrets Keepin', Executive Branch Authoritarianism Pushin', Disaster Capitalism Evincin', Patriot Act Recallin', Bailout Blues!

Secretary of the Treasury Henry Paulson
("Hank" to his friends. So let's stick with Henry).

Q. Should Congress pass into law the $700 billion Wall Street bailout -- otherwise known as The Bailout, otherwise known as the Temporary Asset Relief Plan -- proposed by Secretary of State Henry Paulson (and supported, obviously, by all of the Bushies and the Federal Reserve Chairman Ben Bernanke), in its current form?

A. No, if estimates by Daniel Bruno Sanz, and numerous other experts, predict correctly what fate will befall the value of the not-so-Almighty US dollar. (i.e.: free fall) (Huffington Post).

A. No, because it's "an enormously expensive plan that doesn’t seem to address the real problem," according to Paul Krugman, in whose view Senator Chris Dodd's counterproposal is vastly superior, and which "has a real chance" of edging out Paulson's, due to the paternalism, arrogance and pushiness of Paulson's demand for full Executive Branch control, with zero oversight (more on this in a moment). (New York Times Web site)

You want full immunity from any & all future prosecution??
Say it ain't so, Henry. We thought you were different.

A. No, because, first and foremost, Paulson's proposal gives the Executive Branch FULL CONTROL over the allocation of the $700 billion, with ZERO OVERSIGHT and FULL IMMUNITY FROM OVERSIGHT AND EVEN PROSECUTION. Patriot Act, anyone? Just fucking read this sentence, for which some sneaky little fuck in the Bush Administration wins the Totalitarian Fascist of the Year Award (actually, let's just award it to Paulson; oh, and the boldface is mine):

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Yes. That day has really come, America, where your Executive Branch is actually saying: "Just hand over to us all of the control over everything, and just trust us, we'll fix everything behind closed doors. All we need is this $700 billion! Please just sign on the dotted line immediately."

If you're not angry, America, you should be. You respond: "But, I'm too busy to pay attention to this. I've got a job and a wife and a car and mouths to feed, and...." All the more reason you should be angry, America. All the more reason you should be angry....

Here's a taste of what Yves Smith, contributing to Naked Capitalism, which is a fantastic blog for those of us who are looking for straightforward explanations of the Bush Administration's economic shenanigans, has to say about it this sneaky little provision, in a post titled "Why You Should Hate the Treasury Bailout Proposal":

This puts the Treasury's actions beyond the rule of law. This is a financial coup d'etat, with the only limitation the $700 billion balance sheet figure. The measure already gives the Treasury the authority not simply to buy dud mortgage paper but other assets as it deems fit. There is no accountability beyond a report (contents undefined) to Congress three months into the program and semiannually thereafter. The Treasury could via incompetence or venality grossly overpay for assets and advisory services, and fail to exclude consultants with conflicts of interest, and there would be no recourse. Given the truly appalling track record of this Administration in its outsourcing, this is not an idle worry.

But far worse is the precedent it sets. This Administration has worked hard to escape any constraints on its actions, not to pursue noble causes, but to curtail civil liberties: Guantanamo, rendition, torture, warrantless wiretaps. It has used the threat of unseen terrorists and a seemingly perpetual war on radical Muslim to justify gutting the Constitution. The Supreme Court, which has been supine on many fronts, has finally started to push back, but would it challenge a bill that sweeps aside judicial review? Informed readers are encouraged to speak up.

Nouriel Roubini does not think it passes the smell test:

`He's asking for a huge amount of power,'' said Nouriel Roubini, an economist at New York University. ``He's saying, `Trust me, I'm going to do it right if you give me absolute control.' This is not a monarchy.''

A. No, because the proposal is fundamentally dishonest, and furthermore, would not work. Smith goes on to articulate a significant (and in a couple of respects, shocking) substantive (again, the boldface is mine) problem:

...The Treasury has been using the formula that it will buy assets at "fair market prices". As we have noted, there is simply huge amounts of cash ready to bottom fish in housing-related assets (we saw an estimate of $400 billion a couple of months ago). The issue is not lack of willing buyers; it's that the prospective sellers are not willing to accept prices that reflect the weak and deteriorating prospects for housing.....

...[T]he plan makes no sense unless the Orwellian "fair market prices" means "above market prices.".....Confirmation of our view came from a reader by e-mail:

I worked at [Wall Street firm you've heard of], but now I handle financial services for [a Congressman], and I was on the conference call that Paulson, Bernanke and the House Democratic Leadership held for all the members yesterday afternoon. It's supposed to be members only, but there's no way to enforce that if it's a conference call, and you may have already heard from other staff who were listening in.

Anyway, I wanted to let you know that, behind closed doors, Paulson describes the plan differently. He explicitly says that it will buy assets at above market prices (although he still claims that they are undervalued) because the holders won't sell at market prices. Anna Eshoo pressed him on how the government can compel the holders to sell, and he basically dodged the question. I think that's because he didn't want to admit that the government would just keep offering more and more.

I don't think that our leadership has been very good during this negotiation (or really, during any showdowns with this administration) at forcing the administration to own their position. If Paulson wants this plan, then he needs to sell it to the public, and if he sells a different plan to the public (the nonsense buying-at-market-price plan) then we should pass that. I'd rather see the government act as a market maker for the assets to get them transferred over to private equity firms and sovereign wealth funds and other willing holders. And if we need to recapitalize these companies, it seems like the cheapest way for the taxpayer is to go in and buy up the distressed debt and then convert that to equity.

So unlike the Resolution Trust Corporation, which took on dodgy assets which had fallen into the FDIC's lap due to the failure of thrifts, and the Home Owners' Loan Corporation, which was established in 1934 after the housing market had bottomed, this program is going to swing into action with the clear but not honestly disclosed intent of buying assets at above market prices when future markets and the analysts with the best track records on forecasting this decline (you can add Robert Shiller, CR at Calculated Risk, and Nouriel Roubini to the list) believe it has considerably further to fall.

A. No. But also, Naomi Klein warns us to be equally wary of alternative far-Right proposals, particularly those of Newt Gingrich, that seek to use this moment's crisis as an opportunity to shotgun through legislation that would push agendas of privatization, reverse what few social justice safeguards we may still recognize in this country, and -- of course -- to deregulate the private sector even further, including the repeal of the Sarbanes-Oxley Act. This is serious and twisted shit. Excerpt of Klein's piece, which draws upon her convincing theory of 'disaster capitalism' (Huffington Post):

I wrote The Shock Doctrine in the hopes that it would make us all better prepared for the next big shock. Well, that shock has certainly arrived, along with gloves-off attempts to use it to push through radical pro-corporate policies (which of course will further enrich the very players who created the market crisis in the first place...).

The best summary of how the right plans to use the economic crisis to push through their policy wish list comes from Former Republican House Speaker Newt Gingrich. On Sunday, Gingrich laid out 18 policy prescriptions for Congress to take in order to "return to a Reagan-Thatcher policy of economic growth through fundamental reforms." In the midst of this economic crisis, he is actually demanding the repeal of the Sarbanes-Oxley Act, which would lead to further deregulation of the financial industry. Gingrich is also calling for reforming the education system to allow "competition" (a.k.a. vouchers), strengthening border enforcement, cutting corporate taxes and his signature move: allowing offshore drilling.

Drill, Baby Drill! God damn, am I sick of the Grand Old Party. I mean, although I have always found his politics to be barbaric, its underlying principles deeply racist in character, in a weird way I have always found Newt Gingrich to be essentially a principled and intellectually honest man. (Keep in mind, this is in comparison to the majority of the bullshit artists of the Far Right.) Having said that, this is one of those moments in which I'd like nothing more than to punch him right smack dab in the middle of that fat, smug, pink, greasy cracker face of his.*

Newt Gingrich: "What about the plantation-owners??"

_______________
* What's gotten into me today?