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This is no change at all.
With the presumed appointments of Timothy Geithner, current New York Federal Reserve Chairman, to Treasury Secretary, and Larry Summers, former Treasury Secretary under the Clinton administration, to head the Obama administration’s economic council, one can be assured that the bailouts have only just begun.
Mr. Geithner, as chronicled by Bob Novak earlier this year, was the architect of opening up the Fed’s discount window to investment banks, which resulted from the Fed’s decision to loan JP Morgan some $30 billion to buy the failing Bear Stearns. He, practically speaking, started down the slippery slope of bailouts, first from the Fed, and then from Congress and the Treasury, to prevent, they claim, a financial calamity worse than the Great Depression.
And Mr. Summers for his part was the architect of the 1990’s asset bubbles that inevitably popped, according to the American Prospect. He supported, for his part, massive bailouts: “the Mexican bailout of 1994, which he engineered, to the intervention that saved a wildly leveraged hedge fund named Long Term Capital Management in 1998, Summers consistently supported the use of public funds and government clout to rescue Wall Street speculators during his time in the Clinton administration.”
Now, admittedly, Barack Obama did not run against bailouts. But he did promise change, and well, now we know, nothing’s really going to change. This year’s bailout has already topped some $7.4 trillion, and will continue unabated, reports Bloomberg News, if it is not reined in:
“‘Whether it’s lending or spending, it’s tax dollars that are going out the window and we end up holding collateral we don’t know anything about,’ said Representative Scott Garrett, a New Jersey Republican who serves on the House Financial Services Committee. ‘The time has come that we consider what sort of limitations we should be placing on the Fed so that authority returns to elected officials as opposed to appointed ones.’
“Bloomberg News tabulated data from the Fed, Treasury and Federal Deposit Insurance Corp. and interviewed regulatory officials, economists and academic researchers to gauge the full extent of the government’s rescue effort.
“The bailout includes a Fed program to buy as much as $2.4 trillion in short-term notes, called commercial paper, that companies use to pay bills, begun Oct. 27, and $1.4 trillion from the FDIC to guarantee bank-to-bank loans, started Oct. 14.
“William Poole, former president of the Federal Reserve Bank of St. Louis, said the two programs are unlikely to lose money. The bigger risk comes from rescuing companies perceived as ‘too big to fail,’ he said.
“The government committed $29 billion to help engineer the takeover in March of Bear Stearns Cos. by New York-based JPMorgan Chase & Co. and $122.8 billion in addition to TARP allocations to bail out New York-based American International Group Inc., once the world’s largest insurer. Yesterday, Citigroup Inc. received $306 billion of government guarantees for troubled mortgages and toxic assets. The Treasury Department also will inject $20 billion into the bank after its stock fell 60 percent last week.”
And that’s just an excerpt—revealing the tip of the bailout iceberg.
The fact is, of course, that it may already be too late to halt the bailout mania. With a pro-bailout administration on its way in, and Republicans seemingly split on the issue, there appears to be very little political will to do anything to stop the handouts to corporate America. And one has to wonder: Is this really what the American people had in mind when they voted on November 4th?
Take the most recent Citigroup bailout. At first, the company had received some $25 billion from the Treasury’s Troubled Asset Relief Program (TARP), only to return for some $306 billion in guarantees and another $20 billion to recapitalize the company’s falling stock price. Is it possible that turning to the TARP spooked investors?
And is it really the proper role of government to be in the business of guaranteeing the stock value of companies deemed “too big to fail”? These are important questions, but we already know the answer from the incoming Obama administration. The President-elect himself voted for the Treasury bailout program, and though he harshly criticized corporate America his key appointments are clearly in favor of centralized interventions to prop up failing companies and a failed global monetary and financial system.
And they call this “change”? Sure, just like the leopard and his spots.
Robert Romano is the Editor of ALG News Bureau.
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