Let’s see. There’s Treasury Secretary Hank Paulson’s “bailout fund.” There’s also the AIG money that’s separate from the bailout fund. Then there are the “efficient car” loan guarantees already on schedule to be provided for Detroit’s Big Three automakers. And don’t forget the “cash injections” heading to the coffers of Fannie Mae and Freddie Mac.
Oh, and do you see that long line stretching around the block? Those are all the entities, public and private, accompanied by their lobbyists, wanting in on the action. K Street has never had it so good.
It’s all one big SUCKUP — the Seemingly Unlimited Cash Kitty Under Paulson.
Monday, Martin Crutsinger of the Associated Press noted that over $158 billion has been disbursed so far to publicly held banks in the financial services bailout portion of the SUCKUP. Additionally, over 6,000 — you read that right — privately held banks have December or later deadlines for staking their claims.
Nearly totally lost in the flurry of activity is perhaps the biggest financial bait and switch in human history. The original bailout bill, with its made-up $700 billion cost estimate, was sold to Congress on the idea that Treasury would buy “troubled assets,” primarily mortgage loans on homes and other properties in serious delinquency or foreclosure. Yet less than two weeks later, in a move that was never even hinted at during legislative discussions, Paulson decided that the government would instead take ownership positions in U.S. banks. It is more than a little likely that many “yes” votes on the bailout bill would have been different had congressmen known how Treasury would really use the money. Too bad; now it’s too late.
It’s not only that Paulson changed his strategy almost immediately; it’s that he did so with such a heavy hand. A chilling October 14 exchange on CNBC, one that may someday be seen as a pivotal moment in the demise of the free market system as we know it, told us how it went down (bold is mine; the commentator cited is obviously speaking figuratively):
Paulson put all these egos in the room, and basically put guns to their heads, forcing them to take the money to bolster the banking system.
Some of the firms say they didn’t want the cash. … And Paulson at one point said, “Listen, if you don’t want it, it doesn’t matter, gun to your head, you gotta take it.”
Thus, Paulson even forced government ownership on banks that believed they didn’t need it. Where in the world is the outrage?