"A blue ribbon commission with subpoena powers should be established."
Hank Greenberg, the former chairman and CEO of AIG, made this comment in a panel discussion on C-Span, "Government Aid to Private Industry." The eye-opener was that AIG had worked out a discount of 40% with its counterparties before the bailout. As a private company, AIG was doing exactly what it needed to do to stay viable, to stay in business. Otherwise, it would have had to file for bankruptcy. Some were allowed to fail others weren't. I wonder why?
When the bailout occurred AIG's counterparties received 100 percent. I do not think that it was an accident that Henry Paulson, the former chairman and CEO of Goldman Sachs was the Treasury Secretary when the bailout occurred. Goldman Sachs received not only $10 billion dollars from the government but an additional $12.9 billion, but not before eliminating its competition, Bear Stearns and Lehmann Brothers. Under Paulson, these two investments banks were allowed to fail.
I agree with Hank Greenberg completely that a commission with subpoena powers should be established" and that if it is determined that there is wrongdoing that these should be help responsible for their actions. Below are a list of AIG counterparties that received 100 percent instead of the 40 percent discount that AIG had negotiated. The New York Times listed the banks that received bailout fund via AIG. $38.8 billion went to US banks, $50.2 billion went to foreign banks, $12.0 billion went to municipal bonds and $84.0 billion is still unaccounted for.
Here is the list of banks that received TARP funds via AIG:
$12.9B Goldman Sachs
$12.0B Bank of America/Merrill Lynch
$5.2B Bank of America
$6.8B Merrill Lynch
$11.9B Societe Generale
$11.8B Deutsche Bank
$8.5B Barclays
$5.0B UBS
$4.9B BNP Paribas
$3.5B HSBC Bank
$3.3B Calyon
$2.3B Citigroup
$2.2B Dresdner Kleinwort
$1.6B JPMorgan/Morgman Stanley
$0.4B JPMorgan
$1.2B Morgan Stanley
$1.5B Wachovia
$1.5B ING
$1.1B Bank of Montreal
$1.0B Deutsche Zentral-Genossenschaftsbank
$0.8B Rabobank
$0.7B Royal Bank of Scotland
$0.7B DZ Bank
$0.5B KFW
$0.3B Banco Santander
$0.4B Dresdner Bank AG
$0.4B Credit Suisse
$0.2B Citidel
The "blue-ribbon commission" Henry Greenberg suggests will hopefully get to the bottom of this. Although I must admit to wondering about the impact of work currently being done by the Congressional Oversight Panel charged with figuring out exactly what happened to the TARP funds. I have yet to hear what happened to the $84 billion still unaccounted for.
11 comments:
How do you lose track of 84 billion????
I can see me telling a bill collector: 'But I LOST my money and I don't know where I lost it!' Every SINGLE DOLLAR of that money (our tax dollars) should be accounted for or heads should roll. This is a national disgrace.
Hell, I'd like a 100% 'discount' on some of my bills.....
Kelly - Can you say corruption? Somebody got paid BIG! Henry Paulson, Geithner (current head of the New York Fed and current Treasury Secretary who should know what happened to the $84 billion) and Ben Bernanke, (current and present head of Federal Reserve.) If this is not the biggest banking and government scandal in history, I do not know what is! And we are not even calling it a scandal. This is an OUTRAGE! Paulson initially requested $800 BILLION on a three-page note. More than a few people should lose their jobs in both the government and private sectors and some should probably go to jail. As Arianna Huffington mentioned recently, they do not even have to admit to wrongdoing.
Marion - It is indeed a national disgrace. But did you notice how much of our taxpayer dollars of the $90 billion that was given to AIG went to foreign counterparties? $50.2 billion went to foreign banks. $38.8 billion went to American banks. Love your analogy!
A national disgrace is happened when we invaded Iraq having the flames fanned by the likes of the 'liberal' New York Times.
A National Disgrace is letting the previous presidency say things like 'there have been no attacks since 911' when 911 happened on thier watch. (and very few people calling them out on this) Thousands of Amercan soldiers have been maimed and killed because of this and hundreds of thousands of Iraqis have been killed because of this.
(Every single dollar? What about accounting for every single life, American or Iraqi lost in this war?)
Also, a trillion dollars has been spent on this distruction. But what gets everyone outraged? What may shift the political winds from moderate back to the reactionary tide that got us here? People behaving in ways that our culture rewards in every way possible (being greedy - think TP when he brags about being a Capitalist Pig).
Warren Buffet was on Charlie Rose last night. He said, for whatever it may be worth, that we were lucky to have Geithner, Bernake and Paulson where they were when the crisis came to a head.
What happened to the economy was bound to happen and will probably happen again in 70 years.
Also, I'm not as worried about getting to the bottom of what happened as I am about modifying laws so a crisis won't happen for 70 more years.
No matter what we do, no matter what rules we make, no matter who goes to jail, it will happen in 70 years or so because a future generation of Americans will believe once again they are living 'in a new age' and 'the rules have changed' and so on.
Thoughts like this led to the irrationality in the dot-com bubble and the housing bubble.
I happen to be optomistic that the if the moderates can keep a hold on poloitical power, rules will change for the better. But that may be a big if.
Zorro - Thank you for your comment but I totally disagree with some of it. We do not have to be reactionary; we just have to have those who we have entrusted our money with to do what is already lawful and to put other laws in place to ensure that this will not happen again. How can you dare not be outraged that we "lost" 84 billion dollars in this crisis OR $350 billion during the Hurricane Katrina debacle? Pulease! Outrage is precisely what is needed. The powers that be do not seem to understand any other language. Anger has a place, but it need not supplant rationality.
While Warren Bufffet has been respected, he was such because he was a fierce opponent of debt. He began dealing in derivatives and even he lost his triple A credit score rating. If Berkshire wasn't the biggest shareholder in Moody's, the credit agency, the company may been downgraded from its coveted triple A credit rating most sooner than it was. Many of these projections are ludicrious to me. We are in an altogether different time. The BlackBerry has changed that. Time has sped up and what used to take much longer to get around the world takes a much faster time in this global economy attached to markets throughout the world.
I, and many astute others, utterly disagree with Buffet on Paulson, Geithner and Bernanke. I do remain hopeful that we will recover. But it will take both the enforcement that didn't happen with Paulson, Geithner and Bernanke. If they would have just followed the laws that were already there, this would have prevented this financial crisis that many average people lost so big in. I also hope that the moderates will be able to bring the needed political change. My heart goes out to the Amerian families who lost loved one and the upwards of 200,000 Iraqi too. Many blessings on these indeed.
"Outrage is precisely what is needed."
Irrational outrage is what got Nixon elected over Humphrey in 1968and extended the Vietnam War.
What I see is irrational outrage. Obama is the one who is getting blamed for this mess. We seem to have forgotten who was in charge for the previous 8 years.
Sorkin pointed out on CNBC that what is unsatisfying about the finantial crisis is that there are so many people from all politial stripes at fault (including the avergae everyday Joe loan officers and home buyers). He also belives that history wiil be have a positive verdit on Paulson and the others. I'm sure he knows more about the people involved than I do.
By the way, I still don't think Palin is a joke. At the very least, she can influence a lot of people. Secondly, she could win depending on the cirumstances in 2012. Suppose, for example, a third party progessive decides to run against Obama? That could pull enough votes away from Obama to get a reactionary republican in(and there are no other types of republians) .
Ralph Nader gave George Bush his victory in 2000.
Zorro - Your focus seems to be on an irrational response to this crisis or any other. That is not mine. Regarding Sorkin, I do not have blind faith in this smart young man and still find it quite absurd that he would write such a book and hobnob with those whom the book berates. Sorkin is for sure up close with the Wall Street executives who received billions in bailout. They attended his book signing. Jamie Damon wrote an opt-ed piece recently against being too big too fail as if Chase isn’t. I know people up close in this financial crisis with serious sources and who are very successful hedge fund managers; they think differently and so do I. Although, many hedge funds managers benefited enormously from the crisis.
It would not matter about the loan officers, real estate brokers and agents. If the banks would not have lent the money and the government would not have guaranteed it, this crisis would not have happened. Period. What we have here is moral hazard in a designed perfect storm. I find it very hard to believe that this guys didn't know what was happening when I watched eight years ago a very successful real estate agent give loans to people who verified their incomes with telephone and gas bills. Pulease!
Regarding Sarah Palin, it is not that the impossible will not be possible, it is that this woman is as prepared political candidate for the presidency than my drop dead gorgeous 17 year old niece. And, Sarah Palin ain't that! :-) She has a 27 percent approval rating as a serious candidate. She's likeable enough for some, but president? I don't think so. To think that Americans would elect someone like her will say a lot about America. Why not run the bunny from Vegas? I suspect some of them would have equivalent smarts and likeability. They are at least faithful in their jobs. Loved ones I supposed wish they weren’t. They rarely quit.
I understand your point about the third party candidate.
Here is Nouriel Roubini on the reality of what's happening and a suggestion as to what needs to happen instead of the cheerleading that Buffet did on Charlie Rose:
"The Worst is yet to Come: Unemployed American Should Hunker Down for More Job Losses"
I saw Arianna Huffington's post about Buffet. Buffet wasn't cheerleading - he was pointing out that a big crisis was adverted. He also said we were not out of the woods - we are not even out of the hospital.
As far as Palin is concerened, it depends on what poll you read.
One poll has 9% as voting for her and 37% as considering it. That totals to a possible 46%.
"It would not matter about the loan officers, real estate brokers and agents. If the banks would not have lent the money and the government would not have guaranteed it, this crisis would not have happened."
Reverse the statement above and it is also true. All we are doing is blaming the rich for our problems and own behavior.
The only reason why Palin is not Vice President is because of the finantial crisis. Obama was losing after the republican convention - right up until sept 15the when the crisis became public.
"What we have here is moral hazard in a designed perfect storm."
You are implying a consiracy. As I see it, there were way too many reasons why the crisis happened. I just don't buy this. Too many people were responsible for it to be a true conspiracy.
Roubini is saying the same thing that Krugman has been saying for some time. The problem is how is it possible to get anything through congress that resembles a stimulus package. Obama wanted a bigger one that targeted jobs in the spring and it was watered down.
Being outraged about TARP will only make it more difficult to put together any sort of stimulus because the stimulus opponents tie TARP and stimulus spending together. I saw a quote by Micheal Porter that said 'Americans are at thier best when the take collective responsibility and go on to solve problems"
That is exactly what we are not doing.
1) "Reverse the statement above and it is also true. All we are doing is blaming the rich for our problems and own behavior."
I disagree with this statement, Zorro. There is always sequence to consider.
2)"You are implying a consiracy. As I see it, there were way too many reasons why the crisis happened. I just don't buy this. Too many people were responsible for it to be a true conspiracy."
Conspiracy is your word, not mine. But is collusion and conspiracy in the same family? There are not many reasons this financial crisis happened. It’s very cut and dry, actually. Collateralized debt bundled and re-sold. There are only three main principles: Wall Street banks, the government which backed the loans enabling moral hazard, and the homeowners. The credit agencies were complicit also. The masses can often be lead rather easily, especially when ginned up and when greed subsists in the culture at large. Keeping up with the Joneses is a major driving force and our belief that bigger is better. The power that be know this well.
3) "The problem is how is it possible to get anything through congress that resembles a stimulus package. Obama wanted a bigger one that targeted jobs in the spring and it was watered down. Being outraged about TARP will only make it more difficult to put together any sort of stimulus because the stimulus opponents tie TARP and stimulus spending together.”
The problem with TARP is that it was supposed to rescue the housing market and small business and it did not. Congress passed Paulson’s request and shortly thereafter the money was redirected to Wall Street banks that essentially used the money to buy smaller banks and became even bigger. So, we can only imagine what the next crisis will look like, especially without the oversight that Geithner failed to do as the chairman of the New York Fed that Jamie Dimon still served as a Board of Directors on the New York Fed. Both were charged with the funneling of the TARP funds to Wall Street banks. Where is the $84 billion?
4) "Americans are at thier best when the take collective responsibility and go on to solve problems.”
Yes, I agree in collective responsibility for sure. But does that do away with individual responsibility? The sequence and order of things are also very important as I have described above. If the money wasn’t lent and the government did secure it, the people could not have bought what they couldn’t afford. It is also no surprise that the bankers are the only ones that got paid on the front end and back end: the front end with fees and the back end with TARP funds that enable them to become solvent again and not lend to small businesses but as I have said above to buy smaller banks and pay their "talent" billions of dollars in bonuses.
We can’t go on without addressing what has happened and without making things right. Otherwise, it’s like building a house on sand. When the wind comes it will be blown down. Or, a better analogy is a house of cards. I think that Senators Dodd and Shelby need to go as well as Geithner and Bernanke. These were all in positions when the crisis happened and in key positions. They should not have been allowed to remain as chairman and ranking members. I am also not a fan of President Obama’s economic adviser, Larry Summers. He nearly destroyed Harvard’s endowment. Where is Paul Volker?
5) I’ll find Arianna’s post and read it. Thanks for the mention. As always, thanks for your comment, Zorro.
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