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Thursday, January 28, 2010

Value of "public servant" Geithner's wealth transfer from taxpayers to Goldman Sachs cronies revealed: $8 billion

Revealed: See Who Was Paid Off In The AIG Bailout
(Huffington Post) --

A key question at the heart of the controversial bailout of AIG is just how much money the government lost. The Federal Reserve and Treasury Department have worked to keep that number secret and to conceal who was on the winning end.

An unredacted document obtained by the Huffington Post list the damage in detail. Goldman Sachs alone, for instance, got $14 billion in government money for assets worth $6 billion at the time -- a de facto $8 billion subsidy, courtesy of taxpayers.

The list was produced as part of a congressional investigation led by the House Oversight and Government Reform Committee into the federal bailout of AIG.

The Federal Reserve Bank of New York, then led by now-Treasury Secretary Tim Geithner, purchased a slew of souring assets from the world's biggest banks for 100 cents on the dollar in November and December 2008. A scathing report by a government watchdog held Geithner responsible for the overpayments.

The New York Fed initially pressured AIG to keep the list hidden from investors, regulators and the public. When it was eventually filed with the Securities and Exchange Commission, the SEC allowed the Fed and AIG to keep the details secret. A heavily-redacted version was made public last March.

The document is part of 250,000 pages of internal documents on the AIG deliberations subpoenaed by the oversight committee. It lists the toxic mortgage bonds that banks insured through AIG.

Those insurance contracts, called credit default swaps, are what the New York Fed ultimately took off AIG's books, paying the banks 100 cents on the dollar for toxic mortgage bonds -- home mortgages that were bundled together and securitized. The banks could never have gotten anywhere near such a generous deal on the open market, so the move served essentially as a direct subsidy to those banks from taxpayers...MORE...LINK

Chris Moore comments:

The Left will say this is a problem with capitalism, but what is going on in Washington has nothing to do with free enterprise capitalism and actually more closely resembles old Soviet Communism.

Free enterprise capitalism is when people organize labor, products and/or services, and profit from the organization and market implementation of those tangible goods.

Despite its rhetoric as being implemented upon social and economic justice lines, in the old Soviet system, the government took all the resources of the society and all the goods and services produced by the society at the point of a gun and redistributed them to "the people" upon hierarchical lines, where elite politicians, Commissars, Party members, and their cronies got the lion's share of everything from food to housing to all the best jobs, and "the people" were left to fight over the crumbs.

This is exactly what's going on in America today under the auspices of "capitalism," as the case above demonstrates.

If you follow the link and read the whole story, you will see the following quote:
"The way the AIG bailout was engineered was to specifically benefit Goldman Sachs and its trading partners," said Janet Tavakoli, a Chicago-based derivatives expert and founder of Tavakoli Structured Finance. "Goldman's past and present officers used crony capitalism to put their own interests ahead of the public."
Here is Wikipedia's definition of "crony capitalism":
Crony capitalism is a pejorative term describing an allegedly capitalist economy in which success in business depends on close relationships between businesspeople and government officials. It may be exhibited by favoritism in the distribution of legal permits, government grants, special tax breaks, and so forth. Crony capitalism is believed to arise when political cronyism spills over into the business world; self-serving friendships and family ties between businessmen and the government influence the economy and society to the extent that it corrupts public-serving economic and political ideals.
But what's going on in the Fed/Goldman Sachs case (and the many other cases like it) is the federal government (via the Fed) is requisitioning the resources of society (taxpayer money and debt), and redistributing them to their cronies -- who did nothing whatsoever to "earn" them other than incurring heavy gambling losses, which the Fed is absurdly pointing to as the "rationale" for the wealth transfer.

It would be akin to a mayor who gets big campaign contributions from his gambling-addict brother when he's on a winning streak going to the city council and saying that this same brother, who just went bust, needs to subsidised by the city taxpayers because his losses are helping to keep the local casino in business, and that means jobs and services.

Yes, it's as simple and absurd as that.

But as Hitler and Stalin recognized, the bigger the lie, the more people will believe it. And our "representatives" involved in this massive swindle (which is really what communism was and is, too), have organized much of the government system around maintaining the grift and others like it, getting themselves elected with campaign contributions from the Wall Street fraudsters and other beneficiaries of the scam, or employed by them as ongoing "private" parties to the fraud when they leave office.

Today, the massive swindle is all finally starting to unravel, despite Washington's best efforts to sweep it all under the rug, and the AIG confidence game is only the tip of the iceberg.

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