jbpeebles

Economic and political analysis-Window on culture-Media criticism

Thursday, January 07, 2010

Goldman Sachs directed TARP funds

I've been consistent in my criticism of the Federal Reserve and Treasury Secretary Geithner. Relying on alternative news resources--not the mainstream--I was able to put together a highly accurate analysis of last fall's bailout months before the conclusions I reached made it to the mainstream. (This story is breaking. For more, see addendum below.)

The mainstream media has been so heavily consolidated, corporatized, its content dumbed down--you probably knew that already. What's less obvious is the role it plays in obfuscating vital issues and denying the American people the information they need to reach conclusions that might contradict the status quo.

Just read this on HuffPo about Treasury Secretary Geithner, in an article titled "Geithner's New York Fed Pushed AIG To Keep Sweetheart Deals Secret" by Shahien Nasiripour:
"An arm of the Federal Reserve, then led by now-Treasury Secretary Timothy Geithner, told bailed-out insurance giant AIG to withhold key details from the public about overpayments that put billions of extra tax dollars in the coffers of major Wall Street firms, most notably Goldman Sachs." [Huffington Post]

Goldman Sachs is a poster child for cronyism. As I've reported, the company fills key Congressional staffer and White House economic adviser positions election after election. It's also used flash trading to make 2009 a banner year.

The nexus between Goldman and those in power reaches so deep that the company directly formulates federal policy. When AIG was at risk of failing, a huge bailout was made not to save the banks, but rather to assure Goldman that its investments in AIG wouldn't disappear. Former Goldman CEO Paulson, Treasury Secretary at the time, made dozens of calls to then Goldman CEO Blankfein during the negotiations phase that preceded the bailout. The big answer is why: Goldman hadn't been in trouble at the time. Of course later, during the cover-up phase which continues to this day, Paulson's replacement Geithner denied that Goldman was the intended recipient of TARP funds, through the so-called counterparty risk posed by an AIG failure.

So corrupt has our government become that the White House takes its marching orders from those with the most money on Wall Street. But I guess you knew that. What you didn't know, thanks to the media, is how far the cronyism goes, or how total Goldman's control over our government is. You, the concerned taxpayer, have no ability whatsoever to shape economic policy. Instead the decisions are made in back rooms, far beyond any public scrutiny or legal accountability.

According to the HuffPo article, Barofsky, the Inspector General for TARP, has blasted the way that program funneled huge amounts to Wall Street insiders. More accusations are forthcoming, according to HuffPo, which must trouble the powers-to-be being that the website and its talented reporters have become quite a force for investigative journalism (the MSM has abandoned I.J.).

Specifically, the HuffPo article reports "Geithner's people told AIG to delete references on draft regulatory filings to the sweetheart deals." It goes on to cite a statement by Congressman Issa (R-Ca.): "It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information to the SEC..."

In other words, the facts were hidden. The statement continues:
"The lack of transparency and accountability is disturbing enough, but the outstanding question that remains is why the [New York Fed] didn't fight for a better deal for the American taxpayer. Clearly, the New York Fed wanted to suppress details and limit disclosure of the counterparty deal from the American people -- the only question is why?"

I'll answer why. Because the truth has to be suppressed or it will destroy all the credibility the political and monetary systems have left! If the American people really learned that the AIG bailout wasn't about a threat of systemic failure but instead a quid pro quo that exists between politicians and Wall Street, they'd surely revolt. At the very least they'd consider not paying their taxes. Not exactly the same thing as a revolution, but considering how tightly the Federal Reserve and its banks are ties to the IRS, the damage could be immense.

What's at stake is the faith and trust the people put in money and their leaders. Revealing the truth on the sweetheart deals imperils the myth that we control who governs us. The fact is that the transition to a new administration--one which purported to bring change no less--has meant business as usual.

We saw how the Bush era ushered in a new level of marketing called perception management. As long as the delivery is smooth and consistent enough, people can be fooled into believing anything. Say something often enough, long enough, loud enough, and its veracity is irrelevant. Think of it like branding--present a corporate symbol often enough through advertising, and it becomes familiar to the consumer: the mental equivalent of a brand on the hide of some domesticated livestock.
The corruption is total, and the media plays a direct role in maintaining the illusion that there's choice in who governs us when in fact everyone at the top works for the same moneyed interests. The American political system has become a sham, a facade of public perception and marketing messages with no substance behind it.

The predominantly conservative interests that really run the Capitol want to placate the masses so we go through the pageantry of an election process which is in fact nothing more than a long coronation ceremony for the pre-selected candidate favored by the Establishment.

The evidence of the corruption is far more than economic. We see our national security prerogatives managed for the benefit of a Military Industrial Complex, the ultimate tapeworm which sucks tax revenue out while providing nothing of lasting benefit. Look no farther than the full body scan machines that will be bought in the aftermath of the crotch bomber lapse. These contracts will be with companies tied to Chertoff and Ashcroft, an example of cronyism within the National Security complex.
Meanwhile our trade policy has succumbed to the very same interests which concocted the bailout--wealthy investors who felt threatened by unions and the resistance to corporate rule they presented. So we were told globalization would benefit us, that NAFTA would bring jobs. Instead it's devastated our manufacturing base, coupled with massive overseas investment and off-shoring to Asia, where labor is cheap and union-free.

Qui bono? [Who benefits?] Surely it's not those of us who now toil in the services sector, which was promoted as the savior of the American economy, alongside finance sector jobs. Financial services companies have gone from constituting under 15% of our nations GDP (a misnomer as financial profits don't constitute P--or "Product") to over 40%. Pushing piles of paper with no intrinsic value around (yes, that's what our money really is) looks good on paper, but in the real world, real men and women make real things.

The service economy and financial get-rich-quick bubble that characterized the Bush years weren't all that's burst. So too has exploded the concept that government is worthy of our trust. And so many people have lost pensions and assistance that they'll need to keep themselves comfortable in retirement, which itself has become a laughable notion for those who've got next to nothing, which is a huge mass of people labelled "useless eaters."

Don't believe me? Go to some place where older blue-collar types shop. You can literally see the worry on their face. The older employees live in terror of having a medical accident, being that so many self-employed are uninsured. The closer to retirement, the more worried they become, being that they start to see their inevitable decline in health.

The Wal-mart economy has engineered a new low in desensitivity for the plight of the employee. While young and healthy workers may not be aware of how fragile their status is, the older ones must return to work. One greeter told me she'd had a seizure, fallen, blacked out, been to the emergency room the previous day and come to work. Another, wearing the butcher's white apron, told me she couldn't afford the steak sold there. (They don't actually cut meat at Wal-mart, she'd simply been stocking shelves in the meat section.)

If American style laissez-faire, unregulated capitalism means that elderly have to work until death, and workers' right to health care and time for recovery can't be assured, we need to discard the system entirely. Maybe the system is doing it for us by failing. If things get so bad that no one is secure, and those that are don't feel secure, it'll be replaced. But how much pain will we have to endure before the pain of change is less than that of going on?

In time, we'll come to depend more and more on ourselves, and not expect handouts or help. We'll be less focused on what goes on in some distant capital and look more to local government.

The states offer more direct assistance then the federal government but the recession has hurt them badly. I just saw that California and New York are going to cut billions from their bloated budgets. As long as the federal government can borrow, or print money, the entrenched political system will be in control. The states, which provide health care for poor under 65, don't have the power to issue money like the Federal Reserve does (it's a power relegated to the Fed by Congress.) Therefore, the states have more to lose when Medicaid rolls overflow, or undocumented illegal aliens (millions in CA and NY) need health care and show up in the ER. Therefore the federal government can maintain inadequate security along our borders and avoid the consequences, unlike the states and municipalities.

The conflict of interest between the American people and federal government has reach unprecedented proportions. I think people will increasingly look to opt out, particularly from new taxing schemes and laws passed by the Federal government for the benefit of their cronies. TARP is an excellent example of this fleecing of the American people. Another is our taxation system: the revenue secured by the IRS passes to the Federal Reserve, not to our government.

While borrowing at ultra-low rates of interest, this group of private bankers gets to charge exorbitant rates of interest for consumer lending. Or it can sit back and borrow huge sums from the Federal Reserve and lend it to our government, taking no risk while receiving interest from the American people (via taxes) by lending them back their own money.

Addendum 1-8-10

This story is hot. See HuffPo's compilation on the AIG storyhere.

I mis-titled the post "Goldman directed TARP funds" because I don't build a linkage firmly enough between Geithner and Goldman. Still, I'm confident the control eminated from Goldman on the bailout. Provocative now; established fact soon enough.

I'm fully assuming that Geithner was doing as Goldman wanted. As more and more facts are revealed, this story line will flush out.

The financial motive was large enough for Goldman to cash in on its influence. HuffPo cites blogger Janet Tavakoli:
"The November 2009 TARP Inspector General's report failed to mention that Goldman originated or bought protection from AIG on about $33 billion of the problematic $80 billion of U.S. mortgage assets that AIG 'insured' with credit derivatives, about twice as much as the next two largest banks involved."

Through a cover-up, Goldman Sachs would have attempted to disguise the scope of its influence, to limit political backlash and to protect Geithner, who actions on behalf of the company would show him to be a de facto agent for the company.

I posted at truthout.org concerning another article there. Here's what I said:

"As I say in my blog, this isn't about Geithner. He's only the stooge, the puppet. If he's not in there, Goldman will just put another person in to replace him. Robert Rubin same idea. The insiders are there because Goldman has the most political influence to expend. Read Matt Taibbi for more.

...If the American people were to find out that their money was going to subsidize Goldman's losses, they'd realize that the status quo had been maintained despite the change rhetoric/facade of the duopoly's election charade."

Yeah, a little scrappy I know but sooner or later the people will have to wise up.

See also this article on Geithner at michaelmoore.com.

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