Obama, Bush team up behind another $350 billion for the banks 14 January 2009
First things first. Even before President Bush makes his farewell address on Thursday and Barack Obama is sworn in as the 44th president next Tuesday, the outgoing and incoming administrations are engaged in a concerted drive to release the second $350 billion installment of taxpayer funds to bail out the banks. Obama telephoned Bush Monday morning and asked that he formally request the second half of the $700 billion Troubled Asset Relief Program (TARP) windfall for Wall Street approved by Congress on October 3. Bush complied almost immediately, starting the clock on a 15-day period during which Congress can block the Treasury Department from transferring additional billions to financial institutions only if both houses reject the president's request. Even in that highly unlikely event, the president can vacate the congressional action by issuing a veto, which would require a two-thirds majority in both the House of Representatives and the Senate to override—virtually a political impossibility given overwhelming Democratic support for the bailout and Democratic control of both congressional chambers. Such is the priority given to the bailout money for the banks that Obama and his top economic aides are devoting themselves nearly full- time to meeting with leading Democrats and Republicans and lobbying Congress for support. Obama's $800 billion economic stimulus package, itself tailored to the demands of big business, can wait until mid- February, but Senate Majority Leader Harry Reid has pledged to hold a vote on the TARP money by this Friday at the latest. The joint Bush-Obama push for the second half of the TARP money has occasioned a flurry of complaints from both sides of the congressional aisle over the refusal of the banks to use the billions they received in the first installment to increase their lending and protests from Democrats over the failure to provide relief for homeowners facing foreclosure—the ostensible purposes of the program. There is also much bluster over the lack of any restrictions on how the banks used the money, the absence of serious limits on executive pay and the fact that the banks were not even required to inform Congress or the public what they did with the government funds they received. Of the $350 billion already distributed, $250 billion went to banks and financial institutions, including $125 billion to the nine biggest banks. Another $40 billion was added to the $100 billion previously paid out to rescue the insurance giant American International Group, $19 billion went for emergency loans to General Motors and Chrysler, $20 billion went to other firms, and $25 billion was injected into Citigroup as part of a bailout involving over $300 billion in government loans and guarantees. It is well established that the banks used the money to shore up their reserves and, in the case of some of the biggest firms, to buy up smaller institutions with the aid of a tax break unilaterally enacted by Treasury Secretary Henry Paulson, formerly the CEO of Goldman Sachs, to facilitate a further concentration of financial power on Wall Street. Obama himself on Monday noted "the absence of clarity, the lack of transparency, the failure to track how the money's been spent and the failure to take bold action with respect to areas like housing," saying he was "disappointed." He promised to "fundamentally change some of the practices in using this next phase of the program." This, and similar statements from leading Democrats in Congress, are little more than window dressing designed to placate public anger over the handover of federal funds to shore up the balance sheets of the very institutions whose pursuit of super-profits and financial Ponzi schemes precipitated the deepest economic crisis since the Great Depression. Some political cover is needed to continue placing the assets of the American people at the disposal of this discredited financial elite. But such demagogy and associated political maneuvering cannot disguise the total subordination of the government and both parties to the most powerful sections of the ruling class. The indecent haste with which both the outgoing and incoming administrations are rushing to satisfy the demands of Wall Street for a new infusion of cash provides an object lesson on the class relations that underlie American "democracy." One day before Obama requested $350 billion more for the banks, he explicitly affirmed that his administration would seek to impose major funding cuts and structural "reforms" on the bedrock social programs— Social Security, Medicare and Medicaid—upon which tens of millions of workers and retirees depend. In an interview on the ABC News "This Week" program, Obama was asked whether he would carry out "entitlement reform, including Social Security and Medicare, where everybody in the country is going to have to sacrifice." "Yes," Obama replied, adding that "what you describe is exactly what we're going to have to do... Everybody is going to have to give." Everybody, that is, except for the multi-millionaires and billionaires who comprise the financial aristocracy. There is not even an attempt to explain why it is the critical social programs on which the working class relies that must be cut to offset the explosive growth of budget deficits resulting from cash infusions to the banks and corporations. Indeed, as with the initial passage of the TARP program, there is to be no public discussion or serious congressional debate—no assessment of the failure of the first installment to prevent the economic catastrophe it was supposedly implemented to avert, or explanation of how the second installment will work, whom it will benefit and how it will address the economic crisis any better than the first half of the Wall Street slush fund. Once again, a proverbial gun is being held to the head of the American people. In a letter to congressional leaders, Obama's top economic adviser, Lawrence Summers, wrote that "President-elect Obama believes the need is imminent and urgent. We cannot afford to wait." In his letter to Congress, Summers wrote that companies receiving "exceptional assistance" would be subject to "tough but sensible" limits on executive pay and other restrictions. One can judge how much such assurances are worth from the resumés of Summers and Obama's designee as treasury secretary, Timothy Geithner, who will head up the TARP program. As treasury secretary in the Clinton administration, Summers promoted the dismantling of bank regulations and the cheap credit policies that fueled the housing and credit bubbles which imploded 18 months ago. Geithner, as president of the Federal Reserve Bank of New York, played a central role along with Paulson and Fed Chairman Ben Bernanke in engineering the government loans, cash infusions and guarantees to the banks and financial markets that now total some $8 trillion. Bernanke weighed in on Monday to push for the additional TARP money. In a speech at the London School of Economics, he endorsed Obama's stimulus plan but added that further taxpayer infusions into the banking system were essential. Bernanke suggested that the second installment should be used to buy up bad mortgage-related bonds and other "toxic" assets weighing down the balance sheets of the banks. This was the plan originally marketed by Bernanke and Paulson, only to be dropped within days of congressional passage in favor of direct cash infusions into the banks. Whatever form the next transfusion of cash takes, it will not solve the deepening economic crisis. It will not, and cannot, address the fundamental contradictions and deep-seated structural problems of American and world capitalism. No amount of handouts to the banks can resolve the crisis of profitability in basic production and the conflict between globalization and the nation-state system that underlies the crisis, or reverse the massive decay of manufacturing in the US that is the product of decades of financial speculation and parasitism. Like every other measure taken since the crisis erupted, it will be directed toward defending the interests of the financial elite and leave untouched the foundations of a failed economic and political system. >From its origins, TARP was conceived not as a serious solution to the economic and social crisis, but rather as a means of exploiting the crisis to implement a vast transfer of wealth to the financial aristocracy that would have been impossible under normal conditions. The cost of this plundering of the economy is to be born by the working class. The united front of Obama and Bush behind the bank bailout is yet another demonstration of the fraud of Obama's pose as the agent of "change" and one more expression of the basic continuity between the outgoing and incoming administrations. More fundamentally, it underscores the fact that government policy cannot be changed in any progressive way by elections or the replacement of the Republicans by the Democrats. Behind the increasingly worm-eaten façade of American democracy, all essential questions of social life, of war and peace, of democratic rights are determined by the class interests of the ruling elite. This situation can be changed only through the independent political and revolutionary mobilization of the working class in the fight for socialism. Barry Grey On Jan 13, 1:42 am, "florida mike !" <[email protected]> wrote: > Mythbusting the Obama Recovery Package > http://www.truthout.org:80/011109E > The self-serving myths about President-elect Barack Obama's economic > recovery plan are starting to fly so thick and fast that we have been > working full-time to keep ahead of them. Here's what you need to know > to fire back. > > Here it is: our moment of economic truth. We're standing at that > historic fork in the road where the nation decides, now and for the > foreseeable future, whether it's going to hang on to the catastrophic > assumptions of the free-market fundamentalists and rely once more on > the nostrums that have so far failed to fix the mess, or take a bold > step down a new, more progressive path that will finally re-empower > the American people to build an economy that works for us all. > > As usual, the conservatives have absolutely no conscience about > what they did to create this mess. If they did, they'd all be holed > up > in their gated communities or on their private islands, embarrassed > into silence at best and terrified of peasant uprisings at worst. > Instead, they're jetting into D.C. en masse in a last-ditch attempt > to > head the country off - or at least make sure that any money that does > get spent ends up, as it always has, in their pockets. > > To that end, the self-serving myths are starting to fly so thick > and fast that the staff here at CAF has been working full-time to > keep > ahead of them. Here's some of what they're flinging in this latest > B.S. storm - and what you need to know to fire back. > > 1. The proposed recovery package is too big. > > False. Most progressive economists agree (and Paul Krugman is > downright emphatic) that it's going to take a minimum of a trillion > dollars of well-placed investment to pull our economy out of this > ditch. This is no time for half-measures, blue-ribbon committees, > pilot projects, or trial balloons: this is a life-or-death crisis > that > requires immediate and massive intervention. > > CAF Senior Fellow Bernie Horn puts it this way: "The American > economy is huge and it's at a standstill. It's like a motionless 100- > car freight train - or one going backwards slowly. A small locomotive > simply can't pull it forward. We need an engine large enough to work, > one that can create millions of jobs. If anything, a $775 billion 2- > year plan may be too small rather than too big." > > Dean Baker of the Center for Economic and Policy Research echoed > this same thing on Rachel Maddow's show last Tuesday night. It's got > to be big. And it's got to be now. Anything too small - or too late - > and the American economy will be at serious risk of stagnating the > same way Japan's did in the 1990s. > > 2. If we can't afford (insert pet project here), we certainly > can't afford this. > > Yes, we can. What we really can't afford is a huge recession that > undercuts the tax base. That's a vicious cycle that will make it > increasingly harder to dig out the longer this goes on. The > Congressional Budget Office projects that the current slowdown will > cost the federal government $166 billion in lost tax revenues in 2009 > - a number that could easily get even larger in coming years if we > fall into a real depression. If we get on that trendline, we could > lose a trillion dollars in government revenues by the end of Obama's > first term. We need to invest what we have while we still have it if > we hope to have a strong economy going forward. > > This argument is based on the limited view that wealth is mainly > generated by loaning or borrowing at interest - a common enough > assumption among financial people over the past 30 years. A more > progressive view is that real wealth is generated by labor, combined > with access to resources required for production. Putting people to > work creates wealth. So does ensuring that our current failing energy > regime is replaced as rapidly as possible with one that's infinitely > renewable and that we will finally be in full control of. And so do > other kinds of infrastructure investments, which form the footing on > which a new round of businesses can rise and thrive. > > Businesses have always invested their capital to create more > capital. The best parts of Obama's proposal involve getting the > government to do the same thing. Conservatives are resisting this > because don't believe that there's such a thing as the common wealth > - > which is how they've rationalized their plundering of our common > assets. We need to make it absolutely clear that we do believe in the > common wealth - and that their assaults on everything that allows > America to generate national wealth are going stop, right here and > right now. > > 3. It's more important to balance the budget. Fix that, and the > rest will take care of itself. > > Read history much? Herbert Hoover is history's poster boy for the > idea that balancing the budget during a recession is the best way > known to turn it into a full-on depression. And that wasn't a one- > off: > FDR repeated the lesson in 1937, when he succumbed to the pleas of > budget-hawk conservatives and tried to balance the budget - a move > that put the brakes on what had, until then, been a solid recovery. > > Looking forward, this year's numbers also show the case clearly. > Economists are already estimating that spending by individuals and > businesses will be off by $300 to $500 billion in 2009. The upshot of > this will be millions of lost jobs, which in turn will mean even > lower > spending and more job losses next year as the country accelerates > toward depression. > > The only way to halt this slide is for the government to step in > and fill the hole with an additional $300 billion-$500 billion of its > own spending - and to spend that money on investments that will > create > as many jobs as possible. The longer we wait, the more government > spending it will ultimately take to pull us out of this - and the > less > able we'll be to muster that much cash. > > Balanced budgets are important, but not as important right now as > making sure every American has a paycheck they can count on. We can't > afford to sacrifice the fate of the entire country to this one > economic ideal. --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. 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