Former Wall Street Player On …
Behind Shady Bailouts to Bankers
| Shadowy deals decided which institutions would crash and burn and which would receive the subsidies to stay afloat, feast on the corpses of the fallen, and go on to the record profits. This 2009 interview was posted on AlterNet Oct 30. Nomi Prins is a former managing director at Goldman Sachs and author of the new book, It Takes a Pillage. |
By Joshua Holland and Nomi Prins
Josh Holland: Who ended up getting those billions in bailout money from us taxpayers?Nomi Prins: At one point, a total of $19.3 trillion comprised of $17.5 trillion deployed in some capacity for subsidizing or bailing out banks (including $3.7 trillion to back money market funds, which has now been taken off the table) compared to $1.8 trillion for citizen-related assistance, including some homeowner initiatives. I keep track of these figures on my Web site; also on that page are updated pay figures for all the banksters. Today, the total bailout is (still) over $14 trillion -- an immense subsidy by any historical standard.
Of the top three recipients of the bailout: Bank of America still owes the government $63.1 billion, AIG sits on top of a $181.8 billion pile of federal help, and Citigroup has a $368.7 billion public cushion.
Other recipients of government aid include Goldman Sachs, who is on track to pay managers $22.1 billion compared to $10.9 billion in 2008 and $20.2 billion in 2007. Additionally, JPM Chase is on track to pay $29.1 billion. Goldman Sachs still floats on $54 billion of federal support, and JPM Chase $73 billion -- even after repaying their TARP obligations. (Remember, the $700 billion TARP fund is but a fraction of the entire bailout and subsidization of the banking industry, despite Goldman, JPM Chase and the government wanting us to believe otherwise.)
JH: But it didn't have to be that way. What might the Fed have done -- could it have just said 'No!'? Wouldn't it have devastated the whole economy if it had?
NP: The Fed could have said, no. I don't believe the economy would have tanked if AIG went bankrupt. Nor would individual insurance policy holders with AIG have lost their policies, which was a popular scare tactic at the time. In some sort of receivership, parts of AIG would have kept functioning, while others would be examined and possibly wound down. If that had occurred, we wouldn't be out the $182 billion we're still publicly out of/stuck with, because of AIG subsidies and guarantees.
We certainly wouldn't have written a $12.9 billion check to Goldman Sachs to cover its losses to AIG. The government saved Goldman and others by backing AIG, and that simply wasn't necessary.
The Fed didn't have to allow Goldman and Morgan Stanley to become bank holding companies in a Sunday night fear feast on Sept. 21, 2008, and thereby solidifying the ability of those two firms to access federal subsidies and FDIC backing for new debt they issued.
The Fed definitely didn't have to encourage Bank of America to acquire Merrill Lynch, JPM Chase to acquire Bear Stearns and Washington Mutual, or Wells Fargo to merge with Wachovia. All of these mega-mergers are resulting in greater risk-taking than before the crisis.
This massive bank bailout was allegedly supposed to trickle down to help everyone else. A year, it hasn’t. What the Fed should have done, most importantly, is give the same, or greater, subsidies to individual or small businesses facing their own credit problems or home foreclosures. If that had happened, it would have been both cheaper and more humane, and it would have stabilized the general economy.
JH: So if you were Queen for a day, you'd do things very differently.
NP: Today, some banks are posting record earnings and are on track to record bonuses because of federal subsidies and renewed risk-taking. That means an inherently risky environment, only now with our [public] money on the table, not just the capital [depositors’ savings and borrowers’ mortgages that] banks were lending to each other before the crisis.
JH: What do you hope your readers will take away from the book?
NP: This banking crisis wasn't about subprime loans gone wrong but by a banking system, still intact, that leverages (borrows) too much on the back of consumers’ mortgages, loans and deposits, and that anyone who says otherwise is lying.
Subsidizing the banks with a tremendous bailout does not and can not trickle down to the wider economy. We need to be as vocal as people were in the 1930s, because our individual economic states continue to deteriorate, even as the biggest banks are back to bigger profits, risk and bonuses.
For the unabridged interview, click here
|
Also see: How the Fed Prints Money Out of Thin Air
Lobbying is a Lucrative Investment, Researchers Find
If we expect better from government, we must pressure government |
| Email this article | Sign up for free Progress Report updates via email |
What are your views? Share your opinions with The Progress Report:
| Page One | Page Two | Archive |
| Discussion Room | Letters | What's Geoism? |
