gao tarp big banks implicit subsidy

Bailed Banks Donate to Campaigns With Gov't Money
goldman sachs greg smith muppets ron paul virgin islands

Who Buried the Fact Ron Paul won the Virgin Islands?

Bankers, brokers, and bribers get away with taking public money, private money, and fixing elections. We trim, blend, and append five 2012 articles from: (1) Naked Capitalism, Mar 8, on the bailout by M. Stoller (ex advisor to Rep. Alan Grayson, fellow at the Roosevelt Institute); (2) Forbes, Mar 14, on Goldman by R. Mac; (3) Christian Science Monitor, Mar 14, on Ron Paul by P. Grier; (4) and (5) are letters published by the British press on an essential solution.

by Matt Stoller, by Ryan Mac, and by Peter Grier

The Government Accountability Office continues its subtle war on the talking point used by Treasury that “TARP made money”.

As of January 31, 2012, 341 institutions had exited CPP, almost half by repaying CPP with funds from other federal programs. Institutions continue to exit CPP, but the number of institutions missing scheduled dividend or interest payments has increased.

Much of the government-supplied TARP funding (to small banks) was replaced by the Small Business Lending Fund passed in 2010, which Republicans called “TARP 2.0.

The larger banks, however, where much of the bank-based credit creation in the economy takes place, didn’t use this program. Instead, they got an implicit subsidy of between $6B and $300B a year from the widespread belief that the government will not let their bondholders lose money.

The talking point that the Troubled Asset Relief Program made money for the taxpayer is an important structural argument for the Treasury Department and the political elements in the Obama White House.

Although Treasury regularly reports on the cost of TARP programs and has enhanced such reporting over time, GAO’s analysis of Treasury press releases about specific programs indicate that information about estimated lifetime costs and income are included only when programs are expected to result in lifetime income.

Our banking system is still reliant on the government for support. Officials can claim that TARP made money, but it’s becoming increasingly clear that this is a way of avoiding a description of the actual policy framework.

To see the whole article, click here .

JJS: Also overlooked are two major points. One, bailing out bankers and their buddies swelled government debt, a debt that requires interest payments; those government payments should be subtracted from any so-called profit from the bailout -- and ironically the people who get those payments, who own government debt, are largely the same people who own bank debt.

And two, by rescuing the “too big to fail” banks, government slammed shut the opportunity for smaller, stable banks to fill the breach. The US preaches free market and wages war on nations that resist free market yet fails to practice free market right here at home. If letting big banks go broke truly was a risk to small depositors, government could have protected small depositors directly rather than bail out rich bank owners.

Instead, the government gave bankers billions directly from the Treasury and indirectly trillions from the Federal Reserve, thereby clearly telling bankers and brokers that they need not respect law, custom, or common deceny.

Resigning from Goldman Sachs with guns blazing and ink burning, former executive Greg Smith published a widely-discussed op-ed in Wednesday morning’s New York Times.

Smith, a former executive director and head of the Goldman’s U.S. equity derivatives business in Europe, the Middle East, and Africa, wrote: “Over the last 12 months I have seen five different managing directors refer to their own clients as ‘muppets’.”

Smith wrote that Goldman Sachs supported a culture in which the firm’s interests were driven by how much money they could make off its clients and not necessarily what was best for them. “It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you.”

Two of Smith’s supporters are among the world’s wealthiest: billionaires Jim Clark and Stephen Jarislowsky.

Clark, a competent investor and the founder of companies including Netscape and Silicon Graphics, said Goldman’s treatment of its customers is “what I experienced over the four to five years” he entrusted some of his funds with the firm’s private wealth management division.

Clark, a former Stanford computer science professor, says he paid Goldman’s private wealth management operations a 1.5% fee of his assets “to manage a significant amount of private wealth.”

After Goldman placed Clark’s money in assets like hedge funds, he says he then paid an additional 2% of the assets’ value and 20% of any profits earned on that money. (That is standard fee structure for hedge funds.) Nominal returns during this period were 10%, according to Clark.

“I didn’t think much about these returns until later, but I would never let Goldman Sachs manage my money any more,” he says. “I have no idea how much money G.S. made from me, but it was too much, and they will never make another dime at my expense.”

Billionaire Stephen Jarislowsky, CEO of Canadian investment firm Jarislowsky, Fraser with assets exceeding $38 billion, says he also supports Smith’s op-ed. “It’s about ethics and fiduciary responsibility, and the lack thereof,” explains Jarislowsky. “If you’re a fiduciary you should work for your client and not for anyone else. If you’re a doctor, you’re not supposed to work for your pocketbook, but for your client’s health.”

To see the whole article, click here .

JJS: GS might be bad, but they’re merely the worst of a bad lot; what they do has been business as usual forever. Finally, tho’, if billionaires can get fed up with Wall Street, maybe ordinary people can also find better places to park their savings. When so much money gets concentrated in such a small place, handled by so few people, those few people become too powerful and the power goes to their heads. Are they powerful enough to persuade the Republican Party to rig its primary elections against the one candidate calling for an end of the Fed?

Did you know that Ron Paul sort of won the US Virgin Islands caucus? That’s one vote The New York Times didn’t consider important enough to live-blog. We say “sort of won” because there’s some controversy. Representative Paul got the most votes, which in many circles is considered an indication of victory. Mitt Romney got more pledged delegates, however.

According to the Virgin Islands Republican Party, Paul won a plurality of 29 percent of its nonbinding presidential preference poll. Mr. Romney got 26 percent. However, a separate tally chose delegates to the Republican National Convention. After the smoke from that vote settled, Romney had four delegates, Paul had one, and one remained uncommitted.

This incensed Paul campaign official blogger Jack Hunter, so he produced a video to explain how 29 is a bigger number than 26. “ “Once again, when Ron Paul does win, the mainstream media find ways to ignore it.”

To see the whole article, click here .

JJS: Money corrupts. So does a sense of not belonging. If you feel you don’t belong, you don’t do a good job of looking out for yourself. And if you feel others don’t belong to your group, you often don’t do a good enough job of looking out for them.

What solves that? What prevents money from concentrating in too few pockets? What creates a shared identity of belonging to society? The answer is to regard the value of nature as common wealth.

What advocates of reform need to be considering is a properly constructed tax on the rental value of land. -- Henry Law, Göteborg, Sweden

To see the whole letter, click here .

An annual land value tax is already effective in places such as Denmark and Harrisburg, Pennsylvania. It is not a tax on property ownership but on land ownership, whether the land is being productively used or not. Labour, possibly even the Lib Dems, should be promoting this. -- John Airs, Liverpool

To see the whole letter, click here .

JJS: Have you gotten a letter in your local paper?


Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .

Also see:

Should Goldman Give Back $2.9 Billion to Taxpayers?

Bankers' bonuses restricted in Europe -- in the US …

Replace Guarantees With What?

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