by Jim Marrs
Professor William Black pointed to the experience with AIG (American International Group) as an example of how the lack of regulation led to obscene profits and market manipulation. The taxpayer-backed bailout of AIG in late 2008 ended up totaling more than $180 billion, a cost equaling the entire savings and loan scandal of the 1980s.
In September 2008, AIG’s credit ratings were downgraded and the Fed issued $85 billion in credit to keep the international insurance giant afloat. But the Fed also took a stock warrant for nearly 80 percent of AIG’s equity. The government eventually increased AIG’s credit to as much as $182.5 billion. Public outrage ensued from news reports that AIG had retained millions of dollars in bailout money, some of it going for executive bonuses and lavish junkets. AIG bondholders and counterparties were paid at one hundred cents on the dollar by taxpayers, yet the taxpayers had no claim to future profits. In other words, the benefits of the bailout went to the AIG banks while the taxpayers suffered the costs.
“AIG made bad loans but with guarantees and charged big fees up front,” Black explained. “So, they booked a lot of income. Paid enormous bonuses…. And they got very, very rich. But, of course, then they had guaranteed this toxic waste…. [T]hose liars’ loans are going to have enormous losses. And so, you have to pay the guarantee on those enormous losses. And you go bankrupt. Except that you don’t in the modern world, because you’ve come to the United States, and the taxpayers play the fool. Under Secretary [of the Treasury Timothy] Geithner and Under Secretary [Henry] Paulson before him…took $5 billion…in U.S. taxpayer money and sent it to a huge Swiss Bank called UBS [through AIG]. [UBS] was defrauding the taxpayers of America. And we were bringing a criminal case against them. We eventually get them to pay a $780 million fine, but wait, we gave them $5 billion. So, the taxpayers of America paid the fine of a Swiss bank. And why are we bailing out somebody who is defrauding us?”
Some suggested that UBS was given $5 billion because AIG was the largest contributor to Obama’s campaign and held much of the toxic derivative paper of Goldman Sachs, the major globalist investment firm once headed by Paulson. Though many Americans saw the AIG deal as simply a massive theft that debased our economy, no one in upper management—other than former figurehead and NASDAQ chairman Bernard L. “Bernie” Madoff—was ever charged with a crime.
According to TARP (Troubled Asset Relief Program) inspector Neil Barofsky, even by mid-October 2009, AIG executives still hadn’t repaid half of the $45 million they promised to return. But by March 2009, the public became enraged when it learned that AIG had paid at least $165 million in executive bonuses from the $180 billion in taxpayer loans to keep the company afloat. AIG chief executive officer Edward M. Liddy told a House committee hearing that he had asked employees to voluntarily give back at least half of their bonuses, although he admitted he had no authority to force them to do so.
In December 2008, the U.S. government also took hold of the financing arm of one of the nation’s largest manufacturers—General Motors. William Black and others have criticized the government takeover of General Motors (GM) as mere nationalization and have questioned why the president of GM was fired while the bankers who created the economic mess were not. “There are two reasons,” Black said. “One, [government officials are] much closer to the bankers. These are people from the banking industry. And they have a lot more sympathy. In fact, they’re outright hostile to autoworkers, as you can see. They want to bash all of their contracts. But when they get to banking, they say, ‘contracts, sacred.’ But the other element of your question is we don’t want to change the bankers, because if we do, if we put honest people in, who didn’t cause the problem, their first job would be to find the scope of the problem. And that would destroy the cover-up.
“Geithner is…covering up. Just like Paulson did before him. Geithner is publicly saying that it’s going to take $2 trillion—a trillion is a thousand billion—$2 trillion taxpayer dollars to deal with this problem. But they’re allowing all the banks to report that they’re not only solvent, but fully capitalized. Both statements can’t be true. It can’t be that they need $2 trillion, because they have massive losses, and that they’re fine. These are all people who have failed. Paulson failed, Geithner failed. They were all promoted because they failed….”
Geithner denied any failure, claiming he was never supposed to regulate the banking business. During congressional testimony in March 2009, Geithner, who was the president of the New York Fed during much of the credit boom, indicated he had little interest in scrutinizing other banks’ activities. “I’ve never been a regulator, for better or for worse,” stated Geithner with surprising candor, adding, “And I think you’re right to say that we have to be very skeptical that regulation can solve all of these problems. We have parts of our system that are overwhelmed by regulation.”
“Overwhelmed by regulation!” lamented journalist Bill Moyers over Geithner’s comments. “It wasn’t the absence of regulation that was the problem, it was despite the presence of regulation you’ve got huge risks that build up.” Black agreed, saying, “Well, he may be right that he never regulated, but his job was to regulate. That was his mission statement. As president of the Federal Reserve Bank of New York, [he was] responsible for regulating most of the largest bank holding companies in America. And he’s completely wrong that we had too much regulation in some of these areas. I mean, he gives no details, obviously. But that’s just plain wrong.”
As 2009 drew onward, more financial institutions fell by the wayside, even as the media pumped out heartening stories of an economic rebound and more stimulus activity. In the face of criminal charges, the Alabama bank Colonial BancGroup, Inc., was closed by regulators in August 2009, becoming the seventy-seventh failed bank since the start of the year. It was also the largest bank failure since the loss of Washington Mutual, Inc., in 2008. Colonial posted a $606 million second-quarter loss in 2009, primarily due to loans to developers and home builders in Florida, a state where the housing industry tanked quickly. The bank failed to meet capital requirements to qualify for TARP funds because it simply did not have enough financial reserves to be eligible for TARP support.
One problem, said Robert Auerbach, formerly an economist with the Financial Services Committee of the U.S. House of Representatives, is that central bank officials are often too close to the banks they are meant to keep in check. “The boards of directors of every Fed bank, including the New York Fed, have nine directors. Six of them are elected by the banks in the district,” said Auerbach. “So you have the banks in New York electing the directors that are supposed to supervise them.”
One proven means for keeping the true condition of some banks from the public eye during any reorganization is to retain the officers responsible for the problem in the first place. “[A]s long as I keep the old CEO who caused the problems, is he going to go vigorously around finding the problems? Finding the frauds?” asked Black in Moyers’s interview. He added, “We adopted a law after the Savings and Loan crisis, called the Prompt Corrective Action Law. And it requires [bank officers] to close these institutions. And they’re refusing to obey the law.”
When asked if Geithner and others in the Obama administration have engaged in a cover-up along with the banks, Black responded, “Absolutely, because they are scared to death…of a collapse. They’re afraid that if they admit the truth, that many of the large banks are insolvent. They think Americans are a bunch of cowards, and that we’ll run screaming to the exits. And we won’t rely on deposit insurance.”
DOWNSIZING AMERICA
PEOPLE LIKE BLACK AND Moyers who are in prestigious positions fail to mention that the motive behind Geithner’s and the banks’ financial antics can be traced to secretive globalist organizations such as the Council on Foreign Relations. Moyers also usually fails to mention that he is a member of the CFR, having obviously passed its stringent globalist eligibility requirements. It is in examples such as this that one can see the guiding hand of the gl
obalists in both the world of commerce and of journalism.
Another person close to secretive society members was Henry “Hank” Paulson, the George W. Bush Treasury secretary who oversaw the bailout of AIG. During both the Bush and Obama administrations, AIG was used to funnel taxpayer funds to certain banks like UBS and Goldman Sachs, where Paulson had previously been the CEO.
In 2006, when Bush named Paulson to head the Treasury, the CFR explained the president’s agenda in an op-ed piece: “Bush essentially set five goals for the new Treasury secretary. Keep taxes low. Curb federal government spending to curb the budget deficit. Deal with international imbalances. Keep investment markets open. Support innovation and risk-taking in the private sector to boost US economic growth…. Paulson is the right man at the right time to take on issues like these.”
Despite the fact that IndyMac had failed only days before, on July 20, 2008, Paulson reassured the public that “it’s a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation.”
Paulson has been identified as a key figure in the economic debacle that began in 2008. Time magazine stated, “If there is a face to this financial debacle, it is now his.”
Noting that Goldman Sachs got the lion’s share of taxpayer bailout money—$12.9 billion—William Black declared, “Now, in most stages in American history, that would be a scandal of such proportions that he wouldn’t be allowed in civilized society…. The tragedy of this crisis is it didn’t need to happen at all.”
Black, along with many other commentators, saw losses in workers’ income, securities, pensions, and futures as the result of the misconduct of “a relatively few, very well-heeled people, in very well-decorated corporate suites…and their ideologies, which swept away regulation.” Forbes magazine in 2006 estimated Paulson’s personal wealth at $700 million.
Black and others acknowledged that the destruction of the U.S. financial system came about due to a lack of integrity on the part of several high government and banking officials as well as massive conflicts of interest and a loss of morality. But this is simply the view of those unwilling to address the true issue—conspiracy.
After studying three separate government reports predicting a coming “fiscal doomsday,” the chairman of the investment counseling firm the Weiss Group Inc., Martin D. Weiss, had yet another word in mind. “When our leaders have no awareness of the disastrous consequences of their actions, they can claim ignorance and take no action. Or when our leaders have no hard evidence as to what might happen in the future, they can at least claim uncertainty. But when they have full knowledge of an impending disaster…they have proof of its inevitability in ANY scenario…and they so declare in their official reports…but STILL don’t lift a finger to change course…then they have only one remaining claim: INSANITY!” he wrote (original emphasis). But it would be insane to actually believe that the nation’s money masters are truly insane. The only alternative is conspiracy. The financial meltdown happened because it was engineered to happen.
The belief that the economic collapse was orchestrated even reached the mainstream media. In early 2009, Washington insider Dick Morris pointed out to Fox News commentator Sean Hannity how the International Monetary Fund (IMF) was attempting to bring the U.S. economy under international control by using the excuse that it would merely be coordinating “regulatory efforts.” “The conspiracy theorists who have talked about the New World Order and the UN taking control, they are right…. It’s happening!” he exclaimed.
No matter how clearly Dick Morris saw things, only a few in Congress seemed to be getting the message. Texas Republican representative Kay Granger got it. In an August 2009 letter to constituents, she wrote, “Something happened this week that has serious consequences for each and every one of us, but you probably didn’t even know it happened. On Tuesday [August 25, 2009], the Office of Management and Budget (OMB) released their Midsession Review…. The Midsession Review showed that our country is going to be $2 trillion deeper in debt than the White House originally told us at the beginning of this year. That’s nearly $6,700 more debt for every man, woman, and child in America. If this doesn’t show that the policy of spend, spend, spend isn’t working, I don’t know what does.”
The only answer that Washington seems to come up with to deal with all problems is to spend more money on central government programs. Is this merely ineptitude or is this proof of a hidden agenda, one designed to force the American republic into a tightly controlled socialist society?
DEBT SLAVES
Permit me to issue and control the money of a nation, and I care not who makes its laws.
—AN OFT-REPEATED PARAPHRASE OF AMSCHEL MAYER ROTHSCHILD’S 1838 QUOTE, “I care not what puppet is placed upon the throne of England to rule the Empire on which the sun never sets. The man who controls Britain’s money supply controls the British Empire, and I control the British Money Supply.”
ECONOMICS IS THE LIFEBLOOD of any nation. Many compared President Barack H. Obama’s $787 billion economic stimulus package in 2009 to giving blood to a corpse. They feared the stimulus was simply throwing good money after bad, especially in light of health and data-gathering provisions that seemed out of place in financial legislation.
As the U.S. economy deteriorated, President Obama expanded the Bush administration’s policies for bailing out banks and other financial institutions. President Obama explained that sending money directly to taxpayers might seem more appealing, but said it wouldn’t be as effective in stimulating the economy, saying that “A dollar of capital in a bank can actually result in eight or ten dollars of loans to families and businesses, a multiplier effect that can ultimately lead to a faster pace of economic growth.”
STIMULUS PACKAGE
OBAMA DID NOT COMMENT on criticism raised over the many improprieties connected to the economic crisis, nor did he comment on the argument that his “economic growth” actually was nothing other than an austerity budget based on war. Michel Chossudovsky, a professor of economics at the University of Ottawa and director of the Centre for Research on Globalization, noted that “[Obama’s] austerity measures hit all major federal spending programs with the exception of Defense and the Middle East War, the Wall Street bank bailout, [and] Interest payments on a staggering public debt.
“At first sight, the budget proposal has all the appearances of an expansionary program, a demand oriented ‘Second New Deal’ geared towards creating employment, rebuilding shattered social programs and reviving the real economy. The realities are otherwise. Obama’s promise is based on a mammoth austerity program [original emphasis]. The entire fiscal structure is shattered, turned upside down.” Understandably, Chossudovsky concluded that the Obama plan “largely serves the interests of Wall Street, the defense contractors and the oil conglomerates.” He warned that the Bush-Obama bank bailouts will lead America into a spiraling public debt crisis. “The economic and social dislocations are potentially devastating,” he added.
What this means is that the American taxpayer has been made the lender of last resort for the two government-sponsored private enterprises—the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), whose combined debt of $5.4 trillion has been effectively transferred to the nation’s balance sheet. In addition to personal debt, every American now has a financial responsibility for Fannie Mae and Freddie Mac, as well as other financial institutions.
What is even more maddening was the use of some bailout funds to create extravagant “golden parachute” retirement and severance payments to financial executives who would have to leave their failing companies. These garnered unfavorable publicity in late 2008, as did the revelations of shady dealings between Wall Street and its regulators. Take, for instance, Charles Millard, former director of the Pension Benefit Guaranty Corp. (PBGC), an independent federal corporation that protects the pension plans of nearly forty-four million American workers and retire
es. In May 2009, Millard was called to testify before the Senate Aging Committee over charges that he had cozy and improper contacts with Wall Street firms. Millard, citing his constitutional right to avoid self-incrimination, declined to answer questions. The PBGC, which insures corporate pensions, announced in late May 2009 that it had suffered a $33.5 billion deficit for the first half of the fiscal year, up considerably from a $10.7 billion deficit in 2008.
According to hearing testimony by PBGC inspector general Rebecca Anne Batts, Millard directly participated in granting more than $100 million in PBGC contracts to the international investment firms of Black-Rock Inc., JP Morgan, and Goldman Sachs, against the advice of senior corporate management. Telephone and e-mail records showed Millard had contacts with his prospective bidders prior to hiring them to manage real estate and private equity investments. Millard’s experience illustrates both the incestuous relationship between persons in government who are supposed to be protecting the public and Wall Street. It is also noteworthy that Millard invoked the Fifth Amendment just like Mafia gangsters in the past. If there had been no wrongdoing, then why refuse to testify?
BEFORE THE CRASH
BEFORE THE MARKET CRASH in 2008, stress reached deep into certain strata of American life. Many retirees who once believed their money was safe saw principal losses of up to 80 or 90 percent of their investment.
Serious market slowdown began when investment banks across the globe refused to buy one another’s credit—an unusual move—and when mortgage-purchasing companies Freddie Mac and Fannie Mae decided they could make more money by buying subprime mortgages. It was all part of the Bush administration’s policy of conforming to the United Nations’ Millennium Development Goals, which were unveiled in 2000. These goals addressed such issues as the eradication of extreme poverty and hunger, universal primary education, gender equality, health improvement, and ensuring environmental sustainability. It was laudable goals such as these that led to government pressure on lending institutions to issue subprime mortgages. The result? Hundreds of thousands of unsold homes.