There were three moments in the past 24 hours worthy of everyone’s attention. One was Bill Black’s appearance on Bill Moyers (video). The second was the article in the Wall Street Journal outlining how Larry Summers was paid millions by hedge funds and Wall Street banks last year. And the third piece, the one that really sews it all together, is the Washington Post’s story on how the executive branch wants to sidestep Congress and pay out bonuses to bank executives:
The Obama administration is engineering its new bailout initiatives in a way that it believes will allow firms benefiting from the programs to avoid restrictions imposed by Congress, including limits on lavish executive pay, according to government officials.
Administration officials have concluded that this approach is vital for persuading firms to participate in programs funded by the $700 billion financial rescue package.
The administration believes it can sidestep the rules because, in many cases, it has decided not to provide federal aid directly to financial companies, the sources said. Instead, the government has set up special entities that act as middlemen, channeling the bailout funds to the firms and, via this two-step process, stripping away the requirement that the restrictions be imposed, according to officials.
Of course they are. It’s been clear for some time that the administration has been ratcheting down its rhetoric about AIG and the banks. Eighty one percent of Americans don’t want bonuses paid by TARP recipients, but gone are the days when Obama told Geithner "to use that leverage and pursue every legal avenue to block these bonuses and make the American taxpayers whole."
Shortly after the meeting between the administration and the banking oligarchs, the AP headline was Obama Cools Rhetoric on AIG Bonuses. And in the Wall Street Journal, we learned that the White House believed that bank participation in its PPiP plan was critical to the economy, but the banks did not want to put their "toxic assets" up for sale. They were essentially holding them hostage, and they let the White House know what they would accept in ransom:
When administration officials began calling them to talk about the next phase of the bailout, the bankers turned the tables. They used the
calls to lobby against the antibonus legislation, Wall Street executives say. Several big firms called Treasury and White House officials to urge a more reasonable approach, both sides say. The banks’ message: If you want our help to get credit flowing again to consumers and businesses, stop the rush to penalize our bonuses.
Got that? Taxpayers own these banks, but unless we pay big bonuses to the executives at the top, they’re going to hold their banks, their assets and the economy hostage. The PPiP is a big giveaway to the banks anyway, but they’re refusing to participate in a hugely profitable program simply because they can’t pay themselves enormous bonuses in a month that saw the US lose 663,000 jobs last month.
There was much cheering when Roubini and Richardson wrote that they approved of Geithner’s PPiP plan, saying that if it worked, it would accomplish "mission No. 1, namely the removal of the bad assets from banks’ balance sheets." But as Scarecrow noted at the time, somehow the pom-pom squad almost universally missed the key qualifier:
Going forward, the government must insist on the banks’ involvement in the new program.
But the administration is not going to do that. No, they are letting these executives hold a gun to everyone’s head for their own personal gain, which has nothing to do with the health of the banks they run or what’s best for the economy. Let’s dispense with the bullshit about how these bonuses are necessary to retain all this amazing talent — any schmuck could do those jobs, and half of them are unemployed right now. Listen to Bill Black (video above, Part II and Part III). Bill has been a guest here before, and as he makes frighteningly clear on Moyers, the whole thing is a criminal enterprise — and executives being able to steal money is the point.
We could just make these banks comply with whatever we asked of them. We own them. You could say this is what we pay for not nationalizing them, but we could certainly force whatever terms we want on them simply as the price of keeping the doors open. No, this is what we pay for having Larry Summers in the driver’s seat, a man who is so thoroughly wedded to Wall Street that it’s impossible for him to do anything but continue to funnel money to the same people he’s been enabling his entire career. (Glenn Greenwald has more on the critical role Summers played in the deregulation antics that led us here.)
It’s the most massive stickup in history, happening right under our noses.