The Great Bailout Giveaway!

I received this article via e-mail, this morning.  It supports one of your uncle’s long-running concerns about the $700+++Billion Wall Street Bailout plan.  Instead of reading a rant (fox guarding the chicken coop) from an un-real writer, such as myself, read what William Greider has uncovered.  Then consider one of his closing questions: Is anybody angry?  (I mean besides your Uncle Rave . . . duh!)

 

Paulson’s Swindle Revealed
By William Greider
October 30, 2008 “The Nation” — The swindle of American taxpayers is
proceeding more or less in broad daylight, as the unwitting voters are
preoccupied with the national election. Treasury Secretary Hank Paulson
agreed to invest $125 billion in the nine largest banks, including $10
billion for Goldman Sachs, his old firm. But, if you look more closely at
Paulson’s transaction, the taxpayers were taken for a ride–a very
expensive ride. They paid $125 billion for bank stock that a private
investor could purchase for $62.5 billion. That means half of the public’s
money was a straight-out gift to Wall Street, for which taxpayers got
nothing in return.

These are dynamite facts that demand immediate action to halt the bailout
deal and correct its giveaway terms. Stop payment on the Treasury checks
before the bankers can cash them. Open an immediate Congressional
investigation into how Paulson and his staff determined such a sweetheart
deal for leading players in the financial sector and for their own former
employer. Paulson’s bailout staff is heavily populated with Goldman Sachs
veterans and individuals from other Wall Street firms. Yet we do not know
whether these financiers have fully divested their own Wall Street
holdings. Were they perhaps enriching themselves as they engineered this
generous distribution of public wealth to embattled private banks and their
shareholders?
Leo W. Gerard, president of the United Steelworkers, raised these explosive
questions in a stinging letter sent to Paulson this week. The union did
what any private investor would do. Its finance experts vetted the terms of
the bailout investment and calculated the real value of what Treasury
bought with the public’s money. In the case of Goldman Sachs, the analysis
could conveniently rely on a comparable sale twenty days earlier.
Billionaire Warren Buffett invested $5 billion in Goldman Sachs and bought
the same types of securities–preferred stock and warrants to purchase
common stock in the future. Only Buffett’s preferred shares pay a 10
percent dividend, while the public gets only 5 percent. Dollar for dollar,
Buffett “received at least seven and perhaps up to 14 times more warrants
than Treasury did and his warrants have more favorable terms,” Gerard
pointed out.
“I am sure that someone at Treasury saw the terms of Buffett’s investment,”
the union president wrote. “In fact, my suspicion is that you studied it
pretty closely and knew exactly what you were doing. The 50-50 deal–50
percent invested and 50 percent as a gift–is quite consistent with the
Republican version of spread-the-wealth-around philosophy.”
The Steelworkers’ close analysis was done by Ron W. Bloom, director of the
union’s corporate research and a Wall Street veteran himself who worked at
Larzard Freres, the investment house. Bloom applied standard valuation
techniques to establish the market price Buffett paid per share compared to
Treasury’s price. “The analysis is based on the assumption that Warren
Buffett is an intelligent third party investor who paid no more for his
investment than he had to,” Bloom’s report explained. “It also assumes that
Gold Sachs’ job is to protect its existing shareholders so that it
extracted from Mr. Buffett the most that it could…. Further, it is
assumed that Henry Paulson is likewise an intelligent man and that if he
paid any more than Mr. Buffett–if he paid $1 for something for which Mr.
Buffett would have paid 50 cents–that the difference is a gift from the
taxpayers of the United States to the shareholders of Goldman Sachs.”
The implications are staggering. Leo Gerard told Paulson: “If the result of
our analysis is applied to the deals that you made at the other eight
institutions–which on average most would view as being less well
positioned than Goldman and therefore requiring an even greater rate of
return–you paid a$125 billion for securities for which a disinterested
party would have paid $62.5 billion. That means you gifted the other $62.5
billion to the shareholders of these nine institutions.”
If the same rule of thumb is applied to Paulson’s grand $700 billion
bailout fund, Gerard said this will constitute a gift of $350 billion from
the American taxpayers “to reward the institutions that have driven our
nation and it now appears the whole world into its most serious economic
crisis in 75 years.”
Is anyone angry? Will anyone look into these very serious accusations?
Congress is off campaigning. The financiers at Treasury probably assume any
public outrage will be lost in the election returns. I hope they are
mistaken.
About William Greider
National affairs correspondent William Greider has been a political
journalist for more than thirty-five years. A former Rolling Stone and
Washington Post editor, he is the author of the national bestsellers One
World, Ready or Not, Secrets of the Temple, Who Will Tell The People, The
Soul of Capitalism (Simon & Schuster) and–due out in February from
Rodale–Come Home, America.

They sold us a bill of goods, and our elected representatives (most of them), unfortunately bought it.

Listen to your uncle!


6 Responses to “The Great Bailout Giveaway!”


  1. 1 Allen Taylor October 31, 2008 at 11:45 pm

    Nice writing. You are on my RSS reader now so I can read more from you down the road.

    Allen Taylor

  2. 2 JoAnn Wendl November 1, 2008 at 2:50 am

    What we need now is a petition that we can sign on to for the congress to add these allegations to the already burgeoning files on the thieves of Wall Street. They need, and we need to taste some justice here, to each his own.

    This mess won’t end any time soon. These criminals have literally strewn our path with red tape.

  3. 3 constituentresponse November 1, 2008 at 6:56 am

    Americans need to stop being so naive about the nature of government — or business. They are living in a corporate state, why in the world should they expect fairness, honesty or integrity?

    There is no surprise in these corrupt companies using our Bailout tax dollars to pay for executive bonuses, junkets, and to buy each other out. No surprise at all. That’s what dishonest people do; what people not held accountable do. They’ve learned that most Americans won’t act to stop it. They’re not going to jail and they know it.

    So how do we start stopping it?

    We start by “un-electing” those Senators and Representatives who voted “yes” for the Bailout. They were willing to ignore the 90% of us who were against the Bailout, clearly demonstrating that they do NOT represent us.

    A new group called the Constituent Response Team has put together a Bailout Vote Map ( http://www.constituentresponse.com/congress ) that makes it easy (as a mouse click) to find out how your Senators and Representatives voted. Check it out — and then tell all your family and friends about it, so they can find out how their Representative and Senators voted before they cast their ballot on Tuesday.

  4. 4 JoAnn Wendl November 2, 2008 at 7:27 am

    To comstituent response,

    You must not confuse shock and disappointment with naivete’.
    If your child had been kidnapped, and you felt that paying the ransom might deliver your child alive, wouldn’t you pay it rather than take the risk of having him killed ? Our country was held for ransom and everybody knew it. I cannot blame those who voted to pay it rather than risk disaster for the population at large.

    I would feel better about your response were it signed by an individual instead of the mystery “constituent response.” You might be one of those republicans who refused to sign until the very end when paid off with special favors for doing so. Who are you ? That’s a fair enough question, and frankly you don’t deserve a response until you’ve identified yourself, particularly if you’re suggesting people sign your petition.

    I hold to my recommendation to pursue an investigation after the election. Frankly, people who would suggest we punish those who agreed to pay Paulson off be kicked out of office are suspect in my book, perhaps attempting to avoid the disclosures that might come from such an investigation.

    I don’t believe in kangaroo courts. So there ! Mr. Whoever you are. Don’t waste my time.

  5. 5 unclerave November 2, 2008 at 10:52 pm

    I like your comment, and I like your website. It strongly appeals to my libertarian side, and my disdain for this exclusive – yet phony – “two party system”. I have some reservations though about using this issue ALONE as a reason to vote everyone who voted for the bailout plan out of office. There was a comment on YOUR site that I could REALLY relate to, and that was that your site be expanded to other issues, such as those who voted FOR: the PATRIOT Act(s) and the FISA fiasco.

    There was SO much undue pressure to get this thing passed – especially the “sweetened” package – that it reminded me of the vote that authorized President Bush to use military force against Saddam Hussein’s (Iraq). Supposedly rational and partisan Congresspeople voted in lockstep on that issue, with VERY few exceptions.

    So, I believe that THAT vote should also be included on your site, so that we can get a better overall picture of who these “weak sisters” are. From there we could make a concerted effort to force out those people who have FAILED to represent their contituents.

    YUR

  6. 6 unclerave November 3, 2008 at 7:36 pm

    Easy there, sister Jo! They’re talking about the get-along, head in the sand, average Americans, not the passionate true patriots, such as yourself.

    The writer represents a grass roots website, and he/she is just trying to drum up a little interest, by commenting on blogs that were not in favor of the way this whole bailout mess was designed, hyped and forced down our throats.

    See my reply to his/her comment. YUR


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