Accountability is a Must
Would I support a bailout? Maybe. But that’s a very big maybe. At the very least I would need to see a clear plan with specific guidelines, executed by credible and competent leaders; not one man who appears to be lost. They would all need to be held accountable. And I mean ACCOUNTABLE. But such a plan would need to focus on job creation, not bankers’ salvation.
We need a bailout for Americans not bankers. Americans need jobs; good jobs with good benefits. In part, this means free trade must be restructured so that it becomes fair trade. Unfortunately, this is not going to happen anytime soon, if ever because current trade policies only benefit corporate America – you know, the real governing body of this nation. And they have ensured Washington will vote as big business wants via billions of lobbyist dollars that hits the hands of politicians each year. So if you really think your vote counts, think again.
Pushing all of that aside, let’s deal with the plan that will most likely end up passing instead of the plan that will actually benefit the people. It would need to be structured with irrevocable financial limits, clear rules on how much is paid, how assets will be valued, and limits for each bank. The plan would also need to lay out specific guidelines, rules and limitations for selling the assets to private firms.
Finally, the plan should put forth directives that seek to prosecute bank, Wall Street, and mortgage CEOs and other villains responsible for this mess. Not one of these elements is contained in the current bailout proposal.
Washington has been way behind the curve the entire time. And they have not raised the issue of accountability as I define it. Accountability doesn’t mean reducing CEO bonuses. It means prison time for those responsible for this mess, whether through negligence or incompetence. And I mean EVERYONE. This would place the numbers in the thousands.
In reality, this financial storm cannot be stopped by any bailout. So taxpayer dollars should go to help the people rather than the criminals whom they have stolen from. Bailout funds need to first come from the crooks who orchestrated this mess before one dollar comes from taxpayers. While this will be a lengthy process, specific guidelines should be included in the bailout, which can be addressed at a later time.
The Securities and Exchange Commission (SEC) was created during the last depression to regulate the capital markets. With much irony, the SEC has been asleep on the job with little scrutiny. SEC Chairman Chris Cox allowed naked short selling ever since he entered the SEC in 2005, despite the fact naked shorting is illegal. He sat by doing nothing while illegal shorting activities accelerated the destruction of the banking system.
Even his first list which banned the naked shorting of 19 banks was a joke since it didn’t include the banks most at risk – Washington Mutual, Wachovia and E-Trade – the guys with short interest ratios of 25%. The list only included the banking cartel - the owners of the privately held for-profit Federal Reserve Banking System - and their friends. Other than Fannie and Freddie, these were the banks with the strongest financial position and short positions were very minimal. Therefore, there was absolutely no need for these firms to be on this list.
By the time Cox issued a temporary ban on shorting of some 800 financial firms a couple of weeks later, the destruction was already unstoppable. Washington forced taxpayers to bailout Fannie and Freddie, then AIG. Interestingly, Lehman Brothers was left for the wolves as was Bear Stearns.
Perhaps the most ridiculous aspect of this reported $300 billion 3-firm bailout was the fact that Washington downplayed the potential losses at only $30 billion. By the time it’s over, the bailout of these three firms is likely to cost taxpayers $600 to $800 billion.
As we now realize, this was all just the tip of the iceberg. Perhaps Washington introduced these bailouts one by one as a testing ground to warm taxpayers up for a complete bailout of the banking system. A couple of weeks later, Washington Mutual was seized by the Office of Thrift Supervision (OTS) with the recommendation of the FDIC. Then the bank was handed over to JP Morgan – over $307 billion in assets and $188 billion in deposits - for $1.9 billion; a complete giveaway, wiping out shareholders.
This transaction will go down as one of the biggest heists in banking history. It eliminated common shareholders with no warning only a few days after the OTS publicly stated the bank had no need to raise additional capital through 2008. Next, Wachovia was handed to Citigroup. Given the dire shape of Citigroup, doesn’t seem odd how they would be able to take on the risks associated with the bank that holds the largest amount of option-ARMs on its books?
Remember, Citigroup is in the process of selling off more than $500 billion of assets and still has another $1.1 trillion of troubled assets off-balance, hidden from public eye. Its business model is complete destroyed, yet it was able to take on the huge liabilities held by Wachovia? How is this possible?
Citigroup joins JP Morgan and Bank of America as the kingpins of the Fed. This means they have a blank check when needed. As I have discussed in the past, the banking cartel continues to pick up the pieces using taxpayer money.
And if you think Washington Mutual won’t cost taxpayers, you’re missing what’s going on behind the scenes. The same applies to Merrill Lynch and Wachovia. In part, the negligence by Chairman Cox led to the acceleration of the bailout wave, from Bear Stearns, to Fannie, Freddie and AIG - and now the grand daddy of all bailouts.
Along with former Washington Mutual CEO Kerry Killinger, many other banking, mortgage and Wall Street CEOs, as well as the executives heading the Office of Thrift Supervision and the FDIC, and those who engaged in insider trading of Washington Mutual - Cox should be brought up on criminal charges. That’s accountability.
Who Can You Trust?
When we speak of trust, it’s important to consider two separate aspects of the term. First there’s a trust in judgment or competence. Having trust in one’s judgment is mandatory but insufficient for someone in a high position of responsibility. Without trust in one’s integrity you can throw the best judgment out the door. Thus, honesty and good intentions are also necessary but insufficient requirements.
Only by having complete trust – judgment and honesty - in those who would be heading this bailout can Americans move forward with confidence. The question is….can you trust Paulson and Bernanke? Do you trust their judgment and have confidence in their honesty? Perhaps the real issue is where their loyalty lies. Let me help you decide.
Paulson is asking for unprecedented authoritative powers to carry out the proposed bailout with very little transparency and no clear plan. It would position him with unlimited and unchallenged powers to spend tax dollars as he chooses. This would make him America’s banking dictator, or Bush’s right-hand man in what already resembles a dictatorship. If you disagree, you need to study the executive orders Bush has at his disposal.
It is clear to me that Paulson has no idea what’s going on. He has been lost the entire time and he remains lost now. That is precisely why he has failed to lay out specific guidelines and strategies. I suppose he thinks he can improvise his way through this mess. Once he has a blank check, he’ll use the trial-and-error method to sort through things.
But my concerns do not end there. I have a big problem handing a former Wall Street insider a blank check to do as he pleases. We must therefore question the possibility whether granting Paulson this unchecked authority will actually lead to worse consequences. In my opinion it will. Isn’t this the same way we got into the Iraq mess? Scare tactics, blank checks and no accountability.
Bernanke will most likely also play a central role in this plan. In fact, he will play a larger role if Paulson is replaced next year. Neither had a clue what was going on. Yet, magically Bernanke and Paulson are now on top of the situation. You mean to tell me that all of the sudden they have a full grasp of the problems and have solutions ready in place? If so, we need to see this in writing. These are the same individuals who continued to downplay the crisis for over a year ever since it was obvious.
- May 2007, Bernanke stated the financial system would be able to "absorb the losses from this subprime mortgage problem" without difficulty.
- May 2007, Bernanke stated “we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system."
- April 2007, Paulson stated he didn't see subprime "imposing a serious problem."
- Paulson continued to insist there would be no bailouts for “reckless lenders all throughout 2008 – even just a few weeks before he decided to bail out Fannie and Freddie. Then a few weeks later, while on the verge of collapse, he stated the same thing about AIG only to announce a bailout a few days later. The facts show that if AIG was not provided with a taxpayer-funded bailout, his former firm, Goldman Sachs stood to lose over $20 billion.
Paulson’s promise: “We must now take further, decisive action to fundamentally and comprehensively address the root cause of our financial system’s stresses.”
This plan has absolutely nothing to do with addressing the “root cause of our financial system’s stresses.” Instead of a $700 billion price tag (which will end up growing to several trillions), I’ll address the “root cause of our financial system’s stresses” – right now for free.
The root cause is embedded in America’s Ponzi scheme economy and an unregulated financial system filled with greedy and dishonest individuals who do not feel the threat of criminal prosecution. Note the wording used by Paulson. He wants to make the public think the plan will fix the fundamental problems. The fact is that the bailout won’t even fix the banking crisis, much less America’s fundamental problems.
Bernanke’s scare tactics: “If this plan is not passed it will stifle the credit markets, leading to higher unemployment, lower GDP,” etc. What he is not telling you is that even if the plan is passed, we are going to experience the same fate. They acted way too late and it is impossible to stop the domino effect. If he doesn’t realize this, he should resign. If America had a competent president, he would force Bernanke to resign for destroying the dollar.
How can we trust these men? How can anyone trust the guys who failed to regulate the banking system? They are either clueless or liars; perhaps both. I could care less that Paulson led Goldman Sachs. On Wall Street the saying is “You’re only as good as your last call.” And Paulson really missed this one bad. In fact, his ties to Wall Street concerns me the most.
This is a man who made over $500 million in just a few years working for an industry that screws its customers on a daily basis. I know this because I saw it firsthand while working on Wall Street. These people are criminals and they need to be treated as such.
As for Bernanke, what can you say about a man who spent his entire life sheltered from the realities of the real world? It’s clear he has no idea what he is doing or else does not care about protecting consumers from the devastating affects of inflation. Perhaps he knows exactly what he is doing, which is a much more frightening thought. I’ll let you decide.
The people have spoken – “No bail. Send the bums to jail.” It’s our money and we choose how it’s to be spent. We are sick of the wasteful spending and bailouts for the rich. You cannot have a free market system if you reward failure. Washington needs to remember they serve the people, not vice versa. If this bailout passes, Bush might have to use his dictator-like executive orders to deal with widespread riots. That might well be the biggest risk of the bailout.
Copyright © 2008. Mike Stathis. All Rights Reserved.
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