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Geithner’s No-plan
This is just insane:
Mr. Geithner, who will announce the broad outlines of the plan on Tuesday, successfully fought against more severe limits on executive pay for companies receiving government aid.
He resisted those who wanted to dictate how banks would spend their rescue money. And he prevailed over top administration aides who wanted to replace bank executives and wipe out shareholders at institutions receiving aid.
Fought, resisted, prevailed – the NYT writer obviously adores Geithner. But what is the result of Geithner's 'great victory'?
Because of the internal debate, some of the most contentious issues remain unresolved
The "plan" which is none, calls for spending between $1,200 and 1,900 billion of taxpayer money plus uncounted thousands of billions from the Fed and FDIC (government guaranteed) to make bankrupt banks whole without asking their shareholders or unsecured debt holders to take a haircut.
You might wonder why I – not being a U.S. taxpayer – am furious about this. Well – lots of people with 'special interest' in other countries will point to this insanity as an example of how their government should rescue their banks. I therefore hope and believe that U.S. taxpayers will fight, resist and prevail against this no-plan.
If Obama really tries to get this through, he will burn up most of his political capital in a very short time over a really stupid issue.
The well known alternative: Take the banks into formal bankruptcy and open their books to the public. Fire the management, wipe out the shareholders and the unsecured debt holders, auction off their bad assets and than offer what is left of the bank in a fresh IPO to new private holders.
What is not to like with that for 99% of the people?
The Geithner Plan makes multiple half-moves in various directions, wriggling around the sharp points of the current crisis, artfully accomplishing nothing except buying time for trillions of dollars in ‘dirty assets’ to stay off-book where they can desiccate and decompose until one fine day their hallucinatory value shall be paid for in full with genuine taxpayer dollars.
The Geithner Plan spares the people who lost big on these assets from actually losing anything at all. Losing would make them unhappy, and since these losers are the wealthiest 10% of the nation, who own 70% of the nation and its assets outright, and who own and operate the national government as a private fiefdom, well — these folks are not going to be made unhappy.
Gentle Reader, only two things are happening in all this hoopla.
One, paying back every penny of the investment losses Wall Street’s fraudulent ways have caused to our wealthiest 10%.
Over the past two decades, these people got their government to cut Wall Street free of its several New Deal leashes, in hopes of reaping runaway profits, and lo, those profits came pouring in. The Dow hit 14,000, productivity went up, wages stagnated, overseas war profiteering took off, permanent tax cuts, oh my how the profits came rolling in.
The only problem is that these profits were hallucinatory, being based on fraud, waste, theft, double-dealing, destruction of the manufacturing base, and mindless government borrowing.
Thirty million supremely wealthy persons trusted Wall Street gamblers to double their wealth in a decade, and Wall Street did. And then the whole house of cards turned out to be a house of cards.
Nonetheless, these thirty million people who own and operate both the country and the government WILL HAVE THEIR MONEY BACK — every hallucinated dollar, every paper profit, before they will permit any real concern or care for the other 270 million Americans camping out between the shining seas.
Two, the other thing that’s happening, is the stimulus, the attempt to get credit moving again out among the 270 million Americans. Credit not just for the average shopper, but for the companies they work for, so that they can buy factory materials in bulk, so they can ship overseas, so they can import and export, so they can build a new factory and pay it off over ten years, so they can buy new tools, so they can grow by leaps and bounds instead of saving for years to be able to afford incremental progress. Credit is a magic wand that can raise up a hospital or factory or wind farm or any other means of production as if overnight, and then let the profits from the new thing pay for it over a few years of credit.
Without credit, we all get to live like the Amish, and buy only what we’ve saved and scrimped for.
But — there will be no flow of credit until the bailout is accomplished, or until it is so double-dog guaranteed written into law in blood oaths that the wealthy 10% are not going to lose a penny of their paper profits from the Bush years that they will feel safe enough to be kind enough to permit credit to flow again.
This is the single biggest heist of national wealth and productivity in the history of our species. It is all going to a vanishingly small percentage of our species.
What should be happening right now? Nationalize the banking system.
Open up the books of every financial institution in the country to public scrutiny, and marking to market every financial instrument in existence, private or not. Give everything its honest market value, and draw up a balance sheet for each financial institution. They will either be busted or not. This should be made public as well.
Whomsoever is an investor in the busted institutions is busted to the degree that they invested. Just like it said in the prospectus they read before they invested. That prospectus did not say, “Don’t worry, the taxpayers will cover any losses, to any amount you can imagine. Seriously — you just can’t lose!” It never said that.
Tim Geithner and Barack Obama are saying that, and they are wrong, wrong, wrong.
Any senior management or Board members at busted institutions are out of the industry for life, with no exceptions. They are subject to fines and prosecution if their conduct of the business was criminal or fraudulent or financially irresponsible. There are 20-year old community college graduates who can manage the art of banking without fraud. Let them do so. To those financial wizards who object to this banishment, and wish to continue their careers, they may freely do so as soon as they have paid back the money they lost. It’s a job for honest men and women, not whiz kids, not masters of the universe.
Having nationalized the banking system in this manner, it will be a simple matter to move on to nationalizing health care, water, air, food and other things that a nation whose first duty is to its people would consider inalienable rights.
Alas, America’s first duty is to war upon other nations for their resources in whatever form is needed. America’s second duty is to war upon its own populace, who now need to live more like a Chinese farmer freshly arrived in Shanghai for a good factory job.
Or, as IBM recently offered, like an American laid off from an IBM job in America freshly arrived in Bangalore to do the same damn job for one quarter the pay, 12,000 miles from home.
In previous centuries, this economic state of affairs is what caused pilgrims to board ships and go start their own country. Where that proved impossible, there was a revolution right in the streets.
We are there.
Posted by: antifa | Feb 10 2009 18:01 utc | 19
@34
The Banks are listed neither as “wholly owned” government corporations under 31 U.S.C. Sect. 846 nor as “mixed ownership” corporations under 31 U.S.C. Sect. 856, a factor considered is Pearl v. United States, 230 F.2d 243 (10th Cir. 1956), which held that the Civil Air Patrol is not a federal agency under the Act. Closely resembling the status of the Federal Reserve Bank, the Civil Air Patrol is a non-profit, federally chartered corporation organized to serve the public welfare. But because Congress’ control over the Civil Air Patrol is limited and the corporation is not designated as a wholly owned or mixed ownership government corporation under 31 U.S.C. Sub-Sect. 846 and 856, the court concluded that the corporation is a non-governmental, independent entity, not covered under the Act.
Additionally, Reserve Banks, as privately owned entities, receive no appropriated funds from Congress. . . .
Finally, the Banks are empowered to sue and be sued in their own name. 12 U.S.C. Sect. 341. They carry their own liability insurance and typically process and handle their own claims. In the past, the Banks have defended against tort claims directly, through private counsel, not government attorneys . . ., and they have never been required to settle tort claims under the administrative procedure of 28 U.S.C. Sect. 2672. The waiver of sovereign immunity contained in the Act would therefore appear to be inapposite to the Banks who have not historically claimed or received general immunity from judicial process.
[3] The Reserve Banks have properly been held to be federal instrumentalities for some purposes. In United States v. Hollingshead, 672 F.2d 751 (9th Cir. 1982), this court held that a Federal Reserve Bank employee who was responsible for recommending expenditure of federal funds was a “public official” under the Federal Bribery Statute. That statute broadly defines public official to include any person acting “for or on behalf of the Government.” . . . The test for determining status as a public official turns on whether there is “substantial federal involvement” in the defendant’s activities. United States v. Hollingshead, 672 F.2d at 754. In contrast, under the FTCA, federal liability is narrowly based on traditional agency principles and does not necessarily lie when the tortfeasor simply works for an entity, like the Reserve Banks, which perform important activities for the government.
[4, 5] The Reserve Banks are deemed to be federal instrumentalities for purposes of immunity from state taxation. . . . The test for determining whether an entity is a federal instrumentality for purposes of protection from state or local action or taxation, however, is very broad: whether the entity performs an important governmental function. . . . The Reserve Banks, which further the nation’s fiscal policy, clearly perform an important governmental function.
Performance of an important governmental function, however, is but a single factor and not determinative in tort claims actions. . . . State taxation has traditionally been viewed as a greater obstacle to an entity’s ability to perform federal functions than exposure to judicial process; therefore tax immunity is liberally applied. . . . Federal tort liability, however, is based on traditional agency principles and thus depends upon the principal’s ability to control the actions of his agent, and not simply upon whether the entity performs an important governmental function. . . .
Brinks Inc. v. Board of Governors of the Federal Reserve System, 466 F.Supp. 116 (D.D.C.1979), held that a Federal Reserve Bank is a federal instrumentality for purposes of the Service Contract Act, 41 U.S.C. Sect. 351. Citing Federal Reserve Bank of Boston and Federal Reserve Bank of Minneapolis, the court applied the “important governmental function” test and concluded that the term “Federal Government” in the Service Contract Act must be “liberally construed to effectuate the Act’s humanitarian purpose of providing minimum wage and fringe benefit protection to individuals performing contracts with the federal government.” Id. 288 Mich. at 120, 284 N.W.2d 667.
Such a liberal construction of the term “federal agency” for purposes of the Act is unwarranted. Unlike in Brinks, plaintiffs are not without a forum in which to seek a remedy, for they may bring an appropriate state tort claim directly against the Bank; and if successful, their prospects of recovery are bright since the institutions are both highly solvent and amply insured.
For these reasons we hold that the Reserve Banks are not federal agencies for purposes of the Federal Tort Claims Act and we affirm the judgement of the district court.
AFFIRMED.
http://www.globalresearch.ca/index.php?context=va&aid=8518
Posted by: Anonymous | Feb 11 2009 7:59 utc | 37
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