Obama/Geithner Bank Plan Robs Tax Payers: Congress Drives The Getaway Car

Michael’s post below is an excellent recitation of the details of the financial mess the country finds itself in. I offer the following as a segue into the policy dishonesty we are witnessing in Congress and the White House.

This blog has extensively covered the subterfuge at work in the Obama/Geithner bank bailout plan, to wit, that the administration is using the pretense of a public/private partnership (PIPP) to ostensibly move toxic assets from the balance sheets of banks to a “public/private entity”. It is apparent to many in financial community and to taxpayers that this is a shell game financed by what is essentially Monopoly money.

There is another component to this insidious plan that should also be all too familiar to taxpayers: President Obama and Congress intend to run the scheme off budget, meaning that its funding will not be part of the usual appropriations and budget process (just like Social Security). Jeffrey Sachs highlights this misdirection:

Tim Geithner, Treasury secretary, and Lawrence Summers, director of the White House national economic council, suspect that they cannot go back to Congress to fund their plan and so are raiding the Federal Reserve, the Federal Deposit Insurance Corporation and the remaining Tarp funds, hoping that there will be little public understanding and little or no congressional scrutiny. This is an inappropriate institutional use of the Fed, the FDIC and the Tarp. Mr Geithner and Mr Summers should at the very least explain the true risks of large losses by the government under their plan. Then, a properly informed Congress and public could decide whether to adopt this plan or some better alternative. (emphasis mine)

I have just one quibble with Mr. Sachs’ observation: Congress is already properly informed, so much so that they have become the fox in the chicken coop. They are literally letting the bad guys rob the nation’s central bank and its national deposit insurance fund (FDIC) because Congress lacks the will and the courage to confront the problem head on (by bankrupting and wiping out the shareholders and creditors that funded the Rube Goldberg scheme that many of the nation’s banks and financial institutions have become). This is why conservative bloggers have accurately described Congress’ actions as a kabuki theatre, replete with faux outrage and moments of high dudgeon as hypocrites like Barney Frank’s House Financial Services Committee hand over the combination to the safe behind their backs. Their conduct is a monumental moral failure.

Ronald Reagan arguably forfeited the mid term elections in 1982 by adopting a strict monetary policy to shrink the nation’s money supply and end the high inflation that palagued the economy. This policy laid the foundation for a period of historic recovery and growth, but it was done at a serious political cost. Today the President and Congress have a similar duty to lead but they refuse to do so and instead offer policy that is borne of political expediency and cowardice. The disconnect between Congress and taxpayers has never been so stark.

While You Weren't Looking Round Up
Curing Toxic Assets - And Why We're Doing it Wrong
  • Congress is so out of touch with the actual issue. They are using populist rage, ostensibly created by Congress itself, to make sure that they get re-elected, expand federal powers far beyond that outlined in the Constitution, and with all this money moving around at such a dizzying pace, I’d suspect that someone is making money somewhere on this, and it sure isn’t the American taxpayer. Shell game and kabuki theater are perfect terms for this mess.

  • mag

    Got to give it to some politicans-they have convince some of the public that a socialist/communist government somehow is more ethical and honest then greedy capitalist.
    Actually they could not do it without the stupidity of the people. All the years of our military fighting against governments like obama and company wants and this country goes ahead and votes him in. Sinful.

  • Flu-Bird

    Bonnie and Clyde as well as JOHN DILLINGER did it the hard way BARACK OBAMA and the DEMACROOKS do it the easy way ROB US ALL BLIND and they dont need guns

  • hermie

    Funny how all of the usual trolls can’t find a way to defend the One’s pushing the country into an even bigger financial disaster.

    Social Security, another off the books scam, is broke. Obama and the other Dems said nothing was wrong and it was completely solvent…The funds were completely safe (just like they defended Fannie Mae and Freddie Mac), and now we have another black hole which the taxpayer will lose the last bits of their paychecks.

  • 914

    The teleprompters a front Man for these tax cheating Chicago mobsters.

  • hyperbolist

    Social Security is fine, hermie. That is one thing that Bush lied about, and one of more things than conservatives would care to admit that the media gave the guy a pass on. It was liberal activists–chiefly on the internet–that prevented it from being gutted and privatized, and they were able to do this by explaining that it is in fact solvent and will remain so with only minor tweaks to funding levels.

    You have no idea what you’re talking about.

  • you say tomato, they say tomato. if you were to ask them, Obama and the Democrats in Congress would tell you that they ARE leading, that they’re not offering policy ‘borne of political expediency and cowardice’.

    and while I don’t agree with them or what they’re doing, spare me the tears over having their leaving the taxpayers having to pay for this or for that. Taxpayers haven’t covered the bill since Reagan’s time (with the exception of one or two years late in Clinton’s presidency). And the way things have gone, most so-called taxpayers aren’t paying that much themselves anyway and they’re getting far more back in government services (libraries, and subsidized national parks and museums, roads and bridges, police, fire and the military) and social security and medicare coverage than the little in taxes they are paying. And when the bill comes due (which it won’t, but let’s play along), it ain’t going to be the taxpayer who suffers, it will be those who bought government debt and finds themselves being repaid with seriously devalued dollars. thanks China!

  • 914

    Oh yeah only minor tweaks. Like raising the retirement age to 88 and raising S.S. taxes to 44%. That works if Your all for the government stealing You blind as they look You straight in the face. If it were privatized the Peoples money would actually be in their accounts instead of being continually used to fund other pork barrel lobbyist payoffs.

    Not to worry though..Obama has already shown the propensity to increase national debt by multiples of 4 so Im sure SS Will remain funded with borrowed money for at least the next 3.666 years.

  • Did hyper just say that social security is solvent? This is a program that is billions in the hole and experst agree won’t even be available for younger people in the future. Solvent? Minor tweaks? That’s like saying “Zimbabwe’s financial system is in great shape, if only they’d make some minor changes.”

  • Hyperapologist

    I apologize. I meant to say that Social Security is “soylent”, not “solvent” – i.e. Obama’s plan to turn the elderly into food for his drooling, brain-dead supporters, thus saving money, is proceeding as planned.

  • hyperbolist

    If the funds in Social Security had been privately invested instead, what would this financial mess have done to people hoping to retire within the next few years, 914?

    It takes a really crazy f*cker to believe that the market is an inherently moral mechanism that takes protects people’s interests better than (e.g.) Social Security.

    Whoever told you that SS is insolvent wasn’t a Nobel Prize-winning economist. Do some homework, non-believers.

  • GarandFan

    I’m still waiting to see who is going to ‘buy’ all those ‘toxic’ assets. Soros? Hahahahahahha!

  • Wow, hyper citing Paul Krugman as for why Social Security is solvent….that’s like Stalin citing Marx for why Communism is a great economic system.

  • 914

    The funds in Social Security were not privately invested accept if You classify the politicians as private trustees of Your 25-50 years of labor..

    What has this financial mess done to those people hoping to retire within the next few years Hyperbolist? Certainly cannot be blamed on private investments that these individuals never had the choice to make? And may have allowed them to retire despite the growing goverment created debt.

  • Kenny

    Hypergirlie,

    You’re the one who needs to do your homework: http://www.washingtonpost.com/wp-dyn/content/article/2007/11/20/AR2007112001651_pf.html

    So much for Krugmans honesty and integrity.

    We dipped into deficit spending in Social Security in February of this year.
    direct from the Treasury website:
    (http://www.ssa.gov/cgi-bin/ops_period.cgi)

    February 2009
    (Amounts in millions)
    Total income 54,505
    Total outgo 55,760

    Assets at start of month 2,435,248
    Net increase in fund -1,255
    Assets at end of month 2,433,993

    Of course, here I am trying to argue facts with a liberal, I know better than that.

  • Kenny

    GarandFan,

    It wouldn’t surprise me if Soros didn’t buy some of those toxic assets.

    The way I understand it, the private investor puts up less than 8% to buy a pool of assets. The FDIC and the FED loan the other 92%. If they turn profitable, the private investors get the lions share of the profits, if they are worthless, the investor can walk away and leave the taxpayer on the hook. (non-recourse loans).

    So I’m sure Soros (and others) will buy many ‘pools’ of these assets, and when they figure out which ones are worthless they’ll walk away from them, just pocketing the profits on the good assets mixed in.

  • WildWillie

    Hyper, you are taking such an assinine position it is almost incredulous. 914 touched on it. There is nothing behind the baby boomers retirement. The crooked politicians over the years squandered the surplus. Now we baby boomers will have to work until we are at least 70 and I bet when I approch that age, it will go up again. How you can say SS is not having a tough time of it makes you look more an idiot then you normally would.

    GW offered that 2% of our SS contributions could go to an investment IF we choose to. You lefties are always so concerned about choice until it involves real choices.

    If SS is so great, why does the post office, federal employees and teachers at least in Texas do not contribute? ww

  • hyperbolist

    So put more money into it, Kenny, and then it’s solvent. Presto! By the way, “hypergirlie” is pretty telling. I hope you’re not married; but if you are, I hope your wife is unaware that you hold women in such low regard that you use their gender as an insult. It’s also a sign that you’re insecure in your masculinity. They have pills for that, not to worry.

    By the way, your dickishness aside, comment #16 is an excellent point. Even Obama–the eeeevil leftist–appears to put Wall Street ahead of the middle class. Pretty sad state of affairs.

    Nonetheless, if Social Security funds had instead been privately invested in the stock market these past few years, ya’ll would be much worse off. It’s a very good system that as time progresses will become strained by baby boomers, but if you think the alternative is to blow it up and throw old people who failed to save (or whose savings failed them) to the wolves, then it’s clearly a good thing that your ideological viewpoint carries no weight in today’s political discourse.

  • 914

    Scare politics worked for Clinton Hyper…It doesnt work for You.

  • It wouldn’t surprise me if Soros didn’t buy some of those toxic assets.

    Soros bought Indymac bank.