COMMENT
The fleecing of America
By Hossein Askari and Noureddine Krichene
After elevating America's supreme community organizer, Barack Obama, to the
presidency, the US is hungry for another community organizer to put on a
million-person march on Washington to express the collective national outrage
at the fleecing of America - aka the continuing Wall Street bailout.
Americans need to vent their unprecedented frustration on the economic
injustice that is bordering on highway robbery, congressional and federal
incompetence, and the absence of a vision to unify Americans in a collective
quest to create a better future. The US is in danger of losing collective
momentum as a nation because individual lives are spiraling out of control. The
people need to air their frustration, address issues with transparency, and
move ahead collectively, unified as never before.
Yes, Americans are mad and they have a right to be mad. The financial crisis
has been years in the making. Federal regulators and a number of
administrations made mistakes that are being swept under the rug. These
mistakes must be openly acknowledged and addressed in order to reduce the
likelihood of another such calamity.
If people should give back their ill-gotten gains and maybe even go to jail,
let's address it openly. The US financial system needed to be bailed out. But
how? Where is the sense of fairness? While we had little choice but to rescue
the large financial institutions, we should have extracted the maximum for the
American taxpayer.
How could we lend an institution billions and not insist that our loan must be
paid back in full plus a profit before bailed-out institutions pay any
dividends to their stockholders and give their managers bonuses and raises.
After all, these are institutions that may have folded had it not been for
federal financial support. We, the taxpayers, hold all the chips and let the
people who got us into this mess go scot-free!
Take Goldman Sachs. We, the taxpayers, lent them US$10 billion and the firm is
giving its executives more than $10 billion in bonuses! And when questioned,
Goldman's chief executive answered that the most senior executives were not
getting any bonuses - as if this was an answer to the question and we should
cry; and that these bonuses are not coming from the federal loan - as if we are
stupid and don't realize that a dollar is a dollar no matter where it comes
from or as economists like to say, money is fungible.
Goldman is borrowing our money while showing no remorse for its part in the
financial meltdown and talking down to us, its saviors. Why should an hourly
worker who cannot make ends meet support the lifestyle of Wall Street
executives because this is what they are accustomed to? Where is the shared
pain?
The federal government and Congress have shown little vision or attention to
detail. We need some answers. How could Congress even have considered the
request by Fed chairman Ben Bernanke and now former Treasury secretary Henry
Paulson for $700 billion, based on a handful of pages, that the authors
abandoned in a matter of days?
How could the federal government propose and Congress consider a plan that was
so obviously flawed from the start? How could the Treasury slip in a clause
that changed the tax laws to save bank mergers billions of tax dollars without
Congress knowing that this tax giveaway was there? Did Richard King Steel, a
former vice chairman of Goldman Sachs where he was a partner of Paulson, have
anything to do with this just before becoming head of Wachovia and with
Wachovia possibly benefiting from the change in the tax law?
Was the rescue plan for Citibank fair to the taxpayer, as Paulson represented
the taxpayer and on the other side was his former partner at Goldman, Bob
Rubin? Initially, Citibank received $25 billion from the Treasury under the
Troubled Asset Relieve Program. Soon thereafter, it came back for and got
another $20 billion. But the worst was when the Treasury guaranteed $306
billion of Citibank's assets.
For this, the US taxpayer got close to nothing. No interest. No common stock.
No management changes. No limits on executive compensation. The taxpayer got a
tiny amount of warrants and preferred stock. This was a gift to Citibank's
stockholders pure and simple. The US public has been kept in the dark all along
and was frightened into accepting this as a necessary price to prevent a
financial meltdown.
Would Paulson lend his own money on the same terms as he did taxpayer dollars?
Why did they not develop more stringent clauses on repayment, dividends,
bonuses and executive pay for fairness and to protect taxpayers? Why was Bear
Stearns rescued and Lehman Brothers allowed to fail? Why has there been such a
delay in putting together a comprehensive rescue plan? Why has the government
not come to the rescue of state and local governments before they cut back on
education and lay off workers?
Why don't we have a commission to study the details of how the crisis developed
and to propose regulatory changes to avoid any such calamity in the future? On
and On. Again, we need answers and with some urgency to restore confidence, the
key to turning things around.
The level of public cynicism and dismay is unprecedented. We need to have
answers before we can address our shared financial and economic distress in a
fair and equitable manner. Otherwise, every constituency, be it Wall Street
executives, auto manufacturers, autoworkers, auto dealers, state employees,
owners of commercial real estate and the like, will try to grab what they can
without moving the nation forward.
The nation desperately needs a community organizer to spearhead a march on
Washington to get the voices of the people heard.
Hossein Askari is professor of international business and international
affairs at George Washington University. Noureddine Krichene is an
economist at the International Monetary Fund and a former advisor, Islamic
Development Bank, Jeddah. (Copyright 2009 Asia Times Online (Holdings)
Ltd. All rights reserved. Please contact us about
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republishing.)
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