House Passes Bill With “Global Bailout” Provision

Billions in taxpayer dollars to be handed over to European banks through the IMF

Steve Watson
Infowars.net
Wednesday, June 17, 2009

The House has passed a war funding bill which had tagged onto it a completely unrelated provision to hand over $5 billion to secure $108 billion in loans to the IMF.

The chamber voted 226 to 202 yesterday to forward the legislation to the Senate, which may take it up later this week, reports Bloomberg News.

The measure in the bill will also increase the U.S. member contribution to the IMF by $8 billion and authorize the United States to back the IMF’s plan to sell 400 tons (12.97 million ounces) of gold.

It was placed in the bill at the behest of the Obama administration in order to fulfil the president’s pledge to the G20 in April, to contribute toward a $500 billion boost for the IMF, which it says will go toward “helping poorer nations” during the economic downturn.

However, as we have previously reported, the proposal constitutes an international version of the Wall Street bailout; a $100+ billion bailout for the IMF, which amounts to a bailout for European banks facing big losses in Central and Eastern Europe.

“This will directly benefit Western Europe’s banks, ensuring that their CEE subsidiaries will receive the support they need to weather the recession and remain lucrative businesses.” a Banking Business Review report stated at the time.

Democratic leaders in the House needed 18 of the 51 rebels who previously voted against an earlier draft of the bill, most on anti-war platforms, to reverse their defection and vote yes in order to overcome an almost unanimous Republican opposition.

According to various reports emanating from Capitol Hill, Influential Democrats including Hillary Clinton, and White House chief of staff Rahm Emanuel, a former member of the House leadership, were among those making calls to the potential rebels in an effort to sweet talk them into changing their minds.

It transpired that 19 Democrats dropped their anti-war principals and voted for the legislation.

In order to further woo the potential rebel Democrats, leaders dropped a provision from an earlier draft of the legislation aimed at blocking an American Civil Liberties Union lawsuit seeking the release of photos showing American military personnel abusing prisoners.

The decision was made easier by the fact that president Obama announced that he would personally block any attempt to release the photos.

“Passing a $108 billion global bailout on the backs of our soldiers is just not right,” said Representative Mike Pence of Indiana, the chamber’s No. 3 Republican. “Emergency war funding bills should be about emergency war funding.”

Several other leading House Republicans – including the minority leader, John Boehner, and the whip, Eric Cantor – also referred to the IMF provision as a “global bailout”.

In addition to allocating about $80 billion to finance the wars in Iraq and Afghanistan through Sept. 30, the bill also proposes $1 billion to pay for “cash for clunkers” vouchers of $3,500 to $4,500 for people who turn in older gas-guzzling cars and buy new ones.

The bill also includes almost $8 billion to fight the flu pandemic.

Democrats will need 60-vote supermajorities in the Senate to see the bill passed into law.

We have previously highlighted the ongoing agenda to vastly empower the IMF and transform the institution into a “bank of the world” with the power to print its own currency.

This is not a “conspiracy theory”.

As the Washington Post highlighted, the agenda is laid out in publicly available internal IMF documents, interviews and think-tank reports.

It is part of an open move to empower a group of unelected central bankers with the authority to usurp state sovereignty by overseeing benchmarks for national economic governance and setting regulations for financial institutions all over the globe.

As we have also previously highlighted, both the IMF and the United Nations have thrown their weight behind proposals to implement a de-facto global financial dictatorship.

Both bodies have expressed support for new world reserve currency system to replace the dollar as part of the acceleration towards a new economic world order.

Source: Prison Planet

Tincture of Lawlessness

Obama's Overreaching Economic Policies

By George F. Will
Thursday, May 14, 2009 

Anyone, said T.S. Eliot, could carve a goose, were it not for the bones. And anyone could govern as boldly as his whims decreed, were it not for the skeletal structure that keeps civil society civil -- the rule of law. The Obama administration is bold. It also is careless regarding constitutional values and is acquiring a tincture of lawlessness.

In February, California's Democratic-controlled Legislature, faced with a $42 billion budget deficit, trimmed $74 million (1.4 percent) from one of the state's fastest-growing programs, which provides care for low-income and incapacitated elderly people and which cost the state $5.42 billion last year. The Los Angeles Times reports that "loose oversight and bureaucratic inertia have allowed fraud to fester."

But the Service Employees International Union collects nearly $5 million a month from 223,000 caregivers who are members. And the Obama administration has told California that unless the $74 million in cuts are rescinded, it will deny the state $6.8 billion in stimulus money.

Such a federal ukase (the word derives from czarist Russia; how appropriate) to a state legislature is a sign of the administration's dependency agenda -- maximizing the number of people and institutions dependent on the federal government. For the first time, neither sales nor property nor income taxes are the largest source of money for state and local governments. The federal government is.

The SEIU says the cuts violate contracts negotiated with counties. California officials say the state required the contracts to contain clauses allowing pay to be reduced if state funding is.

Anyway, the Obama administration, judging by its cavalier disregard of contracts between Chrysler and some of the lenders it sought money from, thinks contracts are written on water. The administration proposes that Chrysler's secured creditors get 28 cents per dollar on the $7 billion owed to them but that the United Auto Workers union get 43 cents per dollar on its $11 billion in claims -- and 55 percent of the company. This, even though the secured creditors' contracts supposedly guaranteed them better standing than the union.

Among Chrysler's lenders, some servile banks that are now dependent on the administration for capital infusions tugged their forelocks and agreed. Some hedge funds among Chrysler's lenders that are not dependent were vilified by the president because they dared to resist his demand that they violate their fiduciary duties to their investors, who include individuals and institutional pension funds.

The Economist says the administration has "ridden roughshod over [creditors'] legitimate claims over the [automobile companies'] assets. . . . Bankruptcies involve dividing a shrunken pie. But not all claims are equal: some lenders provide cheaper funds to firms in return for a more secure claim over the assets should things go wrong. They rank above other stakeholders, including shareholders and employees. This principle is now being trashed." Tom Lauria, a lawyer representing hedge fund people trashed by the president as the cause of Chrysler's bankruptcy, asked that his clients' names not be published for fear of violence threatened in e-mails to them.

The Troubled Assets Relief Program, which has not yet been used for its supposed purpose (to purchase such assets from banks), has been the instrument of the administration's adventure in the automobile industry. TARP's $700 billion, like much of the supposed "stimulus" money, is a slush fund the executive branch can use as it pleases. This is as lawless as it would be for Congress to say to the IRS: We need $3.5 trillion to run the government next year, so raise it however you wish -- from whomever, at whatever rates you think suitable. Don't bother us with details.

This is not gross, unambiguous lawlessness of the Nixonian sort -- burglaries, abuse of the IRS and FBI, etc. -- but it is uncomfortably close to an abuse of power that perhaps gave Nixon ideas: When in 1962 the steel industry raised prices, President John F. Kennedy had a tantrum and his administration leaked rumors that the IRS would conduct audits of steel executives, and sent FBI agents on predawn visits to the homes of journalists who covered the steel industry, ostensibly to further a legitimate investigation.

The Obama administration's agenda of maximizing dependency involves political favoritism cloaked in the raiment of "economic planning" and "social justice" that somehow produce results superior to what markets produce when freedom allows merit to manifest itself, and incompetence to fail. The administration's central activity -- the political allocation of wealth and opportunity -- is not merely susceptible to corruption, it is corruption.

georgewill@washpost.com

Fed Said to Order Banks to Stay Mum on ‘Stress Test’ Results

By Bradley Keoun and Scott Lanman

April 10 (Bloomberg) -- The U.S. Federal Reserve has told Goldman Sachs Group Inc., Citigroup Inc. and other banks to keep mum on the results of “stress tests” that will gauge their ability to weather the recession, people familiar with the matter said.

The Fed wants to ensure that the report cards don’t leak during earnings conference calls scheduled for this month. Such a scenario might push stock prices lower for banks perceived as weak and interfere with the government’s plan to release the results in an orderly fashion later this month.

“If you allow banks to talk about it, people are just going to assume that the ones that don’t comment about it failed,” said Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia.

Regulators are using the tests to determine whether the 19 biggest banks have enough capital to cover loan losses during the next two years if the economy shrinks, unemployment surges and housing prices keep declining. The tests are a linchpin of the plan Treasury Secretary Timothy Geithner announced in February to bolster confidence in the nation’s banks and restore financial-market stability.

Geithner has likened the stress tests to those used by doctors to evaluate a patient’s health. They’re designed to mesh with the administration’s effort to remove distressed mortgage assets from banks’ balance sheets. The Fed is overseeing the administration of the tests, people briefed on the matter say.

Progress Report

President Barack Obama is scheduled to get a progress report on the tests today during a meeting with his economic team. Geithner will attend, along with Federal Reserve Chairman Ben S. Bernanke and Sheila Bair, chairman of the Federal Deposit Insurance Corp.

Goldman Sachs plans to report first-quarter earnings April 14, followed by JPMorgan Chase & Co. on April 16. Citigroup reports April 17, and Morgan Stanley announces April 21. All four banks are based in New York.

Spokesman for the banks declined to comment.

“No matter what the result, the stress tests are going to move markets,” Camden Fine, president of the Independent Community Bankers of America, said in an interview yesterday. “That’s the tricky part. If they don’t give out enough information or the information is presented in the wrong way, that could cause markets to plunge.”

Silent on ‘Process’

Banks should stay silent because a focus on the tests would be “a harmful distraction” from earnings, said Scott Talbott, senior vice president for government affairs at the Financial Services Roundtable in Washington.

“It is premature for banks to talk about the stress tests,” Talbott said yesterday. “They aren’t finalized yet and there is no framework to evaluate the results.”

Wells Fargo & Co. Chief Financial Officer Howard Atkins declined to discuss the tests yesterday after his bank reported a record first-quarter profit that beat the most optimistic Wall Street estimates.

“We haven’t commented on regulatory matters and we won’t start now,” Atkins said in an interview. “We don’t comment on the process.”

In a separate interview later, Wells Fargo spokeswoman Julia Tunis Bernard declined to say whether the bank had been told by regulators to keep silent. “We don’t comment on our discussions and conversations with regulators and officials,” she said.

Under the Treasury’s plan, banks would have six months after the reviews to raise any new capital they might need. If the money isn’t obtained from private investors, the government will provide the funds from the $700 billion bank-rescue plan.

Economist: US collapse driven by 'fraud'; Geithner covering up bank insolvency

04/04/2009 @ 3:49 pm

Filed by Stephen C. Webster 


In an explosive interview on PBS' Bill Moyers Journal, William K. Black, a professor of economics and law with the University of Missouri, alleged that American banks and credit agencies conspired to create a system in which so-called "liars loans" could receive AAA ratings and zero oversight, amounting to a massive "fraud" at the epicenter of US finance.

But worse still, said Black, Timothy Geithner, President Barack Obama's Secretary of the Treasury, is currently engaged in a cover-up to keep the truth of America's financial insolvency from its citizens.

The interview, which aired Friday night, is carried on the Bill Moyers JournalWeb site.

Black's most recent published work, "The Best Way to Rob a Bank is to Own One," released in 2005, was hailed by Nobel-winning economist George A. Akerlof as "extraordinary."

"There is no one else in the whole world who understands so well exactly how these lootings occurred in all their details and how the changes in government regulations and in statutes in the early 1980s caused this spate of looting," he wrote. "This book will be a classic."

But that book only covers the fallout from the 1980s Savings & Loan crisis; Black's later first-hand involvement in that scandal being the ensuing liquidation of bad banks.

"A single bank, IndyMac, lost more money than the entire Savings and Loan Crisis," reported PBS. "The difference between now and then, explains Black, is a drastic reduction in regulation and oversight, 'We now know what happens when you destroy regulation. You get the biggest financial calamity of anybody under the age of 80.'"

That financial calamity, he explained, was brought about not by mishap or accident, but only after a concerted effort to undermine and remove all regulations, allowing a creditor free-for-all that hinged on fraudulent risk ratings for bad loans. 

"[T]he way that you do it is to make really bad loans, because they pay better," he told Moyers. "Then you grow extremely rapidly, in other words, you're a Ponzi-like scheme. And the third thing you do is we call it leverage. That just means borrowing a lot of money, and the combination creates a situation where you have guaranteed record profits in the early years. That makes you rich, through the bonuses that modern executive compensation has produced. It also makes it inevitable that there's going to be a disaster down the road.

"...This stuff, the exotic stuff that you're talking about was created out of things like liars' loans, that were known to be extraordinarily bad," he continued. "And now it was getting triple-A ratings. Now a triple-A rating is supposed to mean there is zero credit risk. So you take something that not only has significant, it has crushing risk. That's why it's toxic. And you create this fiction that it has zero risk. That itself, of course, is a fraudulent exercise. And again, there was nobody looking, during the Bush years. So finally, only a year ago, we started to have a Congressional investigation of some of these rating agencies, and it's scandalous what came out. What we know now is that the rating agencies never looked at a single loan file. When they finally did look, after the markets had completely collapsed, they found, and I'm quoting Fitch, the smallest of the rating agencies, "the results were disconcerting, in that there was the appearance of fraud in nearly every file we examined."

He equated the entire US financial system to a giant "ponzi scheme" and charged Treasury Secretary Timothy Geithner, like Secretary Henry Paulson before him, of "covering up" the truth.

"Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong?" asked Moyers. 

"Absolutely, because they are scared to death," he said. "All right? They're scared to death of a collapse. They're afraid that if they admit the truth, that many of the large banks are insolvent. They think Americans are a bunch of cowards, and that we'll run screaming to the exits. And we won't rely on deposit insurance. And, by the way, you can rely on deposit insurance. And it's foolishness. All right? Now, it may be worse than that. You can impute more cynical motives. But I think they are sincerely just panicked about, 'We just can't let the big banks fail.' That's wrong."

Ultimately, said Black, the financial downfall of the United States in the wake of the Bush years is due to "the most elite institutions in America engaging in or facilitating fraud."

"When will Americans wake up and hold the real criminals - Banksters - accountable for their actions, and pressure the government to enact systemic changes to prevent future abuses?"

AIG massive payments to banks stoke bailout rage

March 15, 2009: 09:44 PM ET


* AIG discloses $93 billion in payments to other banks

* Lawmakers call for checks of AIG contracts

* AIG reveals Goldman, European banks top beneficiaries

* Treasury to unveil details of public-private bank rescue

* Goolsbee says bank plan "better" if private money joins (Adds additional comments)

By John O'Callaghan and Lilla Zuill

WASHINGTON/NEW YORK (Reuters) - Goldman Sachs Group Inc and a parade of European banks were the major beneficiaries of $93 billion in payments from AIG -- more than half of the U.S. taxpayer money spent to rescue the massive insurer.

The revelation on Sunday by American International Group Inc was another potential public relations nightmare, coming on the same weekend that the Obama administration expressed outrage over AIG's plan to pay massive bonuses to the people in the very division that destroyed the company by issuing billions of dollars in derivatives insuring risky assets.

The size of the payments also illustrates how seriously a potential collapse of AIG was viewed by the regulatory authorities. U.S. Federal Reserve Chairman Ben Bernanke said in an interview with CBS news magazine "60 Minutes" that the failure of AIG would have brought down the financial system.

AIG, an embattled insurance giant that has received federal bailouts totaling $173 billion and is now paying $165 million in employee bonuses, is at the heart of a global financial crisis that President Barack Obama is trying to address with plans for trillions of dollars in spending.

As part of those efforts, Obama will announce steps on Monday to make it easier for small business owners to borrow money, officials said.

But the revelations that billions of U.S. taxpayer dollars were funneled through AIG to Goldman Sachs -- one of Wall Street's most politically connected firms -- and to European banks including Deutsche Bank, France's Societe Generale and the UK's Barclays could stoke further outrage at the entire U.S. bank bailout.

FINANCIAL SYSTEM AT STAKE?

The fact that billions of dollars given to prop up giant insurer AIG were then transferred to European banks and Wall Street investment houses could raise new doubts about whether the rescue was really economically necessary.

"It doesn't to me seem fair that the American taxpayer has got to bear the 100 percent of the downside," said Campbell Harvey, a finance professor at Duke University.

"A hedge is not a hedge if you did not factor in the counterparty risk. And the U.S. taxpayer should not be obligated to make people whole for hedges that were not properly executed."

Goldman Sachs, formerly led by Henry Paulson who was treasury secretary at the time of the original AIG bailout, said, as it has in the past, that its AIG positions were "collateralized and hedged."

Deutsche Bank and Barclays declined to comment. Societe Generale was not available for comment.

As it seeks to ease the credit crunch that was the original target of the Troubled Assets Relief Program (TARP), the Treasury will also offer more details this week about the workings of proposed public-private partnerships to take toxic assets off banks' books, including a timeframe, a senior department official said on Saturday.

"No taxpayer in these arrangements is going to lose money until the investor who put up the money has lost 100 percent," said Chief White House economic adviser Lawrence Summers.

Treasury officials have said the fund, or funds, would be a vehicle to provide as much as $1 trillion in financing for buying bad assets -- particularly mortgages gone bad as a result of the U.S. housing bust. The Federal Reserve and Federal Deposit Insurance Corp would participate.

STILL INCOMPLETE

As more Americans lose their jobs and homes, Obama's new administration is under heavy pressure to show that the rescue plan for AIG and major banks is working to free up lending and rein in the riskier excesses of Wall Street.

The payments to AIG counterparties include the provision of collateral to back up credit default swaps, a form of financial insurance that AIG's London office was writing; the purchase of the collateralized default obligations, a type of complex debt security that underlay that insurance; and payments to counterparties of a securities lending program.

Through three separate types of transactions, Goldman received an aggregate $12.9 billion. Among European banks, SocGen was the biggest recipient at $11.9 billion, Deutsche got $11.8 billion and Barclays was paid $8.5 billion.

The AIG disclosures are still incomplete in that they do not include payments to the banks since Dec. 31.

The list of counterparties was made public by AIG amid growing pressure on the insurer to come clean about the true beneficiaries of the bailout ahead of a congressional hearing Wednesday at which AIG chief executive Edward Liddy is slated to testify.

Democratic Congressman Paul Kanjorski, whose committee will quiz Liddy, said the counterparties and bonuses would both be topics for investigation at the hearing.

Summers -- speaking before the payments to banks were made public -- called the AIG bonuses "outrageous" but said contracts must be honored, even though Treasury Secretary Timothy Geithner had "negotiated very forcefully" with AIG and done all that was "legally permissible" to limit the payments.

"We're not a country where contacts just get abrogated willy nilly," Summers, a former treasury secretary, said on CBS's "Face the Nation" program. "What the lesson is, is this: We don't really have a satisfactory regulatory regime in place."

HELP FOR BIG AND SMALL

To help small businesses, officials said Obama intends to provide $730 million from the congressionally approved $787 billion economic stimulus program to cut lending fees, boost loan guarantees and expand other programs.

"We know that small businesses are the engine of growth," Christina Romer, who chairs the White House Council of Economic Advisers, said on NBC's "Meet the Press."

"We absolutely want to do things to help them."

As part of the financial rescue, the Obama administration expects private investors to bolster government funds to help cleanse the banking system of bad assets, said Austan Goolsbee, a member of the Council of Economic Advisers.

"It's better to do this jointly with private capital," Goolsbee told "Fox News Sunday." "I believe there is a reasonable expectation that people will participate."

The idea of offering financing support from the government for private investors willing to buy the toxic assets was first put forward by Geithner in February but the lack of detail has disappointed financial markets.

CHECKING AIG CONTRACTS

AIG's Liddy said in a letter to Geithner the giant insurer was legally obligated to make 2008 employee retention payments but had agreed to revamp its system for future bonuses after the Obama administration objected.

"There are a lot of terrible things that have happened in the last 18 months, but what's happened at AIG is the most outrageous," Summers said.

Representative Barney Frank, the Democratic chairman of the powerful House Financial Services Committee, said the government must see if the bonuses can be recovered, adding that the timing of AIG's commitment was important.

"We can't just violate law, legal obligations," Frank told Fox. "I understand that. But I do want to find out at what point these illegal obligations were incurred."

Mitch McConnell, the Republican minority leader in the Senate, called the AIG situation an "outrage" and said the nature of the contracts needed to be checked.

While the news that AIG bailout money went to foreign banks could further stoke political outrage, some experts said the alternative could have been worse.