We all know the scam: Wall Street, having pillaged and plundered the global economy, isn't done with larceny, not while the American government is handing out cash in multi-hundred billion dollar denominations.
A couple of weeks ago a wiley New York Times reporter managed to access an internal JP Morgan Chase executive conference call during which someone asked how the government's 35-billion dollar handout would be transformed into new credit for the bank's customers as intended. The answer was chilling - that money, given to free up credit facilities, wasn't going where intended. The bank instead pocketed the money, deciding to use it to fund its own welfare in the form of future merger and acquisition opportunities. Memo to Capitol Hill - don't hand bags of money to a thief. He's a thief, he'll just steal it. It's what they do.
This bail out plan smelled rotten from the outset. A big part of that stench came from the man who engineered it, Treasury Secretary Henry Paulson, a guy who slid into that job from his previous post as head of Goldman Sachs. As though that background wasn't bad enough, the givewaway that this was going to be a trillion dollar "giveaway" should have been obvious when Paulson initially insisted that he be allowed to dole out the money without oversight and free from any congressional or court challenge.
Wait a minute! Wasn't Paulson up to his alligators in scam derivatives and, worse, Credit Default Swaps before he went to Washington? Wasn't he one of the top bottom-dealers who had wrecked America's economy and left much of the rest of the world reeling? Wasn't he the poster boy of the "Greed is Good" crowd?
Paulson got his hands on the loot anyway and began doling it out - to his friends - the boys he'll again be sharing highballs with soon enough. Won't he be the darling of that select crowd when he gets back in town?
Make no mistake, Paulson isn't finished yet. Just today he tried on another gambit to see if anyone is watching, anyone with enough cojones to stop him. From The New York Times:
"Treasury Secretary Henry M. Paulson Jr. said Wednesday that the $700 billion government rescue program would not be used to purchase troubled assets as originally planned.
Mr. Paulson said the administration would continue to use $250 billion of the program to purchase stock in banks as a way to bolster their balance sheets and encourage them to resume more normal lending.
Mr. Paulson said 40 percent of the nation’s consumer credit was provided through selling securities that are backed by pools of auto loans and other such debt. He said these markets had “for all practical purposes ground to a halt” and needed support.
“With the Federal Reserve we are exploring the development of a potential liquidity facility for highly-rated AAA asset-backed securities,” he said. “We are looking at ways to... ...encourage private investors to come back to this troubled market, by providing them access to federal financing while protecting the taxpayers’ investment. By doing so, we can lower costs and increase credit availability for consumers.”
The announcement marked a major shift for the administration, which had talked only about purchasing troubled assets as it lobbied Congress to pass the sweeping bailout bill.
Mr. Paulson said the administration had decided that using billions of dollars to buy troubled assets of financial institutions at the current time was “not the most effective way” to use the $700 billion bailout package."
What Paulson means, if you read between the lines, is using the bailout fund for direct capital infusion into Wall Street firms to "encourage" them to begin lending again. They need a hell of a lot more than a little encouragement, Hank. Maybe propose a couple of years under federal receivership instead. I think that'd see a lot of credit lines re-opened.