"TARP on Steroids"

by: David Sirota

Fri Oct 30, 2009 at 10:12

Many readers here likely remember September 29th, 2008. For a brief moment, the U.S. House extended a big middle finger at Wall Street - and then, quite predictably, the entire political, media and corporate Establishment went apeshit. Though it only lasted a few days, the standoff helped further controversialize the Troubled Asset Relief Program, and thus ultimately forced the addition of some (albeit mild) restrictions on its power.

Most of us who opposed the TARP as written - and there were not many willing to take that position - were not against taking any action. We were against Congress trampling the constitution and turning the Treasury Secretary into a king, and we were against simply handing away $700 billion with no strings attached. For this, we were attacked by the Punditburo, which preposterously likened a vote for the bill as a courageous - and necessary - vote for landmark civil rights legislation (I shit you not). And for the most part, the American public has remained opposed to writing blank checks to Wall Street, especially considering the news that these kinds of bailouts have put taxpayers on the hook for trillions of dollars.

And yet, as I show in my new newspaper column out today, the Obama administration, far from backing off or restricting TARP, is quietly moving forward a plan to create an even bigger, more permanent TARP.

In the column, I explain the details of this new bailout, which Rep. Brad Sherman (D-CA) calls "TARP on Steroids." You can find the relevant sections I refer to here in sections 1109 and 1604 of the bill, and you can see Sherman's full analysis of the proposal here. I also encourage you to watch the video clip at right in which Treasury Secretary Tim Geithner - the same Geithner who this week was nailed for secretly giving away billions via the AIG bailout - said the White House would oppose any Democratic amendments that would limit this new TARP on Steroids to $1 trillion. And, you can listen here to my Q&A about this issue with Sherman this week on my AM760 radio show.

I wish I could say I was surprised at this - but this is what you get when an administration packs its top-level economic positions with people connected to the same financial firms that destroyed the economy. Corruption, as we are learning, is not the exclusive domain of one party. The only question is whether or not Congress will stage another September 29th. I sure hope it does.

Read the full column here.

The column relies on grassroots support -- and because of that support, it is getting wider and wider circulation (a big thank you to all who have helped with that). So if you'd like to see my column regularly in your local paper, use this directory to find the contact info for your local editorial page editors. Get get in touch with them and point them to my Creators Syndicate site. Thanks, as always, for your ongoing readership and help contacting local editors. This column couldn't be what it is without your help.  

David Sirota :: "TARP on Steroids"

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"TARP on Steroids" | 14 comments
Will this fly so close to the midterms? (4.00 / 2)
The atmosphere in the country outside the beltway is one of outrage at the continuance of business as usual.  I really do think the public is ready to punish the Democrats next year at the polls by depriving the party of at least one chamber of Congress, if not both.  So how can We the People exploit this?  How can we put the fear of electoral defeat if this depraved legislation passes into the Dems if they go along with this latest bout of highway robbery?

A Financial Coup d'Etat, per Michael Moore and Marcy Kaptur, D-OH. (4.00 / 2)
The Bush and Obama administrations, and Obama's moles from Wall Street, Geithner and Summers, have perpetrated a financial coup d'etat, per the conclusions of Michael Moore and Marcy Kaptur of the U.S. House of Representatives in the film Capitalism: A Love Story.

This coup d'etat has made the federal treasury department and Federal Reserve Bank a financial arm of the predatory financial services industry that has brought the nation's economy and financial system to the brink of disaster.

I presume that Congress will let them get away with it, given the massive contributions lawmakers from both parties have accepted from Wall Street.

Why should we be surprised at their conduct, given the moral depravity that induces them and their campaign contributors from insurance companies to let 17,000 defenseless children die from lack of access to health care?

That's the bad news. The good news is that we are also witnessing the Great Awakening of the American people to the sobering truth of the corporate takeover of government and its destruction of U.S. standards of living. The demonstrations and arrests of hundreds of Americans in front of health insurance companies is only the beginning of the backlash that will ultimately force the plutocracy from power.

Nancy Bordier is the author of Re-Inventing Democracy: How U.S. Voters Can Get Control of Government and Restore Popular Sovereignty in America. The book can be read free online by clicking here.

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[ Parent ]
Tragic on many levels (0.00 / 0)
Besides mortgaging away the future of our children and grandchildren for the sake of political expediency (something for which Democrats ultimately will never be forgiven), this gets construed in the public mind with economic stimulus, thus fueling opposition to the latter.

I would be amazed if this flies.  My sense is that there is a much higher sense of outrage out there than people inside the Beltway realize.  Had Christie got two brain cells to rub together, he would have run against Goldman Sachs.

Isn't this something where the Progressive Block strategy would work? (4.00 / 1)

Two legs and a stick (4.00 / 1)
Remember, just yesterday, we found out that Pelosi is greatly expanding Medicaid for the uninsured at the same time that the robust public option was abandoned. The health care bill has been instantly teansformed due to the Blue Dogs from three roughly equal legs (Medicaid, private insurance, public option) into two oversized courses (Medicaid, private insurance) with a teeny "public option."  A three legged stool now has two legs and a stick.  But they will have to buy or subsidize private insurance for millions more people.

Win one for the corporates?

Now it is an unlimited TARP restricted only to giant banks and with no limits on compensation or bonusses.

Win two for the corporations?

Headlines scream that the "recession  is over", code for cutting back on real aid for real people (extended unemployment for one).  Employment is not back and by traditional counts is closer to 17% (U-6) than 10%.  Recessions have never been over until the economy fully recovers.  Past recessions consistently featured 2 or 3 down quarters as part of a 2 year recession.  Why the Reaganesque redefinition?  To cut off social spending and let the looting resume anew.

The worst of the Bush excesses are over (privatizing FEMA, threatening to privatize social security, privatizing the military through super expensive, often foreign contractors).  Let's root out the last and most pernicious of these excesses.  Certainly don't legitimize them.

It seems better that the Geithner system (0.00 / 0)
Apparently companies in receivership have to repay the government before bondholders and shareholders. That's a big step forward. It does seem like the 1104 section support could be a blank check. If section 1104 support were restricted to corporations going through receivership I think that would be OK.

Making the Fed an uberregulator is a major problem, since the Fed boards are largely appointed by banks. There's no good substitute though - all the regulatory agencies failed outrageously during the Bush years. Even the FDIC. the least bad of the lot, didn't start acting until Schumer outed IndyMac.

The real answer is to break up the TBTF banks... (4.00 / 1)
... and create a system of "boring" banks (Krugman; Stiglitz) that work a lot like regulated public utilities. If the rich want to play the ponies, fine. They just can't do it with our money.

A solution like that would be "fair." As long as the TBTF banks exist, cognitive regulatory capture follows as the night the day, and they'll continue to run the government, as they do now.

I am in earnest -- I will not equivocate -- I will not excuse -- I will not retreat a single inch -- AND I WILL BE HEARD.  

[ Parent ]
Agreed (0.00 / 0)
And, more specifically, the clearance/payment mechanisms need to be separated and firewalled from the speculation "investment bank" purposes so we don't get financial meltdown if one big money center bank placed too many bad bets on complicated derivatives (which was the problem last year).

I wasn't saying the proposal was great, just better than what we have now.

[ Parent ]
I'm not even sure of that (0.00 / 0)
I think it ratifies and perpetuates what we have now.

See for example.

Can you imagine? They're actually proposing to keep the names of the systemically dangerous banks secret! And these are Democrats!

I am in earnest -- I will not equivocate -- I will not excuse -- I will not retreat a single inch -- AND I WILL BE HEARD.  

[ Parent ]
Heh, I remember posting that Charlie Rose video (0.00 / 0)
and still cringe at what was said in it--basically "Save those poor bankers!"--and especially who said it--namely, members of the self-designated "liberal" wing of the DC media and punditocracy Village establishment. Ech.

One of the reasons that we can't get a GOOD bank bailout and reform solution is the false dichotomy being promoted by the media, between the "Death to all banks" nonsense coming from the far right (and, I suppose, although they're almost a non-factor these days, the actual far left, which this site it not representative of), and the "Save those poor bankers!" lies coming from the establishment.

Even the now supposedly center-left MSNBC is in on this false dichotomy. Today on his morning show, Dylan Ratigan invoked Thomas Jefferson, who famously and strenuously (and also underhandededly) opposed Hamilton's proposed national bank (the forerunner of the Federal Reserve) because it would supposedly lead to vast wealth inequality and banks effectively owning government.

His prediction did, of course, come true, at certain periods in US history. But not because there was a national bank, per se, but because like anything established for justifiable purposes, it was exploited and corrupted by unscrupulous bankers, businesspeople and politicians. But that the country has needed and benefitted from (and suffered due to the lack of) a WELL-regulated central bank is hard to argue with, and calling for its destruction--as opposed to strong re-regulation) is just plain crazy talk.

Jefferson's fears about a national bank were legitimate, but not his proposed solution--i.e. not creating one--was not (which his proteges Madison and Monroe proceeded to validate when they approved the creation of the 2nd national bank). Hamilton's arguments for a national bank were also legitimate, even if its initial structure was woefully inadequate to protect against corruption (a fault that was to plague future versions of this bank, including the present one, and which Hamilton was naive about).

Surely there's a viable compromise between no central bank, and an unregulated one, and between allowing the banking system to fail, and letting it steal our money and run our lives? We need both, but we also need to re-regulate them.

"Those who stand for nothing fall for anything...Mankind are forever destined to be the dupes of bold & cunning imposture" -- Alexander Hamilton

Speaking of opposing TARP, here are links to Corrente's phone campaigns (0.00 / 0)
... here (09/22/2008), here (09/25/2008), here (09/29/2009) , and here (09/28/2008), and a link to our real-time posting on the crisis, September - December 2008, and ongoing.

I've been trying to find a link to OpenLeft's campaign opposing TARP, but neither the site search function, nor Google, is coming up with anyone. Can someone oblige with a link to OL's phone campaign against TARP?

I am in earnest -- I will not equivocate -- I will not excuse -- I will not retreat a single inch -- AND I WILL BE HEARD.  

. (0.00 / 0)
Thanks to Bush (Who came up with TARP)

Democrats of Congress (Who passed it)

and Obama (who requested the second half).

We get screwed. The only way to reform is through revolution. There's no way to reform the current system. They should have let it all collapse and start from scratch. Look at the banks that we ended up with: (Citi barely making a profit, AIG suffering record losses, Fannie/Freddie (Big losses), Bank of America (Nothing to gloat about). And the banks we don't own that are turning profits: Goldman, JP Morgan, Morgan Stanley, Wells Fargo. Basically, we got all the losers.

Second Half (0.00 / 0)
The second half went to home owners and auto companies.  While they talked about using it for other reasons, to my knowledge little of that $350 billion went to Wall Street.  (I seem to remember a very small chunk did, though, like $20 billion; I can't remember.)

[ Parent ]
Two Sections (0.00 / 0)
In the column, I explain the details of this new bailout, which Rep. Brad Sherman (D-CA) calls "TARP on Steroids." You can find the relevant sections I refer to here in sections 1109 and 1604 of the bill, and you can see Sherman's full analysis of the proposal here.

Section 1109 looks bad -- very much TARP on Steroids.  

However, section 1604 gives the federal government the power to use receivership to take over large failed companies.  This was the policy most liberals supported last year but was not legally or financially possible without asking congress for much more money that TARP itself.  So at first glance, it seems we aught to be in favor of section 1604.

What is the complaint regarding section 1604 and the authorization of emergency receivership?  What am I missing?

"TARP on Steroids" | 14 comments

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