Taking Aim at Bonuses based on $23.7 Trillion in Taxpayer Gifts

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If they earned it, what business is it of ours or the government? On the other hand, if they stole it, why are they not in jail?

If there is money for bonuses it is because of illusory (fake) profits from an illegal scheme that I would call fraudulent. If that is profit then so are the proceeds of purse snatching. So the bonuses, the “profits” and the “capital of the perpetrators belongs to the taxpayers, the homeowners and the investors — the only real victims in this mess.

The REAL tally of taxpayer aid is coming out from members of the media and oversight committees and it isn’t $700 billion the way they have said, and it isn’t $7 trillion the way some pundits have calculated it. It is $23.7 trillion, which is roughly TWICE the U.S. gross domestic product. That’s right folks, so far, as the tally is rising, Wall Street sucked out of our economy the amount we measure as all goods and services traded in the entire United States for two years.

Just think about it. If it were really about $600 billion in defaults or even $2 trillion in defaults, why would the entire economy have taken a nose dive? Why would the world have have been paralyzed? We’ve taken hits before and it didn’t bring us to the brink of ruin. This one did, because the percentage was more than 3% or even 15% of GDP, it was around 200%, so far and it is growing.

It isn’t the bailout or the stimulus that is putting us behind the 8-ball. It’s the money siphoned off by Wall Street who have successfully disseminated two myths through the lazy media: (1) the banks had losses caused by excessive risk taking and (2) government bailout is TARP. The truth is they never had any losses from mortgage defaults or defaults on SWAPS  (how could they with $23.7 trillion covering them?) and TARP is barely 2% of the taxpayer aid through entities created, preserved or promoted with the blessing of the U.S. Treasury and the Federal Reserve.

It shouldn’t surprise me, but it always does — somehow the people with the most money get closest to the microphone and the lazy press lets them take over the narrative. My personal choice is that if they committed fraud knowing of the huge catastrophic consequences and if that fraud and associated acts constitute a crime, then they belong in jail.

If you are serious about getting the past corrected as much as it is possible to do so, and serious about sending referees back onto the playing field so this really doesn’t happen again then start writing to your congressmen, legislators, governors, the White House and DON’T STOP. Make it a weekly ritual.

Those people in the tea parties might seem extreme and some of them might be racist, but their underlying theme is getting traction simply because the people are way out in front of their government this time and the political consequences will be very painful for those who think their jobs are secure. Their theme is that government has been stolen from the people and they are right. The only people to take it back are citizens who vote and people who are willing to serve in public office.

This should not be taken as an endorsement of the tea party — just their message. Wall Street stole our gross domestic product for two years and we want it back. If we get it back or any significant portion of it, state budget deficits will disappear or at least become manageable. Foreclosures will stop or be reduced to a  lower rate than before this mess started. Wealth will be returned at least in part to the middle class so the the economy can function without government stimulus and without that ridiculous cycle of debt.

We have to get over the myth that the banks took the losses from mortgage defaults. They didn’t. They always had the securities sold before committing the funds and used investor money to fund the mortgages. That is why it is incorrect to say that they took excessive risks. They took no risk at all. They schemed like the movie “The Producers”: to open a show that was sure to fail and bet on that. Where is the risk. None to Wall Street.

Of course that’s just my opinion. Maybe the ideologues are right. Maybe we should focus on personal responsibility, selectively enforce it against the middle  and lower class, and let the country go to hell.

So about those bonuses. In the law we have a doctrine called a constructive trust where a thief or other person who is not authorized takes title to property or money that is clearly the property or money of another. Under the doctrine of a constructive trust the current holder of the property, despite his pleas to the contrary is actually holding the property “constructively” for the real owner(s).

If there is money for bonuses it is because of illusory (fake) profits from an illegal scheme that I would call fraudulent. So the bonuses, the “profits” and the “capital of the perpetrators belongs to the taxpayers, the homeowners and the investors — the only real victims in this mess.

11 Responses

  1. […] Taking Aim at Bonuses based on $23.7 Trillion in Taxpayer Gifts […]

  2. […] taking-aim-at-bonuses-based-on-23-7-trillion-in-taxpayer-gifts […]

  3. http://www.reuters.com/article/idUSTRE60N1S220100124

    SEC mulled national security status for AIG details
    Matthew Goldstein
    NEW YORK

    Tue, Jan 19 2010NEW YORK (Reuters) – U.S. securities regulators originally treated the New York Federal Reserve’s bid to keep secret many of the details of the American International Group bailout like a request to protect matters of national security, according to emails obtained by Reuters.

    Crisis in Credit

    The request to keep the details secret were made by the New York Federal Reserve — a regulator that helped orchestrate the bailout — and by the giant insurer itself, according to the emails.

    The emails from early last year reveal that officials at the New York Fed were only comfortable with AIG submitting a critical bailout-related document to the U.S. Securities and Exchange Commission after getting assurances from the regulatory agency that “special security procedures” would be used to handle the document.

    The SEC, according to an email sent by a New York Fed lawyer on January 13, 2009, agreed to limit the number of SEC employees who would review the document to just two and keep the document locked in a safe while the SEC considered AIG’s confidentiality request.

    The SEC had also agreed that if it determined the document should not be made public, it would be stored “in a special area where national security related files are kept,” the lawyer wrote.

    In another email, a New York Fed official said the SEC suggested in late December 2008, that AIG file the document under seal and then apply to the regulatory agency for so-called confidential treatment, if central bankers wanted to stop the information from becoming public.

    The emails were included in the mountain of documents the New York Fed turned over last week to the House Committee on Oversight and Government Reform, which will hold a hearing Wednesday into the AIG bailout and the New York Fed’s role in trying keep the specific terms of that Fed-engineered rescue in November 2008, from being made public.

    More than a year later, the Fed’s bailout of AIG remains controversial because it funneled nearly $70 billion to 16 big U.S. and European banks that had bought credit default swaps from AIG. Banks like Goldman Sachs Group Inc, Societe Generale and Deutsche Bank had bought those insurance-like derivatives to guard against defaults on hundreds of securities backed by subprime mortgages.

    ‘BACKDOOR BAILOUT’

    Lawmakers on Capitol Hill have labeled the AIG bailout, in which the New York Fed created a special entity to purchase those securities from the banks at essentially their face value, a “backdoor bailout” for the 16 financial institutions.

    The new batch of emails, along with others that have become public in recent weeks, reveal that some at the New York Fed had gone to great lengths to keep the terms of the bailout private and the SEC may have played a role in contributing to some of the secrecy surrounding the AIG rescue package.

    “The New York Fed was orchestrating what can only be characterized as an extreme effort to ensure that details of the counterparty deal stayed secret,” Rep. Darrell Issa from California, the ranking Republican on the House Oversight Committee, said through a spokesman. “More and more it looks as if they would’ve kept the details of the deal secret indefinitely, it they could have.”

    In March, some of the secrecy surrounding the AIG bailout began to fall away when the insurer, under pressure from Congress and the SEC, agreed to publicly name the 16 banks that got money in the rescue package and how much each received.

    But AIG, largely at the prodding of the New York Fed, refused to make public all of the information in the controversial document, officially called “Schedule A — List of Derivative Transactions,” according to the emails turned over by the central bank to Capitol Hill. AIG continued to seek confidential treatment from the SEC for the redacted portions of the five-page filing.

    Last May, the SEC did grant AIG’s request for confidential treatment for the remaining redacted portions of the Schedule A filing. The redacted parts include the CUSIP, or trading ID, number for each security on which AIG wrote a CDS contract, as well as the face value of each individual security that AIG had insured against default.

    The SEC agreed to let AIG keep that information confidential until November 2018 — or the 10th anniversary of the bailout. Critics contend that without the redacted information, it is difficult to determine which of the 16 banks had held the worst-performing securities, and which banks originated the worst of the troubled securities.

    GEITHNER UNDER MICROSCOPE

    The New York Fed has argued the information needs to remain confidential to enable BlackRock Inc, which manages the portfolio of securities bought from the banks, to compete with hedge funds on an even playing field.

    U.S. Treasury Secretary Timothy Geithner, who has drawn fire for his role in the bailout, was set to testify before the House Oversight Committee on Wednesday. Geithner, who led the New York Fed at the time of the AIG bailout, has said he was not privy to the discussions about what information AIG should or should not release to the public and the SEC.

    New York Fed spokeswoman Deborah Kilroe said on Friday that the more than 250,000 pages of documents provided by the central bank to Congress “demonstrate that the FBNY’s actions assisted AIG in ensuring the accuracy of its disclosures and protected important U.S. taxpayer interests.”

    For its part, SEC has said it pushed AIG to make public the list of banks getting bailout money and only signed off on the request for confidential treatment after the insurer released that information. SEC spokesman John Nestor said: “The SEC required AIG to make public all of the information in Schedule A that was material to an investor in AIG.”

    But this latest round of emails reveals that it was an official with the SEC in December 2008 who recommended that AIG and the New York Fed could seek confidential treatment for the Schedule A document as an alternative to making the entire document public.

    In November, a New York Fed lawyer, in another email, had said he thought it was “highly unlikely” the SEC would grant confidential treatment for the document.

    AIG and the New York Fed took the SEC’s advice and filed a heavily redacted version of the Schedule A on January 14, 2009, and at the same time requested confidential treatment for the redacted portions.

    The emails also discuss that BusinessWeek magazine had submitted a Freedom of Information Act request for the document and the confidential treatment request was a way of dealing with that and other possible requests by the media for the document.

    (Reporting by Matthew Goldstein; Editing by Maureen Bavdek

  4. http://www.reuters.com/article/idUSN2313050820100124

    By Lisa Richwine and Ross Colvin
    WASHINGTON, Jan 23 (Reuters) – U.S. President Barack Obama called lawmakers on Saturday to check that Federal Reserve Chairman Ben Bernanke had enough support for a second term and two key senators said the nomination was on track.

    In a sign of how worried the White House is about a sudden recent surge in opposition to Bernanke’s renomination, Obama contacted the Democratic Senate leadership to make sure it had enough votes.

    “(The) president made … calls to a few senators this afternoon including leadership to make sure everything on track and he has been assured that Bernanke is on track for confirmation,” a senior administration official said.

    Bernanke’s second term suddenly appeared at risk on Friday after two Senate Democrats announced their opposition.

    They joined a growing number of senators who vowed to vote against his appointment as November’s congressional elections approach against a backdrop of broad frustration with the economy and anger over the way Washington rescued banks.

    The Democratic chairman and a Republican on the U.S. Senate banking committee said on Saturday they were confident he would win the Senate’s backing.

    “Based on our discussions with our colleagues, we are very confident that Chairman Bernanke will win confirmation by the Senate for a second term,” Senators Chris Dodd and Judd Gregg said in a joint statement.

    A Senate vote on Bernanke next week “seems very likely,” a Democratic aide said on Saturday. Another Democratic aide voiced confidence Bernanke would have the votes for confirmation.

    Bernanke’s current term is set to expire Jan. 31.

    ‘EXCELLENT JOB’

    His critics say the Fed failed to prevent the recent financial crisis, the worst since the Great Depression, and combated the meltdown in a way that favored banks and others in the financial industry at the expense of ordinary citizens.

    Dodd, a Democrat, and Gregg, a Republican, said media reports about Bernanke’s confirmation prospects were “highlighting a very vocal opposition.”

    They added that Bernanke had done “an excellent job” responding to the financial crisis and they supported him because “he is the right leader to guide the Federal Reserve in this recovering economy.”

    Senator Dick Durbin, the No. 2 Democrat in the Senate, also said on Saturday he would vote to confirm Bernanke but planned to meet him ahead of the vote to “continue to demand … a commitment to transparency and accountability” in Fed policy.

    If the Fed “refuses to exercise its authority to demand bank reform and protect America’s consumers, I will join with members of Congress to push for new laws that achieve these goals,” Durbin said.

    Democratic Senator John Kerry, also pledging to vote in favor of the nomination, said while he had “some concerns about the Fed’s approach to banking accountability, Chairman Bernanke should not be a scapegoat for systemic failings.”

    Bernanke won support on Friday from Senate Majority Leader Harry Reid, although he said his support was not unconditional.

    With U.S. unemployment at 10 percent and voters angry at Wall Street, members of Congress facing elections in November have come down hard on the central bank.

    Opposition to Bernanke from Senators Barbara Boxer and Russ Feingold on Friday brought the total of known “no” votes among the Democratic majority to four. Many others have said they were still on the fence.

    The shift was abrupt and added a new element of uncertainty for a stock market that had already been reeling in recent days. The Standard & Poor’s 500 fell into the red for the year-to-date on Friday, joining the Dow and Nasdaq indexes.

    Several Republicans have already come out against Bernanke and some have moved to block his confirmation, forcing Senate leaders to secure a super-majority of 60 votes in the 100-member chamber to move the nomination.

    POPULAR RESENTMENT

    With elections in November, many lawmakers are unwilling to take any stand that appears to benefit Wall Street. That tendency has only been sharpened since this week’s Republican upset for the Massachusetts Senate seat that had been a Democratic stronghold for decades.

    Large U.S. banks, seen as the source of the financial crisis that punished the economy with the deepest recession since the 1930s, have come under pressure from Washington for their quick return to big profits and paying outsized bonuses after receiving billions of dollars in taxpayer aid.

    The unemployment rate stands at 10 percent, with more than 15 million Americans out of work.

    Bernanke, who was first named as chairman by former President George W. Bush, was nominated to a second term by Obama in August.

    It is unclear what would happen if Bernanke, who is also serving a separate, 14-year term on the Fed’s board, is not confirmed by the deadline. The law specifies that the vice chairman of the board, Donald Kohn, would serve in the “absence” of the chairman, but absence is not defined. (Additional reporting by Ross Colvin Thomas Ferraro and Andy

  5. This is what we should be asking… “if they stole it, why are they not in jail?”

  6. I agree, this is not a left or right thing, it is an American thing, and we need an American solution!
    Take health care for example, the left says let the
    government (taxpayers) pay for it, the right says “oh no
    let the private sector (us) pay for it, but does either party get to the heart of the matter, the high cost of medical care because of a shortage of doctors, nurses and other health care workers. When you have a shortage of something, the price will be high,
    no matter who is paying for it. So the solution is to
    invest more money in training health care workers so
    that the price will come down. We should pay the best
    and the brightest right out of high school to go into the
    medical field and dispense with all this “wasted” time
    they spend in college. This would open the field up to
    the working class, who in most cases, can not waste
    four years in glorified “high school” on mom and dad’s
    dime before getting down to business, “health care” for the American people at an affordable price. Also,
    they would not feel, that due to all the suffering they
    went through, the nation owes them a super fat pay check. Only in America do we tolerate having the AMA
    dictate how many Doctors we will train, in order to keep the price sky high.
    This is why we need a new political party, led by
    real leaders who put “America First” not “Profits First”.
    I call on all you ex-military officers, especially Naval
    Officers, to look at the silver dollar you got when you
    received your commission, and you swore to defend
    the US Constitution against all enemies, domestic and foreign and then “REMEMBER THE LIBERTY”,
    form a local branch of the FEDERALIST PARTY, run
    for office, and support our brother, Jesse, who is risking it all to give the American people a real choice
    in 2010 and 2012. SINN FEIN (OURSELVES ALONE)
    Let’s not lose again by default. WE NEED TO BE IN IT TO WIN IT. You were trained to be a leader, so let’s see you put your training to work!

  7. Or we could all just succumb to the general mindlessness of modern society and revel in the new season of American Idol.

  8. Dead on–the banks lost nothing because they risked nothing. And yes, the bailout now functions as a credit card for the banks with a limit of $24 trill (if you can call that amount a “limit”).

    As far as the tea parties go, we all need to get over left vs. right, liberal vs. conservative, Democrat vs. Republican, etc. That’s the divide and conquer strategy of the wealthy; the fact is that there is only one party–the Elite Party–and they own both the Dems and the Repubs. The main idea of the tea parties, as Neil says, is absolutely correct. So they don’t like Obama–good! Obama was supposed to serve to placate all us lefties (my former ideological identification) so that the machinations of the Elite Party could not only continue, but also increase in scope and size, as they surely have–the bailout increases, the wars expand, the police state gets more firmly entrenched, etc.

    We have to forget any loyalty we have to a party or an ideology and demand and act on one thing only–the truth, no matter if it’s a Democrat or a Republican (or neither one of those) speaking it.

    Great article, Neil!

  9. Great article! I especially agree with the part where
    you said” Their theme is that government has been stolen from the people and they are right. The only
    people to take it back are citizens who vote and people who are willing to serve in public office.”
    For too long, we the the people have been fooled
    by this “dog and pony show” called the “battle between Republicans and Democrats” which as
    Jesse Ventura has pointed out, is alot like “professional wrestling” it is all for show, their
    is not a “dimes worth of difference ” between the
    two major parties. The “gullible sheeple” need to
    stop wasting their votes on these two “criminal
    organizations” which are controlled at the top by
    the same small group of people.
    My proposal is that we revive the old Federalist
    Party of Alexander Hamilton. In 1791, our country
    faced a similar situation (albeit on a smaller scale).
    The Continental paper dollars had dropped to a
    ratio of 15 to 20 to the silver dollar, and our States
    and Federal governments were wallowing in massive
    debts (by the standards of their day).
    What the Federalists did was form the First United
    States Bank using this massive debt as backing for the issuance of a new currency, US Notes, which were
    spent into circulation interest free and were to be redeemed by an excise tax. (in those days on liquor).
    Today, it would have to be on imported oil, so there
    would be an incentive to switch to our domestic natural gas )as per the Pickens Plan.
    Also, there would have to be a moratorium on
    interest payments on private debt, like mortgages,
    and only the principal would be required as repayment
    because there is no way the interest could ever be paid back without destroying the dollar. Such a plan
    would create a “gentle deflation” over , say a twenty
    year period, with the dollar increasing in value by about 5% a year until it reached par with the old
    silver dollars. Thus, instead of interest on debt, creditors would see the value of the currency go up,
    instead of down. This was the genius of Hamilton’s
    original plan, and it worked. By 1811, America was
    debt free and prosperous, but the private banksters
    of that day hated that system because there was no
    profit in it for them, so they tried to kill the concept of a
    US National Bank.
    So form a local branch of the Federalist Party, and run for office. Give the American people a real choice
    in 2010 and 2012.

  10. I personally believe our country will be history by the end of this year.

    Steve
    99Libra@gmail.com

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