Have You Heard About The 16 Trillion Dollar Bailout The Federal Reserve Handed To The Too Big To Fail Banks?

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What you are about to read should absolutely astound you. During the last financial crisis, the Federal Reserve secretly conducted the biggest bailout in the history of the world, and the Fed fought in court for several years to keep it a secret.

Do you remember the TARP bailout? The American people were absolutely outraged that the federal government spent 700 billion dollars bailing out the "too big to fail" banks. Well, that bailout was pocket change compared to what the Federal Reserve did. As you will see documented below, the Federal Reserve actually handed more than 16 trillion dollars in nearly interest-free money to the "too big to fail" banks between 2007 and 2010. So have you heard about this on the nightly news? Probably not. Lately Bloomberg has been reporting on some of this, but even they are not giving people the whole picture. The American people need to be told about this 16 trillion dollar bailout, because it is a perfect example of why the Federal Reserve needs to be shut down. The Federal Reserve has been actively picking "winners" and "losers" in the financial system, and it turns out that the "friends" of the Fed always get bailed out and always end up among the "winners". This is not how a free market system is supposed to work.

According to the limited GAO audit of the Federal Reserve that was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the grand total of all the secret bailouts conducted by the Federal Reserve during the last financial crisis comes to a whopping $16.1 trillion.

That is an astonishing amount of money.

Keep in mind that the GDP of the United States for the entire year of 2010 was only 14.58 trillion dollars.

The total U.S. national debt is only a bit above 15 trillion dollars right now.

So 16 trillion dollars is an almost inconceivable amount of money.

But some other dollar figures have been thrown around lately regarding these secret Federal Reserve bailouts. Let's take a look at them and see what they mean.

$1.2 Trillion

A recent Bloomberg article made the following statement....

The $1.2 trillion peak on Dec. 5, 2008 -- the combined outstanding balance under the seven programs tallied by Bloomberg -- was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg.

The $1.2 trillion figure represents the peak outstanding balance on these loans, not the total amount of all the loans. On December 5, 2008 the "too big to fail" banks owed this much money to the Federal Reserve. Many of them could not pay these short-term loans back right away and had to keep rolling them over time after time. Each time a short-term loan got rolled over that represented a new loan.

$7.7 Trillion

Bloomberg is reporting that the Federal Reserve had made a total of $7.77 trillion in financial commitments to the big banks by the end of March 2009....

Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.

But as mentioned above, a one-time limited GAO audit of the Federal Reserve that was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act covered an even broader time period and revealed even more bailout loans.

According to the GAO audit, $16.1 trillion in secret loans were made by the Federal Reserve between December 1, 2007 and July 21, 2010. The following list of firms and the amount of money that they received was taken directly from page 131 of the GAO audit report....

Citigroup - $2.513 trillion
Morgan Stanley - $2.041 trillion
Merrill Lynch - $1.949 trillion
Bank of America - $1.344 trillion
Barclays PLC - $868 billion
Bear Sterns - $853 billion
Goldman Sachs - $814 billion
Royal Bank of Scotland - $541 billion
JP Morgan Chase - $391 billion
Deutsche Bank - $354 billion
UBS - $287 billion
Credit Suisse - $262 billion
Lehman Brothers - $183 billion
Bank of Scotland - $181 billion
BNP Paribas - $175 billion
Wells Fargo - $159 billion
Dexia - $159 billion
Wachovia - $142 billion
Dresdner Bank - $135 billion
Societe Generale - $124 billion
"All Other Borrowers" - $2.639 trillion

This report was made available to all the members of Congress, but most of them have been totally silent about it. One of the only members of Congress that has said something has been U.S. Senator Bernie Sanders.

The following is an excerpt from a statement about this audit that was taken from the official website of Senator Sanders....

"As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world"

So where is everyone else?

Why aren't leading Republicans and leading Democrats crying bloody murder over this report?

This scandal should have been front page news for months when it was revealed.

But it wasn't.

And Guess what?

Not only did the Federal Reserve give 16.1 trillion dollars in nearly interest-free loans to the "too big to fail" banks, the Fed also paid them over 600 million dollars to help run the emergency lending program. According to the GAO, the Federal Reserve shelled out an astounding $659.4 million in "fees" to the very financial institutions which caused the financial crisis in the first place.

In addition, it turns out that trillions of dollars of this bailout money actually went overseas. According to the GAO audit, approximately $3.08 trillion went to foreign banks in Europe and in Asia.

So why were our dollars being used to bail out foreign banks while tens of millions of American families were deeply suffering?

That is a very good question.

Also, it is important to remember that many of these bailout loans were made at below market interest rates, and this enabled many of these financial institutions to rake in huge profits.

According to a recent Bloomberg article, the big banks brought in an estimated $13 billion by taking advantage of the Fed’s below-market rates....

While the Fed’s last-resort lending programs generally charge above-market interest rates to deter routine borrowing, that practice sometimes flipped during the crisis. On Oct. 20, 2008, for example, the central bank agreed to make $113.3 billion of 28-day loans through its Term Auction Facility at a rate of 1.1 percent, according to a press release at the time.

The rate was less than a third of the 3.8 percent that banks were charging each other to make one-month loans on that day. Bank of America and Wachovia Corp. each got $15 billion of the 1.1 percent TAF loans, followed by Royal Bank of Scotland’s RBS Citizens NA unit with $10 billion, Fed data show.

So once the financial crisis was over, were adjustments made to the financial system to make sure that this type of thing would never happen again?

Of course not.

Today, the "too big to fail" banks are larger than ever. The total assets of the six largest U.S. banks increased by 39 percent between September 30, 2006 and September 30, 2011.

So now they are more "too big to fail" than ever.

But this is what happens when we allow unelected central bank bureaucrats to run our financial system.

Most Americans do not realize this, but the truth is that the Federal Reserve is not part of the government. In fact, it is about as "federal" as Federal Express is. The Federal Reserve has admitted that they are a privately owned institution in court many times, and you can see video of a Federal Reserve employee admitting that the Federal Reserve is privately owned right here.

The Federal Reserve is an out of control monster that is throwing around trillions of dollars whenever it wants to. Nobody should be allowed to do this. Nobody should be allowed to give bailouts to banks and corporations without the express permission of the U.S. Congress and the president of the United States.

This is a point that I made in my article yesterday. The Federal Reserve decided this week that it is going to provide "liquidity support" to Europe. If the American people do not like this move, that is just too bad. We do not get a say in the matter.

Are you starting to understand why I keep pushing the idea that it is time to shut down the Federal Reserve?

Please share this information about the secret 16 trillion dollar Federal Reserve bailout with your family and your friends.

If we can get enough people to wake up, perhaps there is still time to change the direction that this country is headed.

From the Economic Collapse Blog

Video: The Fed Grants $7.77 Trillion in Secret Bank Loan - Now Do You Understand Occupy Wall Street?

Kucinich bill seeks to end the Federal Reserve:

Kucinich bill seeks to end the Federal Reserve!
http://www.godlikeproductions.com/forum1/message1718844/pg1
Kucinich bill seeks to end the Federal Reserve
http://www.rawstory.com/rs/2011/12/01/kucinich-bill-seeks-to-end-the-federal-reserve/

Related:

WHAT THE HELL? The U.S. Secretly loaned 7.7 TRILLION To Banks Without Interest. Then Borrowed Back WITH Interest
http://www.godlikeproductions.com/forum1/message1718942/pg1

America's Next TARP Model
http://www.thedailyshow.com/watch/thu-december-1-2011/america-s-next-tarp-model

A Bloomberg report reveals that the U.S. government loaned banks $7.7 trillion in secret bailout funds at no interest and then borrowed the money back at interest.
Bloomberg reports 7.7 trillion in loans to big banks and Wall Street
http://reading-sage.blogspot.com/2011/11/bloomberg-reports-77-trillion-in-loans.html?m=1pg1

h/t to Jean Stoner

WATCHDOG: BANK BAILOUTS CREATED MORE RISK IN SYSTEM

The problems that led to the last financial crisis have not yet been addressed, and in some cases have grown worse, says Neil Barofsky, the special inspector general for the trouble asset relief program, or TARP. The quarterly report to Congress was released Sunday.

The government's bailout of financial institutions deemed "too big to fail" has created a risk that the United States could face a worse fiscal meltdown in the future, an independent watchdog assigned to review the program told Congress on Sunday.

The Troubled Assets Relief Program, known as TARP, has not addressed the problems that led to the last crisis and in some case those problems have festered and are a bigger threat than before, warned Neil Barofsky, the special inspector general at the Treasury Department.

"Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car," Barofsky wrote.

Barofsky wrote the $700 billion financial bailout has encouraged more risk-taking because bank executives, who are still receiving massive bonuses, figure the government will come to the rescue the next time they steer their ships nearly aground.

"The market mentality now seems fixed that the U.S. government will continue to step in and bail out giant financial institutions," said Sen. Susan Collins, R-Maine, ranking member of the Senate Homeland Security and Governmental Affairs Committee. "The IG's findings confirm my decision to oppose releasing $350 billion in TARP funds last year and my recent vote to terminate the program altogether."

"The SIGTARP's report is just another reminder of how Congress and the administration have ignored the role that politics and government played in causing the housing crisis and the economic collapse while pursing other regulatory reforms will not fix the underlying problem," said Rep. Darrell Issa, R-Calif., the ranking member on the House Oversight and Government Reform Committee.

But House Speaker Nancy Pelosi's spokesman Nadeam Elshami said politics is the reason the government stepped in to save the banks in the first place.

"The American people paid a heavy price because of the reckless economic policies of the Bush administration where the interests of Wall Street were placed ahead of the interests of Main Street. The House passed Wall Street reform legislation to protect taxpayers and consumers and ensure transparency and accountability without a single Republican vote. We hope that House Republicans would drop their unanimous opposition and work for reform instead of against it," Elshami said.

The inspector general's report details stonewalling by the Treasury Department over a recommendation that walls be built between managers of the public-private investment program, which uses taxpayer cash to buy bad assets, and employees of the fund management companies which sell the toxic assets.

Barofsky's report outlined 77 cases of possible criminal and civil fraud, including crimes of tax evasion, insider trading, mortgage lending and payment collection, false statements and public corruption.

One case concerns apparent self-dealing by one of the private fund managers Treasury picked to buy bad assets from banks at discounted prices. A portfolio manager at the firm apparently sold a bond out of a private fund, then repurchased it at a higher price for a government-backed fund.

A rating agency had just downgraded the bond, so it likely was worth less, not more, when the government fund bought it. The company is not being named pending the outcome of Barofsky's investigation.

Treasury said it welcomed Barofsky's oversight but resisted the call to erect new barriers against conflicts of interest. The new rules "would be detrimental to the program," Treasury spokeswoman Meg Reilly said in a statement. The existing compliance rules "are a rigorous and effective method of protecting taxpayers," she said.

"As the report says, 'for various reasons, Treasury has decided that requiring such walls 'is simply not practical in the context of PPIP,' and has refused to adopt this recommendation. It is disappointing but not unsurprising that the Treasury Department under the leadership of Secretary (Tim) Geithner is once again stonewalling transparency," Issa said.

"Frankly, just because it may be inconvenient is not a good enough excuse to justify leaving taxpayer dollars vulnerable to manipulation and fraud," he continued.

Much of Barofsky's report focused on the government's growing role in the housing market, which he said has increased the risk of another housing bubble.

Over the past year, the federal government has spent hundreds of billions propping up the housing market. About 90 percent of home loans are backed by government controlled entities, mainly Fannie Mae, Freddie Mac and the Federal Housing Administration.

The Federal Reserve is spending $1.25 trillion to hold down mortgage rates, and millions of homeowners have refinanced at lower rates.

"The government has stepped in where the private players have gone away," Barofsky said in an interview. "If we take government resources and replace that market without addressing the serious (underlying) concerns, there really is a risk of" artificially pushing up home prices in the coming years.

The report warned that these supports mean the government "has done more than simply support the mortgage market, in many ways it has become the mortgage market, with the taxpayer shouldering the risk that had once been borne by the private investor."

Barofsky's report echoed concerns raised by housing experts in recent months, as home sales and prices rebounded. They warn that the primary reason for the turnaround last year has been billions of dollars in federal spending to lower mortgage rates and prop up demand.

Once that spigot of cash is turned off, they caution, the market will be vulnerable to a dramatic turn for the worse. Daniel Alpert, managing partner of investment bank Westwood Capital, wrote in a report that national home prices are bound to fall 8 to 10 percent below the lows of last spring.

"The lion's share of the remaining decline will occur in markets that saw sizable bubbles but have not yet retrenched," he wrote.
Officials from the Obama administration counter that massive federal intervention has helped the housing market stabilize and prevented more dire consequences.

Barofsky's report also disclosed that, while the Obama administration has pledged to spend $75 billion to prevent foreclosures, only a tiny fraction -- just over $15 million -- has been spent so far. Under the Making Home Affordable program, only about 66,500 borrowers, or 7 percent of those who signed up, had completed the process as of December.

He said the key to preventing future crises is to reform Fannie Mae and Freddie Mac, create and improve loan underwriting and supervision of banks. He stopped short of endorsing specific proposals for overhauling financial regulation, but said many of the proposals would go far to improving the system.

The Associated Press contributed to this report.

FOXNews.com

When you hear reports like this, there is no question that we cannot afford ObamaCare or Cap and Trade, yet Obama told us just last week in his State of the Union that he intends to push through that agenda against our wishes and obviously opposite of what we can afford or will help out country. He also urged the Congress to pass the 'Stimulus 2 Bill', renamed the jobs bill. It leaves little room for question. He is an ideologue who intends to destroy our Country and our system.

We cannot afford to continue on this path and survive!!!

** Mr. Barofsky better watch himself. Even though the IG’s are supposed to be immune to being fired on a whim by the Inspectors General Reform Act, it didn’t help Gerald Walpin.

What’s Behind Obama’s Sudden Attempt to Fire the AmeriCorps Inspector General??

Conquer and Divide… Written By A Mom

I feel very lost, as I am sure many do. What do I do next? Which issue is the most important to me? I hope I am not alone…

There are so many issues that have come about lately that I have problems with. For instance, Cap & Trade Bill, Tarp, Stimulus, GM & Chrysler Bailouts, AIG, School Indoctrination, Obama getting the Nobel Peace Prize while giving our tax money to organizations all over the world that perform abortions, the amount of Czars and the power they have, Obama dragging his feet on sending troops to Afghanistan because it may offend his radical left supporters while our children, spouses, grandchildren, etc. are being bombed and shot and wishing they had more support, just to list a few.

I saw some of Obama’s speech on TV today and felt repulsion filling in me while he spoke. I could not believe how arrogant he was. What really scared me was the fact that he so easily and quickly divided our Country; it only took 9 months. I have never seen a President or Leader that joked about and belittled the people in his Country just because they do not have the same vision as he does, ok, maybe Sadam Hussein, Hugo Chavez, and other Dictators that Americans used to believe were evil. But never a President of the United States of America while I have been alive, at least not like this one.

I personally did not vote for Obama, but know many who have. I have a very hard time talking with these people mainly because I think they know not what they have done, especially when they think he is taking us down the right path. When he took office my first thought was that “Now, maybe racism will finally come to an end” but it has gotten worse. I am a true American and was ready to support the new President, but it did not take long before I realized how dangerous of a man he was, along with his administration and supporters.

I truly feel that Obama and his administration are purposely creating explosive issue after explosive issue, believing that the average American middle class citizen will become overwhelmed with all of the chaos and eventually give up fighting the changes Obama is trying to make against our Constitutional rights. Then I realized that this is how they plan to change our Government into a Socialistic society. This thought made me realize that I could not lie down and let go, I need to do something (peaceful of course) to stop this movement.

But with all of this energy, I still feel lost, like I do not know what I can do. I have lost a business and a job as of late due to the wonderful economy that our President designed to create dependency. I have no money and am having a very hard time feeding my family. My husband was laid off for 9 months; we are in jeopardy of loosing our home. He finally found work but has to drive for 4 hours per day and works for 10-12 hrs (construction), and is exhausted when he gets home. So I do not feel I can travel around to Tea Parties as this also costs money. I need to do something from home. I want to be a part of any movement that rings true to my beliefs. I have so much time but so little money, how can I help? I would love to go to DC for the rally but just know that it is not financially possible without harming my family.

My wish is that each State group will have a leader that will divide groups up to work on individual issues that As A Mom… approves of. Organize protests, tea parties, post events for all to attend for separate issues, oversee that the groups morals are being upheld, because there are so many we need to be very worried about, but it is exhausting trying to worry about them all at once. We should also be watching for positive actions that are done and support them whole heartedly. If any one else feels the same please let me know that I am not alone! I have so many ideas and would be very glad to share and discuss them with others, and hear others points of view.

Deb F. – As a Mom…Sisterhood of the Mommy Patriots – 50.000 strong in less than 3-weeks.
Manitowoc, WI

As a Mom…Sisterhood of the Mommy Patriots sponsored Operation... Can You Hear Us Now and will be holding a Mom's March on Washington, D.C.

Conservative Artists are making a difference as well. People are starting to stand up – The New Counter Culture: Liberty

Can Your Hear Us Now? - Video

Posted: Knowledge Creates Power – Cross-Posted: the Daily Thought Pad

Don't Let Obama "Devour" Your Wealth!

Obama's Dangerous "Eating Problem." Don't Let it Gobble You Up...

Dear Concerned American,

President Obama keeps lecturing about our “obesity epidemic.” But he’s the one who can’t stop eating (or smoking)!

No, not food. It’s worse! Obama is devouring the entire free-enterprise system.

In his first 100 days as president, Obama gobbled up two major automakers, wolfed down nearly 600 banks, gorged on blue-chip companies, and scarfed down the U.S. credit industry. Now he wants dessert.

President “Obama the Hungry” makes King Henry VIII look like a compulsive dieter!
I know something about overeating. It can kill you. Back when I was governor of Arkansas, I was so overweight I developed Type II diabetes. Doctors told me to lay down the knife and fork -- or else. That scared me. I cut the calories and lost 110 pounds. Only then did I regain my health.

Does bloat scare Obama? Heck no. He’s hungry for more! Fresh from gulping down $800 billion of our money to load up his Washington smorgasbord, he’s planning yet another massive banquet. Obama wants to belly up to the table and swallow the best health care system in the world. And you and I will pay the tab for this gargantuan pig-out!

As sure as heartburn follows a chili-dog, this massive “Obama-binge” will trigger hyperinflation. There’s only one way for the President to pay for this feast and you know what it is. Yes, get those presses rolling and print trillions of inflated dollars.

I’ll bet you’re thinking -- well, what can I do about it? True enough, Obama can pretty much do what he wants -- at least until the 2010 mid-term elections come along and we Americans can send him a “slim-down or else” message.

But right now, you and I need to protect the money we’ve earned and invested over the years -- before Obama’s hyperinflation chews our buying power down by multiple percentage points. This is a serious concern, believe me. It’s so serious I won’t pretend, as a politician and talk-show host, to have the answers for you. But I know someone who does.

I urge you to consider the proven financial guidance of Doug Fabian -- the renowned investing advisor who saw the financial meltdown of 2008 coming and saved a whole lot of people a whole lot of money.

Subscribers to Successful Investing, Doug’s newsletter, knew the meaning of terms like “housing bubble” and “sub-prime” long before they became headline news and the source of financial misery for millions.

This is what Doug wrote in 2006, nearly two years before the crash:

“Pay little heed to the real estate industry’s PR campaign to play down the coming housing price slump. It’s happening. The bottom is falling out for many banks, investors, and homeowners right now.”

This is what Doug is writing today:

“Never mind the endless speculation about inflation and interest rates -- they’re going up.”

Doug ’s not just warning his readers about hyperinflation, he’s steering them to investments that make money during inflationary periods. He reminds us that many fortunes were made in the 1970s when America was ravaged by high inflation and brought to the brink of collapse by Jimmy Carter -- a president eerily similar to Barack Obama.

Look, I’m no investing wizard. But I invest. I have to. So do you. Counting on Social Security while Obama is in office is a little like saying, “The Light Brigade is about to charge? Sign me up!”

But having someone with the proven know-how and track record of Doug Fabian is a comfort. That’s some track record, by the way. Successful Investing has generated double-digit annual returns for ordinary investors for 32 years and counting. Best of all, Doug does all the work for you.

Don’t just take my word. Investor’s Business Daily called Doug “one of the best market timers in the business.” And The Hulbert Financial Digest -- the watchdog of investing newsletters -- rated Doug’s trading services in the Top 10 for 2008 -- out of 186 financial publications over all.

Count on it, the “Obama-binge” will result in hyperinflation. ($800 billion in government spending makes it all but inevitable). You can’t control that. But when the day of reckoning comes, you can be one of the few whose portfolio is already adapted to profit from it. Could you ask for anything better? Well, you can. But you’ll have to wait till 2012 before we elect a new president!

Sincerely,

Mike Huckabee

$23.7 Trillion to Fix Financial System?

In New Report, Neil Barofsky Says It's Possible Government Could Spend $23.7 Trillion to Fix Financial System

Sitting down?

In a July 2009 report on government efforts to fix the financial system, Neil Barofsky, the special inspector general for the TARP, says total government support has the potential to reach $23.7 trillion.

(Brendan Hoffman/Getty Images)

"The total potential federal government support could reach up to $23.7 trillion," says Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, in a new report obtained Monday by ABC News on the government's efforts to fix the financial system.

Yes, $23.7 trillion.

"The potential financial commitment the American taxpayers could be responsible for is of a size and scope that isn't even imaginable," said Rep. Darrell Issa, R-Calif., ranking member on the House Oversight and Government Reform Committee. "If you spent a million dollars a day going back to the birth of Christ, that wouldn't even come close to just $1 trillion -- $23.7 trillion is a staggering figure."

Granted, Barofsky is not saying that the government will definitely spend that much money. He is saying that potentially, it could.

At present, the government has about 50 different programs to fight the current recession, including programs to bail out ailing banks and automakers, boost lending and beat back the housing crisis.

Barofsky's estimate means that if each federal agency spends the maximum potential amount involved in these 50 different initiatives -- if the Federal Reserve ends up spending $6.8 trillion on its programs. If the Treasury Department spends $4.4 trillion, if the Federal Deposit Insurance Corporation spends $2.3 trillion, and so on -- then the numbers add up to a total of $23.7 trillion.

That figure, Barofsky notes, is designed to "suggest the scale and scope of these efforts and not to provide a firm financial statement." It is not a figure that has been evaluated to give an estimate of likely net costs to the American taxpayer. "The actual potential for losses," he says, "is likely to be lower."

But in his new quarterly report to Congress that will be released Tuesday, the watchdog warns that hundreds of billions of taxpayer dollars could be lost if the government does not make certain changes to these programs. The Treasury Department, he cautions, needs to increase the transparency of the $700 billion TARP program, which he says has grown to an unprecedented scope and scale.

"Although Treasury has taken some steps toward improving transparency in TARP programs, it has repeatedly failed to adopt recommendations that SIGTARP believes are essential to providing basic transparency and fulfill Treasury's stated commitment to implement TARP with the highest degree of accountability and transparency possible," Barofsky says in the report.

Barofsky said his office currently has 35 ongoing civil or criminal investigations.

Treasury Should Require TARP Recipients to Report on Use of Funds, Says Barofsky

Barofsky notes that there are currently four specific recommendations that the Treasury Department has not adopted. The department, he believes, should require all TARP recipients to report on their use of funds. The department should also report on the values of its TARP portfolio so taxpayers know about the value of their investments; disclose the identity of any TALF borrowers; and disclose tradings, holdings and valuations of assets of the public-private investment funds that will be buying toxic assets from banks.

This public-private investment program is a key source of concern for the watchdog. In the program, a handful of selected funds will purchase toxic assets -- like mortgage-backed securities -- from banks in an effort to cleanse their balance sheets and help them increase lending.

In his last quarterly report in April, Barofsky cautioned that many aspects of the toxic asset program left it vulnerable to fraud, waste and abuse, such as conflicts of interest for fund managers, collusion with fund managers, money laundering and misuse with the Fed's lending program, known as the TALF.

Since then, Treasury has incorporated many of the watchdog's recommendations, so now "the program has a significantly improved compliance and fraud-prevention regime than that initially proposed," Barofsky says. However, he warns that "there remain some significant areas in which Treasury's plan for PPIP falls short."

One such area is the lack of an informational barrier -- or a wall -- between fund managers making investment decisions on behalf of the program and employees of the fund management company who manage funds that are not part of the program. A fund manager, Barofsky warns, "could generate massive profits in its non-PPIF funds as a result of an unfair advantage."

Treasury has declined to put such a wall in place.

"Failure to impose a wall will leave Treasury vulnerable to an accusation that has already been leveled against it -- that Treasury is using TARP to pick winners and losers and that, by granting certain firms PPIF manager status, it is benefiting a chosen few at the expense of the dozens of firms that were rejected, of the market as a whole, and of the American taxpayer," Barofsky says. "The reputational risk is not one that can be readily measured in dollars and cents, but is rather a risk that could put in jeopardy the fragile trust the American people have in TARP and, by extension, their Government."

"Such transparency not only dissuades misconduct and promotes sound management but also promotes a better understanding of PPIP and thus enhances the credibility of PPIP and TARP more broadly," he says. "Even more importantly, the most significant investors in each PPIF, the American taxpayers, have a right to know the status of their investments. The lack of transparency as to what use TARP funds were put by recipients in other TARP programs, in SIGTARP's view, has damaged the credibility of TARP and therefore may have threatened its viability. Treasury should not repeat that apparent error with PPIP."

However, the department, Barofsky says, plans to disclose "no more than the bare minimum required by statute."

With nearly $24 trillion potentially flying out of federal coffers, the watchdog wants the government to do a lot more than just "the bare minimum."

When Barofsky testifies before the House Oversight and Government Reform Committee on Tuesday, Congress is expected to sound off on the watchdog's findings.

In a separate report released Monday, Barofsky said he obtained responses from banks on what they did with TARP funds, something that the Treasury Department has refused to do. Many of the banks, he said, used some funds to make investments, buy other banks and pay off debts.

"This administration promised an 'unprecedented level' of accountability and oversight, but as this report reveals, they are falling far short of that promise," Issa said. "In fact, the Treasury Department is actively obstructing transparency. The American people deserve to know how their tax dollars are being spent -- especially considering they are the ones who are footing the bill."

Source: abcnews.go.com/Business/Politics / Fox Nation

Posted: Knowledge Creates Power

Biden Acknowledges Administration 'Misread' The Economy

Vice President Biden acknowledged today that the administration underestimated the depth of the economic recession months ago as it prepared a recovery package that is only now beginning to take effect.

"We misread how bad the economy was, but we are now only about 120 days into the recovery package," Biden said on ABC's "This Week." "The truth of the matter was, no one anticipated, no one expected that that recovery package would in fact be in a position at this point of having distributed the bulk of the money."

Figures released last week showed that the national unemployment rate has reached 9.5 percent, and that the economy is still shedding nearly half a million jobs a month. In reality if you factor in all the people who have dropped off the unemployment roles but haven’t found work, the unemployment figure is actually at 16% and then their are 4 other groups to factor in… people who have lost their jobs but got severance package so either haven’t hit the unemployment rolls yet or won’t qualify; people who lost their jobs over the past 3 to 4 years who gave up looking to replace their employment as the economy started its march downward; students who graduated this past year that have never found employment other than the part-time jobs they had while in school, and the group which includes seniors and people who were previously out of the job market that have to go back to work now because they’ve lost their investments that they counted on to supplement their incomes.

President Obama pushed through a $787 billion stimulus package within his first month in office to slow the economic slide by replacing retreating private-sector demand, in part, with government spending.

But criticism has been mounting from the left and right, albeit for different reasons, that the plan was misconceived.

Administration officials have argued for weeks that the economic projections made before Obama took office presented an overly optimistic view of the economy, a case Biden reiterated in blunt terms today.

Conservative critics have used the mounting job losses to argue that the stimulus package - a mix of government spending and tax cuts - should have been titled more toward the latter than it was.

Meanwhile, liberal economists such as Paul Krugman have argued for more public spending, just as the stimulus money begins trickling into the economy.

After acknowledging the economic "misreading," Biden said "the second question becomes, did the economic package we put in place, including the Recovery Act, is it the right package given the circumstances we're in?"

"And we believe it is the right package given the circumstances we're in," he said.

Asked if a second stimulus package is needed, Biden said it is "premature to make that judgment."

Instead, he said, the administration will monitor the effect of the government spending in the coming months, as the public-works projects financed by federal funds move from the planning stage to the hiring and construction phase.

"And so this is just starting," Biden said. "The pace of the ball is now going to increase."

By Scott Wilson

Wow… Is anyone surprised. Everyone I know could have told them this and come up with better and less intrusive solutions without all their experts, czars and Ivy League educations. The unemployment situation is much worse than the administration’s figures show; the bank bailouts and stimulus plan is a failure with virtually no funds ever trickling down under Joe’s watch; nobody can get a loan and the next crisis, created by this administrations and their unbridled spending in all areas, is the debt crisis. Ask Marion~

National Debt Clock... Tick Tock

Posted: Knowledge Creates Power

Related Resources:

• President Trump? What If?
• Catastrophe or Catastrophe CD
• Glenn Beck's Common Sense

Huckabee Slams GOP Elites for Crist Endorsement

Signaling wider dissensions in the Republican ranks, former Arkansas governor and presidential candidate Mike Huckabee is slamming the National Republican Senatorial Committee (NRSC) for endorsing Gov. Charlie Crist over another, more conservative Republican in Florida’s open Senate race.

Huckabee announced his official support for former state House Speaker Marco Rubio (R) in a video Tuesday. He follows Sen. Jim DeMint, R-S.C., in support of Rubio, a popular Cuban-American conservative from South Florida.

“I’m disgusted that they would take a position in a hotly contested race when you have a quality candidate like Marco Rubio, who was the youngest Speaker in the Florida House,” Huckabee told The Hill. “This is not just some nameless, faceless guy that decided to throw his name in, who had no chance and no credibility.”

He continued: “I thought that their endorsement not only was premature, but was outrageous. And they ought to get behind the guy who would do a whole lot more, in my mind, to unite and fire up Republicans, and that’s Marco Rubio.”

“The establishment Republicans have made this endorsement for the same reason that they’re in so much trouble,” Huckabee said. “They go out there and support stuff like TARP bills and stimulus packages, pork-barrel spending and huge debt, and they wring their hands and act like, 'This is not good, but we don’t have a choice.' "

Marco Rubio For Senate – Billed as Florida’s Future

Source: Newsmax

Posted: Knowledge Creates Power

Banks to return $68 billion in bailout money

New York buildings are reflected in the window of a Capital One bank office window. The Treasury Department said Tuesday it will allow 10 of the nation's largest banks to repay $68 billion in government bailout money. (AP File)

Ten of the nation’s biggest financial companies got a green light Tuesday to return $68 billion in federal bailout money — freeing the banks from limits on executive pay and leaving the government with a small gain on the rescue cash.

While the paybacks could be a signal that the banking industry is stabilizing, analysts say it is far from a clean bill of health, and some said it was too soon to let the banks give back the money.

Presidential spokesman Robert Gibbs said the returned money would go “back into general revenue” and could even be used to bail out banks again. (And this seems to be the plan… Many banks have wanted to repay stimulus money before but were not allowed because they weren’t ready… per the administration. But now that people are starting to get fed up and money sources are drying up, they need the money, they will take the pay back and do it all again.

Still, the government has collected $1.8 billion from dividends on shares of preferred stock it received in exchange for bailout money, he said. And the government still holds warrants to buy shares of bank stock at cut-rate prices in the future.

The $68 billion in paybacks would be the largest since the $700 billion Troubled Asset Relief Program took effect eight months ago at the peak of the financial crisis. Specifically, the money comes from a $250 billion slice of the $700 billion bailout package.

Other chunks of the $700 billion will be harder, if not impossible, to recover. Some of it, such as $70 billion funneled to failed insurer American International Group Inc., ended up in the pockets of healthier banks that did deals with AIG.

And even the banks getting out from under the TARP still rely on government support, including debt guarantees from the Federal Deposit Insurance Corp. and credit lines from the Federal Reserve.

The banks chafed under restrictions on executive pay imposed by the government for banks that took bailout cash, arguing they were losing top talent to other firms. The administration is expected to roll out new executive pay rules Wednesday that would apply to banks that still have TARP money.

“It’s our obvious hope that additional money is not going to have to be used to stabilize banks,” Gibbs said. “I certainly wouldn’t rule it out.”

Indeed, banking experts stressed that the payments do not signal an end to the financial crisis. In fact, they say, most banks approved to pay the money back never needed it in the first place.

And three major banks that have not been approved by the government to pay the money back — Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. — could need federal help for years to come.

“When a troubled bank is capable of repaying, that would be significant,” said Barry Ritholtz, head of the financial research firm FusionIQ. “But we’re not going to see that anytime soon because they can’t afford it.”

Among the banks approved to pay back their bailout cash are eight that passed the government “stress test” earlier this year: JPMorgan Chase & Co., American Express Co., Goldman Sachs Group Inc., U.S. Bancorp, Capital One Financial Corp., Bank of New York Mellon Corp., State Street Corp. and BB&T Corp.

Those banks had to show they could raise private capital without federal guarantees before getting permission to pay back TARP money.

Morgan Stanley did not pass the test, but got approval to return its bailout money after quickly raising enough capital. And Northern Trust Corp. did not undergo the “stress test” but said it also had received permission to repay its bailout money.

President Barack Obama welcomed the news but said: “This is not a sign that our troubles are over — far from it.”

Indeed, the repayments carry risk. Some say it could create a banking system of winners and losers, with weaker banks stuck with federal restrictions and finding it harder to compete for customers and talent against rivals that operate more freely.

Others say the repayments could conceal problems in the banking industry. Smaller banks are still saddled with billions in risky commercial real estate loans. And large banks still hold the toxic mortgage-backed assets at the heart of the financial crisis.

Paying the government back leaves banks with less protection against future losses, said Christopher Whalen, managing director of the consulting firm Institutional Risk Analytics. And with less capital on hand, they may have to scale back lending.

Other critics said it was dangerous to allow the money to be paid back before the administration overhauls the regulatory framework that governs banks.

“The credit crisis made it clear that the banks acted in irrational and greedy ways. I don’t believe that enough changes have really happened yet,” said Donald Thomas, an independent research analyst.

Adding to the concerns, a report released Tuesday by the congressional panel overseeing the bailout said the hypothetical scenarios used in the “stress tests” might have been too rosy.

That raises the troubling possibility that even raising enough capital to satisfy the government won’t guarantee banks can withstand a deeper recession. And that means the banks might have to seek more federal aid.

Citi and Bank of America, two of the most troubled financial institutions, have taken $45 billion each in bailout money. Wells Fargo said it has not asked for permission to pay back $25 billion in TARP money.

Banking analyst Bert Ely said it could be years before those banks disentangle themselves from the government.

More than 600 banks have received a total of almost $200 billion from the TARP, and 22 smaller banks have already paid the money back. The $1.8 billion in dividend money includes stock the government owned in these smaller banks.

Besides the preferred-stock dividends, the banks that took bailout money issued warrants that give the government the right to buy bank stock at a fixed price later. Bank stocks have been battered but are expected to rise as the economy recovers, so the warrants could deliver substantial profits to taxpayers.

Or the government could sell the warrants back to the banks “at fair market value,” the Treasury Department said — presumably also locking in profits for the taxpayers.

Testifying before a Senate panel, Treasury Secretary Timothy Geithner said the value of the warrants for banks permitted to repay TARP funds are in the “several billion dollar range.”

But it sounds like Secretary Geithner’s understanding might not always be right on…~ Geithner said, after his visit to China that “the Chinese have justifiable confidence in our economy”. Yet other reports, including from Illinois Congressman Kirk, say that China is very uneasy and concerned about the U.S. economy. A telling moment was when a round of laughter broke out as Tim Geithner was speaking in China and said “your investments are secure”; the rudeness of laughing at someone virtually never happens in China. M~

By: Stevenson Jacobs and Daniel Wagner - Associated Press
06/09/09 7:44 PM EDT

This week we will be selling treasury bonds (T-bills). The question is who will buy them… Who wants to luck up their money our future for 30-years? Who buys those bills could make a huge difference in all our lives!

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Posted: Knowledge Creates Power

White House Set to Appoint a ‘Pay’ Czar

WASHINGTON -- The Obama administration plans to appoint a "Special Master for Compensation" to ensure that companies receiving federal bailout funds are abiding by executive-pay guidelines, according to people familiar with the matter.

The administration is expected to name Kenneth Feinberg, who oversaw the federal government's compensation fund for victims of the Sept. 11, 2001, terrorist attacks, to act as a pay czar for the Treasury Department, these people said.

Kenneth Feinberg, who oversaw payouts to 9/11 victims, will keep tabs on executive pay at companies in bailout.

Mr. Feinberg's appointment could be announced as early as next week, when the administration is expected to release executive-compensation guidelines for firms receiving aid from the $700 billion Troubled Asset Relief Program. Those companies, which include banks, insurers and auto makers, are subject to a host of compensation restrictions imposed by the Bush and Obama administrations and by Congress.

Wall Street has been anxiously awaiting more details on how the rules will be applied. "The law is confusing and a bit ambiguous, and so we're looking for certainty as to how to structure pay incentives," said Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, a trade association.

The move comes amid a series of sometimes-overlapping efforts to curb pay at financial firms following perceived industry excesses that led to the lending boom and bust.

The Obama administration earlier this year issued guidelines that include limiting salary for top executives at some firms receiving TARP funds and requiring that additional pay be in the form of restricted stock, vesting only after the company repays its debt, with interest, to the government. Congress then chimed in with even tougher rules curbing bonuses for top earners at firms receiving TARP money. As part of that effort, lawmakers barred those firms from paying top earners bonuses that equal more than a third of their total compensation.

The White House has been wrestling with how to marry those two efforts, which in combination are more punitive than administration officials had intended.

The government is also pursuing a separate revamping of financial-sector rules that could change industry compensation practices more broadly. For instance, the Federal Reserve is considering rules that would curb banks' ability to pay employees in a way that would threaten the "safety and soundness" of the bank.

Mr. Feinberg is expected to focus on pay restrictions related to firms receiving TARP bailout funds, helping companies to interpret the rules and ensure that they are being followed.

For instance, companies have been confused about whether to pay 2008 bonuses, since restrictions on incentive pay didn't go into effect until early 2009. Some firms have made the payments while others have held off. Many firms are also unsure whether the "top earners" targeted by Congress include rank-and-file employees or just executives.

Comments - “Obama is establishing a new cabinet of officials who are accountable only to him. This is an unprecedented power grab.” — Kathryn Reagan

Mr. Feinberg will report to Treasury Secretary Timothy Geithner, but he is expected to have wide discretion on how the rules should be interpreted. Firms likely won't be able to appeal decisions that Mr. Feinberg makes to Mr. Geithner, according to people familiar with the matter.

Mr. Feinberg, founder and managing partner of the law firm Feinberg Rozen LLP, spent several years overseeing payouts totaling more than $7 billion to victims of the 9/11 attacks. He personally reviewed every claim, approving or denying awards and allocating sums to be paid out of the Treasury.

By Deborah Solomon - contact at deborah.solomon@wsj.com

Printed in The Wall Street Journal, page A2

Posted: Knowledge Creates Power

Immigration and Self-Preservation

I will be the first to admit to being annoyed by automated phone instructions that direct me to press “one” for English and “two” for Spanish. It is more than a minor inconvenience. It is a matter of principle. If immigrants are to make a meaningful contribution to society they must do a little work before they are given all of society’s benefits. That includes taking the time to learn English. It’s the same logic that was used to put me through a semester of pledging before being admitted to the ranks of the Sigma Chi fraternity in 1986.

But the statist says he does not want American institutions to teach immigrants our language, our history, and our culture. He says he does not want to do so because of his commitment to the religion of moral relativism. He says that to do so would send the wrong message that American culture is somehow better than other cultures.

Of course, the statist is being less than truthful. The very fact that we are flooded with immigrants shows that we are superior to other countries like Mexico. The fact that past nations like East Germany have had to build walls to keep people in, not out, shows they are aware of their inferiority. We don’t need to worry about hurting their collective feelings.

So the statist may as well admit that it is not out of principle – as if moral relativism can, indeed, be principled – that he makes immigration so easy. The reason is one of raw power. He wants more votes in order to advance the statist agenda.

The statist may, from time to time, claim that his stance on immigration is pragmatic rather than principled. This is at best an unprincipled distortion of the truth. He cannot claim that amnesty is a “solution” to the “problem” of filling low wage jobs that poor people will not fill. It is his stance on immigration that drives down wages in the first place. Surely one cannot claim credit for solving the problems he created himself.

It is hardly surprising that the statist mentality leads not just to a desire to erode borders but, also, to a desire to erode our national defense. Those who are unwilling to see our nation as superior are hardly in a position to argue for military superiority. The same mentality that leads to faith in moral relativism leads to faith in the United Nations. But George Washington saw things differently. In 1793, he said the following:

There is a rank due to the United States among nations which will be withheld, if not absolutely lost, by the reputation of weakness. If we desire to avoid insult, we must be able to repel it; if we desire to secure peace, one of the most powerful instruments of our rising prosperity, it must be known that we are at all times ready for war.

At a time when America is flirting with statist policies, other nations are moving beyond their own borders in search of resources, which, if obtained, could drastically change our standing in the world. Russia is claiming the North Pole as its own in order to obtain more oil. China is making contracts with Latin America in pursuit of the same goal.

Meanwhile, the statist is unconcerned. America is only five percent of the world’s population. But it consumes twenty-five percent of the world’s energy supply. The statist “solution” to the “problem” of such global inequality is to make America poorer.

This statist mentality is so pervasive that it threatens our economy, our national security, and every aspect of our individual liberty. Its advance has been made possible, not just by Democrats, but also by unprincipled Republicans. Herbert Hoover made FDR’s New Deal possible with protectionist policies following the stock market crash of 1929.

George W. Bush has similarly enabled President Obama with his TARP policies of 2008. His statement that he “abandoned free-market principles to save the free-market system” will live in infamy. It has secured his place in history as the Republican Jimmy Carter – a president so inept that he took down an entire party for a whole generation.

But thank God groups like the Young America’s Foundation and the Leadership Institute are working to produce a new generation of conservatives who will help rebuild this nation based on conservative principles. And thank God Mark Levin has written Liberty and Tyranny to show them just how to do it.

I believe Mark Levin is correct in asserting that we must limit the Supreme Court’s judicial review power. We must do so by establishing legislative veto power over Court decisions with a supermajority vote of both houses of Congress. That would be more in line with the Framers intent than the status quo.

I believe Mark Levin is also right in asserting that we must end the monopoly of government education by applying anti-trust laws to the National Education Association. We must do the same for the American Federation of Teachers.

Whatever we do, we must act soon. For, it was Ronald Reagan who warned us: “Freedom is never more than one generation away from extinction. We didn’t pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same or one day we will spend our sunset years telling our children and our grandchildren what it was once like in the United States where men were free.”

by Mike Adams

Source: Mark Levin (2009) Liberty and Tyranny: A Conservative Manifesto. New York: Simon and Schuster.

HOW OBAMA'S SOCIALISM WORKS

President Obama's vision of the future is, apparently, an economy guided, steered and -- when the occasion demands -- commanded by the federal government. Some of the companies will remain private. Washington will take others over. But all will look to the White House, as to an orchestra conductor, for signals as to how and when and where to proceed. (Sounds like a blend of socialism and fascism).

This summary is the vision that emerges from the Chrysler bailout.  

Whether or not one believes the claims of attorney Thomas Lauria (I do) that the investment bank Perella Weinberg Partners was strong-armed by the administration, the fact remains that the four firms that accepted the piddling offer of 29 cents on the dollar are all awash in Troubled Asset Relief Program (TARP) money.

Citigroup, Morgan Stanley, Goldman Sachs, and JPMorgan Chase all dutifully approved the offer from Washington, while Perella Weinberg reportedly held out for 50 cents. Did the combined $90 billion the four compliant firms owed Washington in TARP funds make a difference in their passive acquiescence? You bet it did.  

They shouldn't have said yes. Clearly, Obama was not about to pull the trigger, which would have sent tens of thousands of autoworkers straight into unemployment. Politically, he would have had no choice but to cough up the $4.5 billion loan the feds just gave Chrysler with or without a debt settlement. The political pressures that have always operated on this Democratic president are still there and still in play.

Knowing the ultimate vulnerability of the administration position, any investment bank that was looking out for its clients would have demanded more than 29 cents. But Citigroup, Morgan Stanley, Goldman Sachs, and JPMorgan Chase all had a higher calling -- they had to appease King Barack I. To its credit, Perella Weinberg put its investors first.

But this little vignette shows exactly what the new rules of the game will be under this administration. It won't be Soviet-style socialism or Reaganesque capitalism. The system will more resemble the Japanese arrangement where MITI, the Ministry of Trade and Industry, informally guided companies and told them what to do. In Japan, a nod usually suffices to command. In the United States, one has to use a hammer. But the result will be the same: compliant capitalism.

Companies will not look out for their shareholders or their employees or even their customers so much as watch the smoke signals from Washington to decide what to do. The markets won't control decisions. Washington will.

The same balance of government control and nominal private ownership is evident in the mortgage rescue plan and the efforts to rekindle consumer lending. It will be manifest in the cap-and-trade legislation and in the priority that the administration will accord to green lending and job creation.

The strong-arming that obviously led up to the Chrysler deal will also be typical of the Obama industrial policy. When the chips are down, JFK's pressure on U.S. Steel to lower its prices in 1962 will be the model for the Obama years. While terrorists need not fear any violation of their constitutional rights, CEOs of Fortune 500 companies will not be so fortunate.
At the core of the new policy will be the simple assumption that Washington knows best.

But it doesn't. The stagnation of the Japanese economy in the past 20 years is eloquent testimony to the fact that government usually gets it wrong. Sometimes it makes the wrong decision because it fails to anticipate the market (as Japan did when it downplayed laptop computers and stressed mainframes). More often (as is normal in Japan), it is so in the thrall of special interests that it ends up articulating a consensus of those who would divide up the pie among them.

One way or another, the government usually runs the economy into the ground, as it will under King Barack I.

By DICK MORRIS
Published on TheHill.com on May 5, 2009

Related Resources:

• Senior creditors: Chrysler deal violates 5th Amendment
• OBAMA'S LEAP TO SOCIALISM
• Confusion: Fascism vs Socialism... Progressivism... And What Happened to Capitalism?
• White House Hesitating To Accept TARP Fund Paybacks – And the Question is Why???
• Dick Morris - Suspects Obama Planning to Takeover ALL BANKS
• Dick Morris - Suspects Obama Planning to Takeover ALL BANKS & NWO
  • American Progressivism – Part One
  • American Progressivism – Part Two
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  • American Progressivism – Part Four and Five

Fleeced – A Must Read

American Progressivism

Posted:  Knowledge Creates Wealth on 5.6.09

Urgent Message from Christopher Ruddy & Dick Morris

Dear Fellow American,

We are getting down to the wire!

At noon (Eastern Time) tomorrow, Thursday, May 7th, we will launch our Call to Arms broadcast, and I urge you to register before it’s too late — your financial future may depend on it!

Go here to reserve your spot for FREE!

Joining me on this exclusive video webinar program will be famed CNN anchor Bob Losure, along with top experts like Dick Morris, as well as my chief financial analyst, David Frazier.

I will also be playing a never-before-aired interview with the late Sir John Templeton, who prophetically explains why Obama’s financial plans will fail.

We also will show a recent video clip from Warren Buffett that has gotten scant media attention but is simply shocking in what the Oracle of Omaha predicts.

On the Call to Arms broadcast, we will be providing you with specific investment advice you can make to protect and grow your wealth.

Both Dick Morris and I also will be making a shocking announcement, one that I believe will help jumpstart your finances.

If you can’t make the noon call, I will be releasing the broadcast again at 7 p.m. (Eastern Time) that night.

And by registering, you will get immediate access to the VIP Web site, where I’ve created a library of free smart investing videos and articles for you to view.

So take a few moments to register now!

There’s no risk!

I look forward to you joining me tomorrow in this revolutionary online event.

To Your Success,

Christopher Ruddy

Senior creditors: Chrysler deal violates 5th Amendment

If the Obama administration expected the senior creditors of Chrysler to fold their tents under political pressure, they may have gotten a rude shock today.  Thomas Lauria, who accused the White House of threatening the creditors withn humiliation at the hands of the White House press corps, has filed a motion to halt the administration’s machinations on behalf of the UAW in the Chrysler bankruptcy.  Lauria and his allies claim that the Obama administration has violated the Constitution in their bid to devalue the senior creditors’ holdings on behalf of junior creditors, and have some precedent to support the allegation.

The heart of the argument starts on page 8 (via HA commenter Outlander):

III. The Taking of Collateral through a Direct or Indirect Use of TARP Authority is Unconstitutional.

13. The Treasury Department relies on TARP as the purported authority to justify the disparate treatment under the 363 Sale, even though TARP was enacted after the Senior Lenders’ liens on the Debtors’ property were already in place. The Supreme Court long ago recognized, however, that a secured creditor’s interest in specific property is protected in bankruptcy under the Fifth Amendment. Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555, 594 (1935). That case involved a Depression-era statute that was intended to help bankrupt farmers avoid losing their land in mortgage foreclosure. The statute in Radford provided that the bankrupt debtor could achieve a release of the security interests either (i) with the lender’s consent, purchasing the property at its then appraised value by making deferred payments for two to six years at statutorily-set interest rates; or (ii) by seeking from the bankruptcy court a stay of the proceedings for up to five years during which time the debtor could use the property by paying a rent set by the court, which payments would be for the benefit of all creditors, with a purchase option at the end of that period. Id. at 856-57.

14. Justice Brandeis noted that the “essence of a mortgage” is the right of the secured party “to insist upon full payment before giving up his security [i.e., the property pledged].” Radford, 295 U.S. at 580. In invalidating the statute, the Court stated that “[t]he bankruptcy power . . . is subject to the Fifth Amendment,” and that the pernicious aspect of this law was its “taking of substantive rights in specific property acquired by the bank prior to the act.” Id. at 589-90 (emphasis added). Thus, Congress could not pass a law that could be used to deny to secured creditors their rights to realize upon the specific property pledged to them or “the right to control meanwhile the property during the period of default.” Id. at 594. That is precisely what the Treasury Department would have Chrysler do here, with respect to the Chrysler Non-TARP Lenders’ property rights that were acquired prior to the enactment of TARP.

15. Relying on purported authority provided by TARP, the Treasury Department is demanding that Chrysler’s assets be stripped away from the coverage of the Senior Lenders’ liens – thereby impairing the rights of the Senior Lenders to realize upon those assets – so that those assets may be put in New Chrysler and used to the benefit of unsecured creditors in this proceeding, who will then be paid much more than the Senior Lenders. But, even assuming that TARP provides the Treasury Department with authority to provide funding to the Debtors and impose the transfer of collateral away from the Senior Lenders, TARP was enacted long after the Senior Lenders contracted with the Debtors and received senior liens on the Debtors’ property. Radford specifically disallowed the use of a law to retroactively alter existing liens on property.

16. Here, the proposed sale of the Debtors’ assets will leave the Senior Lenders with a diluted pool of assets and no further interests in the operating assets covered by their specific liens. The Constitution forbids this application of a law retroactively to undercut the Senior Lenders’ pre-existing property rights in favor or inferior creditors.

17. Finally, that the Treasury Department would take these unconstitutional actions to help the United States address difficult economic times is not an answer. Indeed, the same justification was expressly rejected in Radford, where Justice Brandeis noted that a statute which violated secured creditors’ rights, but which was passed for sound public purposes relating to the Great Depression, could not be saved because “the Fifth Amendment commands that, however great the nation’s need, private property shall not be thus taken even for a wholly public use without just compensation.” Id. at 602.

18. What is really striking here is that what is being proposed by the Sale Motion would strip the Collateral away and allow it to be put to use as new capital in New Chrysler for the benefit of existing and other creditors – even though the Chrysler Non-TARP Lenders have been given no opportunity to realize upon that Collateral to the point of full repayment ahead of at least $14 billion of selectively identified unsecured creditors.

One might think that a Constitutional scholar like Barack Obama would have already known that, but either this precedent escaped him or he doesn’t care about it at all.  Brandeis acted to uphold contract law, especially in the face of a government interest in paying off politically-connected unsecured creditors ahead of the senior creditors.  There is no other reason for Brandeis to make that decision, as only government could insert itself into the contractual relationship during a bankruptcy proceeding — just as Obama has done with Chrysler.

Lauria’s argument seems very compelling here, especially given Brandeis’ rather clear assertion that bankruptcy proceedings have to fall within the 5th Amendment — and that government can’t implement a taking to satisfy its own arbitrary aims by ignoring the relationship of the creditors to the default.  We’ll see whether the court rebukes Obama.

POSTED AT 1:36 PM ON MAY 4, 2009 BY ED MORRISSEY

OBAMA'S LEAP TO SOCIALISM

President Obama showed his hand this week when The New York Times wrote that he is considering converting the stock the government owns in our country's banks from preferred stock, which it now holds, to common stock.

This seemingly insignificant change is momentous. It means that the federal government will control all of the major banks and financial institutions in the nation. It means socialism.

The Times dutifully dressed up the Obama plan as a way to avoid asking Congress for more money for failing banks. But the implications of the proposal are obvious to anyone who cares to look.

When the Troubled Asset Relief Program (TARP) intervention was first outlined by the Bush administration, it did not call for any transfer of stock, of any sort, to the government. The Democrats demanded, as a price for their support, that the taxpayers "get something back" for the money they were lending to the banks. House Republicans, wise to what was going on, rejected the administration's proposal and sought, instead, to provide insurance to banks, rather than outright cash. Their plan would, of course, not involve any transfer of stock. But Sen. John McCain (R-Ariz.) undercut his own party's conservatives and went along with the Democratic plan, ensuring its passage.

But to avoid the issue of a potential for government control of the banks, everybody agreed that the stock the feds would take back in return for their money would be preferred stock, not common stock. "Preferred" means that these stockholders get the first crack at dividends, but only common stockholders can actually vote on company management or policy. Now, by changing this fundamental element of the TARP plan, Obama will give Washington a voting majority among the common stockholders of these banks and other financial institutions. The almost 500 companies receiving TARP money will be, in effect, run by Washington.

And whoever controls the banks controls the credit and, therefore, the economy. That's called socialism.

Obama is dressing up the idea of the switch to common stock by noting that the conversion would provide the banks with capital they could use without a further taxpayer appropriation. While this is true, it flies in the face of the fact that an increasing number of big banks and brokerage houses are clamoring to give back the TARP money. Goldman-Sachs, for example, wants to buy back its freedom, as do many banks. Even AIG is selling off assets to dig its way out from under federal control. The reason, of course, is that company executives do not like the restrictions on executive pay and compensation that come with TARP money. It is for this reason that Chrysler Motors refused TARP funds.

With bank profits up and financial institutions trying to give back their money, there is no need for the conversion of the government stock from preferred to common -- except to advance the political socialist agenda of this administration.

Meanwhile, to keep its leverage over the economy intact, the Obama administration is refusing to let banks and other companies give back the TARP money until they pass a financial "stress test." Nominally, the government justifies this procedure by saying that it does not want companies to become fully private prematurely and then need more help later on. But don't believe it. They want to keep the TARP money in the banks so they can have a reason and rationale to control them.

The Times story did not influence the dialogue of the day. People were much more concerned with the death of 21 horses at a polo match. Much as we will miss these noble animals, we will miss our economic freedom more.

By DICK MORRIS
Published on TheHill.com on April 21, 2009

Posted:  Knowledge Creates Power on April 23, 2009

Related Resources:

• Confusion: Fascism vs Socialism... Progressivism... And What Happened to Capitalism?
• White House Hesitating To Accept TARP Fund Paybacks – And the Question is Why???
• Dick Morris - Suspects Obama Planning to Takeover ALL BANKS 
• Dick Morris - Suspects Obama Planning to Takeover ALL BANKS & NWO
• American Progressivism – Part One
• American Progressivism – Part Two
• American Progressivism – Part Three
• American Progressivism – Part Four and Five

White House Hesitating To Accept TARP Fund Paybacks – And the Question is Why???

Goldman Sachs is ready to pay back $10 Billion in TARP funds early and White House is giving non-answers to why it is delaying if not not putting pressure on GS executives not to??

Goldman Sachs and others have wanted to pay back their TARP loans and instead of cheering, the Obama White House Appears to be refusing the money?

Why?  Why indeed is the question!!! Perhaps the answer is: 

Obama Wants to Control the Banks

There's a reason he refuses to accept repayment of TARP money.

I must be naive. I really thought the administration would welcome the return of bank bailout money. Some $340 million in TARP cash flowed back this week from four small banks in Louisiana, New York, Indiana and California. This isn't much when we routinely talk in trillions, but clearly that money has not been wasted or otherwise sunk down Wall Street's black hole. So why no cheering as the cash comes back?

My answer: The government wants to control the banks, just as it now controls GM and Chrysler, and will surely control the health industry in the not-too-distant future. Keeping them TARP-stuffed is the key to control. And for this intensely political president, mere influence is not enough. The White House wants to tell 'em what to do. Control. Direct. Command.

It is not for nothing that rage has been turned on those wicked financiers. The banks are at the core of the administration's thrust: By managing the money, government can steer the whole economy even more firmly down the left fork in the road.

If the banks are forced to keep TARP cash -- which was often forced on them in the first place -- the Obama team can work its will on the financial system to unprecedented degree. That's what's happening right now.

Here's a true story first reported by my Fox News colleague Andrew Napolitano (with the names and some details obscured to prevent retaliation). Under the Bush team a prominent and profitable bank, under threat of a damaging public audit, was forced to accept less than $1 billion of TARP money. The government insisted on buying a new class of preferred stock which gave it a tiny, minority position. The money flowed to the bank. Arguably, back then, the Bush administration was acting for purely economic reasons. It wanted to recapitalize the banks to halt a financial panic.

Fast forward to today, and that same bank is begging to give the money back. The chairman offers to write a check, now, with interest. He's been sitting on the cash for months and has felt the dead hand of government threatening to run his business and dictate pay scales. He sees the writing on the wall and he wants out. But the Obama team says no, since unlike the smaller banks that gave their TARP money back, this bank is far more prominent. The bank has also been threatened with "adverse" consequences if its chairman persists. That's politics talking, not economics.

Think about it: If Rick Wagoner can be fired and compact cars can be mandated, why can't a bank with a vault full of TARP money be told where to lend? And since politics drives this administration, why can't special loans and terms be offered to favored constituents, favored industries, or even favored regions? Our prosperity has never been based on the political allocation of credit -- until now.

Which brings me to the Pay for Performance Act, just passed by the House. This is an outstanding example of class warfare. I'm an Englishman. We invented class warfare, and I know it when I see it. This legislation allows the administration to dictate pay for anyone working in any company that takes a dime of TARP money. This is a whip with which to thrash the unpopular bankers, a tool to advance the Obama administration's goal of controlling the financial system.

After 35 years in America, I never thought I would see this. I still can't quite believe we will sit by as this crisis is used to hand control of our economy over to government. But here we are, on the brink. Clearly, I have been naive.

By STUART VARNEY – a host on the Fox Business Network.

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