The Barack Obama administration is becoming more and more like the government of the defunct Soviet Union. It shamelessly lies to the American public about things that are so blatantly obvious that the lies don’t merely seem pathetic, they seem downright bizarre.
A good example is its’ stance on Nationalization and Socialism. We keep on being told repeatedly that Banks are NOT going to be nationalized, we are also told (again, by Obama himself) that the government is working strictly within the framework of the free market economy (and not implementing socialism)
But let’s look at an excerpt from an article in today’s IHT on the reality of what is happening:
U.S. financial institutions that are getting government bailout funds have been told to put off evictions and modify mortgages for distressed homeowners. They must let shareholders vote on executive pay packages. They must lower dividends, cancel employee training and morale-boosting exercises, and withdraw job offers to foreign citizens.
Based on the above, it is clear that the government has nationalized the financial institutions which collected TARP funds, and is actively exercising its authority in running them. As a result, the government, and not the open market is deciding what business decisions these institutions make, if this is not nationalization, I don’t know what is.
Here’s another good excerpt:
A growing chorus of industry experts is warning that asking weak banks to carry out the government’s economic and social policies could increase the drain on the public purse.
He who controls the banks, controls the economy. Once banks start implementing the government’s economic and social policies, we would have moved even closer to socialism.
Funny thing is that Obama isn’t even nominating anyone to fill the top positions at the Treasury Department, could this be because the fewer people who know what’s going on the better?
I guess as far as Obama is concerned, the American public has been reduced to a “human jacuzzi of stupid”, just saw that term on Michelle’s blog, and had to use it lol..
Here’s the full article IHT:
U.S. financial institutions that are getting government bailout funds have been told to put off evictions and modify mortgages for distressed homeowners. They must let shareholders vote on executive pay packages. They must lower dividends, cancel employee training and morale-boosting exercises, and withdraw job offers to foreign citizens.
As public outrage swells over the rapidly growing cost of bailing out financial institutions, the administration of President Barack Obama and lawmakers are attaching more and more strings to rescue funds. Some experts say the conditions are necessary to prevent Wall Street executives from paying lavish bonuses and buying corporate jets, but others say the conditions go beyond protecting taxpayers and border on social engineering.
Some bankers say the conditions have become so onerous that they want to give the bailout money back. The list includes small banks like TCF Financial of Wayzata, Minnesota, and Iberiabank of Lafayette, Louisiana, as well as giants like Goldman Sachs, Wells Fargo and U.S. Bank in San Francisco. They say they plan to return the money as quickly as possible, or as soon as regulators set up a process to accept the repayments.
Other institutions like Johnson Bank of Racine, Wisconsin, initially expressed interest in seeking bailout funds but have now changed their minds. One of the biggest concerns of the banks is that the program enables Congress and the administration to add new conditions at any time.
“We are taking an approach that wants the banks to help the economy and whether it is ultimately good for a particular bank is secondary,” said L.William Seidman, a former chairman of the U.S. Federal Deposit Insurance Corp. and of the Resolution Trust Corp. during the savings-and-loan industry bailout. “Weak banks are being asked to do things that will erode their position.”
A growing chorus of industry experts is warning that asking weak banks to carry out the government’s economic and social policies could increase the drain on the public purse. These experts say that the financial assistance, while helpful in the short run, could require weak banks to engage in lending practices that will lose them even more money, and that the government inevitably will become more heavily involved in dictating how banks do their business.
“I honestly believe the people in power pushing this policy see it as a win-win – as something that is good for the banking industry and good for homeowners and others,” said Douglas Elliott, a former investment banker who is now an economics fellow at the Brookings Institution. “But there is a slippery slope and there are potentially significant negative consequences.”
The demands to modify mortgages or forestall evictions are especially onerous, some bank executives say, because they could prompt some institutions to take steps that, while helpful to homeowners, could lead to greater losses.
Elliott explained that, by transferring money from banks to homeowners, banks that were already fragile could wind up losing more money. “What gets us in real trouble is when we try to fudge things and pretend that something is in the direct interest of both the government and the financial institutions, when it in fact costs the banks money or increases their risk levels.”
Take Fannie Mae and Freddie Mac, the housing finance companies that the government now controls. In recent months, they have been told to spend billions of dollars buying bundles of mortgages for which there are no other buyers, and to let homeowners refinance their loans – even if they have no equity.
Such commands are echoes of the 1990s, when Fannie and Freddie tried to balance dueling mandates that required them to both make a profit for their shareholders and to serve a public mission of increasing homeownership.
In service of both shareholders and what they asserted was the public good, Fannie and Freddie borrowed extensively in order to buy and hold mortgages in their own investment portfolios. They purchased billions of dollars in risky subprime mortgages. As a consequence of having a public mandate, they also had a credit line with the U.S. Treasury and their risky business strategies were viewed by the markets as being guaranteed by the government.
To satisfy both mandates, the companies also faced fewer restrictions and were allowed to take on more debt than other financial companies. But when buyers began defaulting and home prices plunged, the companies nearly collapsed and last fall were placed under government conservatorship. Elliott said that some banks participating in the bailout program were now in the same conflicting position that Fannie Mae and Freddie Mac were.
He and other experts also worry that, by relying on weak banks to carry out administration or congressional policies, officials are not biting the bullet and shutting down weak banks that may be insolvent. At the height of the savings and loan crisis in the 1980s and 1990s, Congress and regulators adopted new rules known as “prompt corrective action” that required the government to quickly close weak financial institutions if they could not raise money to absorb mounting losses.
The rules were a response to a consensus that keeping weak institutions open longer, under an earlier practice known as forbearance, damaged healthy banks competing with the government-subsidized ones and ultimately destabilized the banking system. By shuttering weakened institutions before their losses grew, prompt corrective action was also seen as less costly to taxpayers and the government’s deposit insurance fund.
Administration officials say that some of the banks in the spotlight today are simply too large to be seized by the government, making comparisons to the savings and loan crisis misleading.
Moreover, they say, the public outrage over the growing cost of the bailout makes it politically imperative that they exert greater control over the way the money is being spent, particularly if, as expected, the administration seeks more money in the future.
But by keeping weak banks operating, the markets continue to sink and taxpayer costs are mounting, outside experts said.
“The current policy is likely to result in weaker banks,” Seidman said. “And keeping insolvent banks in operation does not benefit the system.”
Some community bankers, whose institutions are stronger than the large money center banks, agree.
C.R. Cloutier, the president of MidSouth Bank of Lafayette, Louisiana, and a survivor of the savings and loan debacle, said that his institution accepted $20 million from the rescue fund because he and his board believed it was patriotic and would help them offer loans during a recession. But faced with what he says is an unwarranted stigma of participating in the program, as well as the new restrictions that are imposed on banks taking the money, he is now considering whether to return the money, as other institutions have sought to do.
“Two things you learn in the banking business,” Cloutier said. “The first is concentration is bad. We now have 64 percent of deposits in eight institutions. The second rule is your first loss is your best loss. Get it over with. Don’t pump water in a dead fish.”
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