Finance Sector and Economic Impact

By Padmini Arhant

When the Bush administration officially recognized the economic recession in late December 2007, the malignant cancer in the financial sector was widespread – originating from gross mismanagement, underhand dealings, some in breach of lenient SEC regulations… a scenario analogous to the health abuse by overindulging individuals submitting to a potentially terminal illness.

Upon diagnosis, the prognosis called for a radical treatment to prolong life. Hence, the former administration executed a series of financial bailouts commencing with Bear Stearns, AIG, including major and minor banks bailout to a tune of $700 billion TARP (Toxic Assets Relief Program) fund.

Incidentally, the former Treasury Secretary Henry Paulson bound by vested interest and commitment to his alma mater Goldman Sachs let the comparable investment group Lehman Brothers submerge into insolvency.

Is cherry picking a coincidence or key Treasury representative fulfilling obligations to the dominant force Goldman Sachs in the finance industry?

Please refresh your thoughts after reviewing the blogpost ‘Bailout Debacle’ March 22, 2009 listed under Economy and Business category at www.padminiarhant.com

In this context, the cited article revealing facts behind the bailout is attention worthy.

According to http://www.wsws.org/articles/2008/sep2008/paul-s23.shtml – Thank you.

Published by the International Committee of the Fourth International (ICFI)

Who is Henry Paulson?

By Tom Eley, 23 September 2008

“Henry Paulson rose through the ranks of Goldman Sachs, becoming a partner in 1982, co-head of investment banking in 1990, chief operating officer in 1994. In 1998, he forced out his co-chairman Jon Corzine “in what amounted to a coup,” according to New York Times economics correspondent Floyd Norris, and took over the post of CEO.

Goldman Sachs is perhaps the single best-connected Wall Street firm. Its executives routinely go in and out of top government posts. Corzine went on to become US senator from New Jersey and is now the state’s governor. Corzine’s predecessor, Stephen Friedman, served in the Bush administration as assistant to the president for economic policy and as chairman of the National Economic Council (NEC). Friedman’s predecessor as Goldman Sachs CEO, Robert Rubin, served as chairman of the NEC and later treasury secretary under Bill Clinton.

Since taking office, Paulson has overseen the destruction of three of Goldman Sachs’ rivals.

In March, Paulson helped arrange the fire sale of Bear Stearns to JPMorgan Chase. Then, a little more than a week ago, he allowed Lehman Brothers to collapse, while simultaneously organizing the absorption of Merrill Lynch by Bank of America.

This left only Goldman Sachs and Morgan Stanley as major investment banks, both of which were converted on Sunday into bank holding companies, a move that effectively ended the existence of the investment bank as a distinct economic form.

These bailouts have been designed to prevent a chain reaction collapse of the world economy, but more importantly, they aimed to insulate and even reward the wealthy shareholders, like Paulson, primarily responsible for the financial collapse.

Paulson bears a considerable amount of personal responsibility for the crisis.

Paulson then handsomely benefited from the speculative boom. This wealth was based on financial manipulation and did nothing to create real value in the economy. On the contrary, the extraordinary enrichment of individuals like Paulson was the corollary to the dismantling of the real economy, the bankrupting of the government, and the impoverishment of masses the world over.

Paulson was compensated to the tune of $30 million in 2004 and took home $37 million in 2005. In his career at Goldman Sachs he built up a personal net worth of over $700 million, according to estimates. “

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True Perspective: By Padmini Arhant

The entire economic meltdown ceremoniously attributed to the financial sector’s wayward unruly conduct in the absence of limited or no regulation. Typically, it’s a free market voluntarily surrendering to a free fall after skyrocketing profits in the pockets of privileged few in the society.

Who did the private enterprise otherwise the market system’s oligarchs approach for salvation?

It was none other than the taxpayers of the economy represented by the government.

It’s poignant to underscore the convenience for private sectors to seek the taxpayer i.e. government’s assistance when they are drowning and fleetingly dismiss the same government as an incompetent, redundant agency during the buoyancy like in the health care battle.

The day is not far when the health care and insurance industry configured to the obscene profit driven settings mimic their counterpart finance industry imploring the taxpayers/consumers bailout.

When the wealth management industry succumbs to their own greed ladened follies, can the health care and insurance industry sustain the malpractice at the economy’s expense?

If there is any respect for the laws of nature or ethical consideration, the key economic components such as the finance, health industry and others would realize that universally every substance has a limited potential to thrive and exceed performance level at any given time. The mankind periodically experienced catastrophic blows in the form of severe economic recession to ‘Great Depression’ due to the prevailing markets inertia.

Still, the lesson is never learned by the delusional segment forging permanency on this planet; choose to remain confined to the improbable cause in wealth amassment.

Now directing focus on the finance sector, the ‘artful dodger’, a nickname of the Charles Dickens’ melancholy character ‘Oliver Twist’ when turned down for more porridge, despite the courteous magic word ‘please,’ was never discouraged to maneuver the situation in personal favor.

Unlike the character ‘Oliver Twist’ a victim of severe socio-economic disparity…parallel to the modern twenty first century reality, the finance sector is well armed with tactics adherence to the rule of law in appearance but decisively biting the hands that feeds them, i.e. the consumers and taxpayers.

What are the latest strategies by the finance industry to clean up the mess on their balance sheets?

The current trend in the finance sector is adapting to the new age attraction i.e. presentation and mass appeal even if it is lacking in substance. If anything achieved from the domino effects by the financial sector, it is the mastery of unsavory techniques to impress shareholders at the consumers’ peril.

During the bailouts, both the prior and the incumbent administrations were unequivocally guaranteed instant revival of the lending activity, a predominant factor in the liquidity crisis exacerbating the economy until date.

It’s been nearly twelve to eighteen months since the infamous massive bailouts with no relief to the average citizen, retailers or the small businesses, crucial for the economic recovery. The economy deprived of the consumer spending flow because of the financial institutions’ stringent policy to hoard the taxpayers’ funds received in the form of bailouts at zero percent or nominal interest rate. Instead the taxpayer bailout is unabashedly used for extravagant bonuses to the architects of the financial calamity.

Although, the Obama administration recently capped the finance charges and interest rates on credit card borrowings to ease the extraordinary burden on average citizens, the industry leapfrogged Congress with discretionary interest rates not limited to atrocious 29.9% APR and threatening to increase further on default payments.

Another proactive measure by the banks in an effort to window dressing the balance sheet was minimizing risk exposure related to credit card and consumer lending. The industry defiantly targets the vulnerable groups like students, homeowners and the lower to median income consumers with abrupt cancellation of accounts in good standing.

The irony is noteworthy. It’s considered perfectly normal if the finance industry absconded their responsibility to the American taxpayers/creditors not barring any accountability to the oversight committee regarding the bailout investments. However, the then taxpayers/creditors as consumers/borrowers now subject to scrutiny and unprecedented means by the same financial institutions holding the mantle to lending and borrowing.

While the myriad of finance industry borrowed taxpayer funds at zero or negligible interest rate, the sector in return either withholding financing in most cases or lending at an exorbitant rate to the consumers who are also the creditors.

In the housing market, the situation synchronizes with the other lending areas such as credit card, personal loans etc. The reason for the agonizing slump in the real estate across the nation squarely falls back on the commercial banks reluctant to unleash the cash flow to qualified first homebuyers and responsible mortgagees/homeowners unable to purchase or refinance their homes. The stranglehold on consumer borrowing precipitates the foreclosures notwithstanding the vertical decline in home sales and values.

Again, the White House initiatives to restrain foreclosures and assist primary residence owners through TARP fund allocation need evaluation as the financial institutions are focused on ‘business as usual’ and not measuring up to the rigorous standard that exists for average consumers while the bailed out financial industry borrowers exempt from it.

The status quo is inadequate and compromises the high value homes in the government pursuit to rescue the conforming loans, i.e. Fannie Mae and Freddie Mac toxic assets. Fannie Mae and Freddie Mac, is a private company backed by government funds.

Not surprisingly, the illicit practice permeated to the commercial real estate affecting the prospects in that segment.

Home equity, the major and sometimes the only asset for overwhelming majority being inaccessible along with the spiraling health care and insurance costs for families, the overall economic impact is enormous forcing many to bankruptcy accelerated by the escalating unemployment rate.

Did the bailout beneficiaries show any evidence to qualify for funding?

Supposedly not, then why should they be allowed to run the economy into muck and handsomely rewarded with taxpayer bailout for the colossal failure in financial history?

Where are the taxpayer funds invested and why are they not held accountable thus far?
Is the financial market granted constitutional immunity?

And if not,

What is holding the legislators from intervening on behalf of the electorate to probe the public affairs maintained as private matter by the industry?

Meanwhile, the investment group, Goldman Sachs implicated for alleged insider information to high value investors through trade specialists deserve proper investigation and due process. The SEC regulations must apply to all without exception in absolute transparency.

With the holiday season approaching, the consumer spending is vital to expedite the stagnant economic growth. As stated above, the positive development in housing and job market intertwined with the investment pace, only possible through private sector faithful participation in lending and reactivating the economy.

Unless and until the finance sector across the board, the commercial, investment and insurance industries get their act together and relinquish the ‘subprime’ syndrome, the sagging economy will continue and eventually consume the source, the financial groups.

The financial sector is obligatory to the taxpayers as creditors and borrowers particularly with respect to the disproportionate bailouts.

Finally, with no further procrastination on the financial markets audit, it’s imperative for the Congress appointed oversight to obtain legitimate explanation on investments and lending abstinence. Any dissatisfactory response and non-cooperation by the industry must be pursued with mandatory judicial protocol.

Thank you.

Padmini Arhant

Economic Bailouts On An Unprecedented Scale

By Padmini Arhant

Presentation of Economic Bailouts on an Unprecedented Scale

From: Stimulus Package Details

Source: http://www.stimuluspackagedetails.com/bailout.html

Mortgage Stimulus Packages

No industry has been helped more by the various economic stimulus packages than the real estate industry.

Add it all up, and $500 billion was committed in 2008 by the Bush Administration, and

The Obama Administration chipped in another $275 billion in early 2009, not to mention the $1 trillion that was designated for buying up toxic assets (which are comprised primarily of sub-prime loans given to suspect borrowers, collateralized by overvalued real estate).

Economic Bailouts On An Unprecedented Scale

Starting in 2008, and extending into 2009, the U.S. Federal Government became involved in a myriad of companies and industries, handing out bailouts at an alarming rate, blurring the lines between capitalism and socialism, free enterprise and government intervention.

Below, in alphabetical order, are the major recipients of economic bailouts.

Automakers

$25 billion in low-interest loans to General Motors, Ford, and Chrysler
$22 billion in low-interest loans to General Motors, Chrysler
$30 billion to help General Motors steer through bankruptcy
Total: $77 billion

AIG – Insurance Company

$60 billion loan – September 2008
$40 billion purchase of preferred shares – September 2008
$25 billion in purchase of toxic assets – October 2008
$25 billion loan (credit limit raised to $85 billion total) – October 2008
$30 billion loan – 2009
Total: 180 billion

Bear Stearns – Investment Bank And Brokerage Firm

$29 billion in guarantees – 2008

Fannie Mae/Freddie Mac – Mortgage Companies

$300 billion – 2008
$200 billion – 2009
Total: $500 billion

G-20 World Leaders Stimulus

$1 Trillion Stimulus Package – G-20 World Leaders Stimulus – April 2009

The leaders of the 20 most powerful countries in the world (representing 85% of global economic production) convened in London and agreed to $1 trillion in economic stimulus funds, as well as tighter global financial regulations.

June 2009 update: According to the Obama Administration, only about 5% of the $787 billion stimulus package passed in February 2009, has been distributed.”

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Bush Stimulus Package

By Padmini Arhant

Presentation of Bush Stimulus Package details

From: Stimuls Package details – Thanks

Source: http://www.stimuluspackagedetails.com/bush.html

Bush Stimulus Packages

In 2008, the Bush Administration handed out a slew of economic stimulus packages.

Under President George Bush’s administration, the Federal government gave

$29 billion to bail out Bear Stearns,

$178 billion to American taxpayers in the form of economic stimulus checks,

$300 billion to bail out American homeowners,

$200 billion to bail out Fannie Mae and Freddie Mac,

$150 billion to bailout AIG, and

$700 billion to bail out banks (TARP).

Total Bush Administration Bailout – $1.557 trillion dollars i.e. $1 trillion and $557 billion dollars.

Timelines Of The Bush Economic Stimulus Packages

Following is a timeline of the economic stimulus packages, in chronological order.

March 2008 – $29 Billion Stimulus Package – Wall Street Bailout

The Federal Reserve stepped in to prevent the collapse of Bear Stearns (one of the world’s largest investment banks and brokerage firms) by guaranteeing $29 billion worth of potential losses in its battered portfolio. This provided enough economic stimulus for JP Morgan Chase to take over the beleaguered firm.

May 2008 – $178 Billion Stimulus Package – Average American Bailout

The U.S. Treasury provided an economic stimulus package to American taxpayers in the form of $600 economic stimulus checks for individuals and $1,200 economic stimulus payments for couples.

That cost the government $100 billion, and they threw in another $68 billion in tax breaks for businesses, $8 billion to increase unemployment benefits from 26 weeks to 39 weeks, and a $4 billion economic stimulus package to be doled out to states and local municipalities to buy and rehab foreclosed properties.

July 2008 – $300 Billion Stimulus Package – Homeowners Bailout

The Bush Administration committed $300 billion for 30-year fixed rate mortgages for at-risk borrowers, as well as tax credits for first-time homebuyers, who could be eligible to receive up to a $7,500 tax credit.

September 2008 – $200 Billion Stimulus Package – Fannie Mae and Freddie Mac Bailout

Fannie Mae and Freddie Mac (privately owned mortgage companies that are backed by the federal government) were about to fail, due to declining house prices and rising foreclosures.

The Bush Administration stepped in with a $200 billion economic stimulus package and placed Fannie Mae and Freddie Mac and their $5 trillion in home loans in “temporary conservatorship,” to be supervised by the Federal Housing Finance AgeSeptember 2008 – $50 Billion Stimulus Package To Guarantee Money Market Funds

When the economic crisis reached a crescendo, Americans began to pull their money out of money market funds – historically considered to be the safest investment. To stop the bloodshed, the U.S. Treasury agreed to guarantee up to $50 billion, for up to a year.

September 2008 – $25 Billion Stimulus Package – Automakers Bailout

In an attempt to stave off bankruptcies for the “Big 3 automakers,” the Bush Administration gave General Motors, Ford, and Chrysler $25 billion in low-interest loans.

September – November 2008 – $150 Billion Stimulus Package – AIG Bailout

With the world’s largest insurance company in dire straits and 74 million clients at risk, the American government chipped in and gave AIG (American Insurance Group) $150 billion in a stimulus package that included: loans, purchase of toxic assets, and purchase of preferred shares.

October 2008 – $700 Billion Stimulus Package – Banks Bailout

The Bush Administration, under the umbrella of the U.S. Treasury, committed $700 billion in economic stimulus money under TARP (Troubled Asset Relief Program). By many accounts, if this economic stimulus money hadn’t been injected, credit between banks would have frozen overnight, and not only the American economy, but also the global economy, would have seized up.

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Is The Economic Stimulus Package Working?

“Is the economic stimulus package working” seems to be the question on most people’s minds.

But which economic stimulus package are you talking about?

Bear Sterns was taken over by JP Morgan Chase, so maybe that $29 billion economic stimulus plan worked.

We all got our economic stimulus checks in 2008, but we didn’t necessarily put them back into the economy, so that $178 billion might not have been well-spent.

The $300 billion mortgage stimulus, “Hope For Homeowners,” awarded in July 2008 didn’t work very well either, because few people took an interest in the program. While proponents of this particular economic stimulus package estimated that 400,000 homeowners could be helped over a three-year period, in the first month, only 111 had applied.

The $200 billion economic stimulus handout to Fannie Mae and Freddie Mac, the mortgage giants, stabilized them enough to prevent collapse.

The $50 billion economic stimulus to stabilize money market funds might have averted a disaster.

The $150 billion doled out to AIG, the insurance giant, prevented their closure, but must not have completely solved the problem since AIG came back for $30 billion more less than six months later, even as they were awarding $165 million in bonuses to their top executives.

The $25 billion given to the Big 3 automakers, Chrysler, Ford, and GM, allowed them to live to see another day, but they remain on the brink of disaster.

The $700 billion bank bailout, given in extreme haste in October 2008, might have kept the banks functioning, but no one really knows where that money went or what was done with it, so it’s hard to judge whether TARP is working.

$700 Billion Bush Stimulus

The $700 billion Troubled Asset Relief Program, (TARP), given out by the George Bush Administration in October 2008. No one can seem to track down any details on this. The money was given to banks with the goal that they would lend it to people. They didn’t seem to do that, but no accountability was written into the hastily concocted plan, which seems to have been concocted in a matter of days, in a “cocktail napkin” format.

And that was just the economic stimulus packages of 2008.

Bush Administration Bank Bailouts

Source: http://www.stimuluspackagedetails.com/bush.html – Thanks.

Bush Stimulus Packages

In 2008, the Bush Administration handed out a slew of economic stimulus packages.

Under President George Bush’s administration, the Federal government gave

$29 billion to bail out Bear Stearns,

$178 billion to American taxpayers in the form of economic stimulus checks,

$300 billion to bail out American homeowners,

$200 billion to bail out Fannie Mae and Freddie Mac,

$150 billion to bailout AIG, and

$700 billion to bail out banks (TARP).

Total Bush Administration Bailout – $1.557 trillion dollars i.e. $1 trillion and $557 billion dollars.

Timelines Of The Bush Economic Stimulus Packages
Following is a timeline of the economic stimulus packages, in chronological order.

March 2008
$29 Billion Stimulus Package – Wall Street Bailout
The Federal Reserve stepped in to prevent the collapse of Bear Stearns (one of the world’s largest investment banks and brokerage firms) by guaranteeing $29 billion worth of potential losses in its battered portfolio. This provided enough economic stimulus for JP Morgan Chase to take over the beleaguered firm.

May 2008
$178 Billion Stimulus Package – Average American Bailout
The U.S. Treasury provided an economic stimulus package to American taxpayers in the form of $600 economic stimulus checks for individuals and $1,200 economic stimulus payments for couples. That cost the government $100 billion, and they threw in another $68 billion in tax breaks for businesses, $8 billion to increase unemployment benefits from 26 weeks to 39 weeks, and a $4 billion economic stimulus package to be doled out to states and local municipalities to buy and rehab foreclosed properties.

July 2008
$300 Billion Stimulus Package – Homeowners Bailout
The Bush Administration committed $300 billion for 30-year fixed rate mortgages for at-risk borrowers, as well as tax credits for first-time homebuyers, who could be eligible to receive up to a $7,500 tax credit.

September 2008
$200 Billion Stimulus Package – Fannie Mae and Freddie Mac Bailout
Fannie Mae and Freddie Mac (privately owned mortgage companies that are backed by the federal government) were about to fail, due to declining house prices and rising foreclosures. The Bush Administration stepped in with a $200 billion economic stimulus package and placed Fannie Mae and Freddie Mac and their $5 trillion in home loans in “temporary conservatorship,” to be supervised by the Federal Housing Finance Agency.

September 2008
$50 Billion Stimulus Package To Guarantee Money Market Funds
When the economic crisis reached a crescendo, Americans began to pull their money out of money market funds – historically considered to be the safest investment. To stop the bloodshed, the U.S. Treasury agreed to guarantee up to $50 billion, for up to a year.

September 2008
$25 Billion Stimulus Package – Automakers Bailout
In an attempt to stave off bankruptcies for the “Big 3 automakers,” the Bush Administration gave General Motors, Ford, and Chrysler $25 billion in low-interest loans.

September – November 2008
$150 Billion Stimulus Package – AIG Bailout
With the world’s largest insurance company in dire straits and 74 million clients at risk, the American government chipped in and gave AIG (American Insurance Group) $150 billion in a stimulus package that included: loans, purchase of toxic assets, and purchase of preferred shares.

October 2008
$700 Billion Stimulus Package – Banks Bailout
The Bush Administration, under the umbrella of the U.S. Treasury, committed $700 billion in economic stimulus money under TARP (Troubled Asset Relief Program). By many accounts, if this economic stimulus money hadn’t been injected, credit between banks would have frozen overnight, and not only the American economy, but also the global economy, would have seized up.

Obama Stimulus Packages

By Padmini Arhant

Forwarding Bailout Details:

From: Stimulus Package Details

Source: http://www.stimuluspackagedetails.com/obama.html – Thanks.

In 2009, the Obama administration began the year by handing out economic stimulus packages.

In the first 60 days in office, President Barack Obama spearheaded

A $787 billion economic stimulus package based on job creation and tax cuts,

A $275 billion mortgage stimulus program aimed at saving troubled homeowners from foreclosure,

A $30 billion bail out to AIG (which added to the $150 billion the Bush Administration gave the insurance giant in 2008), and

A $1 trillion “toxic asset” buyout program designed to get under-water assets off the balance sheets of America’s banks so that the banks could begin lending again.

At the end of March 2009, the Obama Administration gave automakers General Motors and Chrysler another $22 billion in low-interest loans.

In June, the Obama Administration gave General Motors another $30 billion to help steer it through bankruptcy.

Total Obama Stimulus Package – $2.1 trillion dollars – $2 trillion and $144 billion dollars, of that $1 trillion relates to “toxic asset’ program.

Timelines Of The Obama Economic Stimulus Packages

Following is a timeline of the economic stimulus packages, in chronological order.

February 2009 – $787 Billion Stimulus Package – Average Americans Bailout

The Obama Administration and Congress authorized $787 billion in spending and tax cuts, primarily to create or save an estimated 3.5 million American jobs.

February 2009 – $275 Billion Stimulus Package – Homeowners Bailout

The Obama Administration handed out a $275 billion mortgage stimulus plan, designed to assist more than 9 million American homeowners in refinancing their home loans or averting foreclosure. Of the $275 billion stimulus, $75 billion was allotted for direct spending for keeping people in their homes, and $200 billion came in the form of additional help for Fannie Mae and Freddie Mac.

(See above, in the July 2008 entry, for more information on the first economic stimulus package that was awarded to these mortgage giants.)

March 2009 – $30 Billion Stimulus Package – AIG Bailout

The federal government intervened once again to help insurance giant AIG, this time in the form of a $30 billion loan from TARP funds. (See above in the September-November 2008 entry, for more information on other AIG bailouts.)

March 2009 – $15 Billion Stimulus Package – Small Business Loans

The Obama Administration introduced a $15 billion economic stimulus venture aimed at the small business lending market to get money flowing into small business lines of credit again.

March 2009 – $1 Trillion “Toxic Asset” Program – Banks Bailout

The Obama Administration launched a public-private economic stimulus venture (involving the U.S. Treasury and FDIC) to try to get toxic assets off the balance sheets of banks so that they can return to normal lending practicesMarch 2009.

March 2009 – $22 Billion Stimulus Package – Automakers Bailout

The Obama Administration extended another $22 billion in loans to Chrysler and GM, this time, with strings attached, including the firing of General Motors Chairman Rick Wagoner.

April 2009 – $1 Trillion Stimulus Package – G-20 World Leaders Stimulus

The leaders of the 20 most powerful countries in the world (representing 85% of global economic production) convened in London and agreed to $1 trillion in economic stimulus funds, as well as tighter global financial regulations.

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Economic Stimulus Details:

$787 Billion Obama Stimulus

The $787 billion economic stimulus bill signed into law by President Barack Obama in February 2009 was more detailed, 1,071 pages to be exact. To summarize, here’s where the money’s supposed to go:

$288 billion – tax relief

$144 billion – state and local municipalities*

$111 billion – infrastructure and science

$81 billion – poor and unemployed

$59 billion – health care

$53 billion – education and training

$43 billion – energy

$8 billion – other

$1 Trillion Obama Stimulus

The $1 trillion toxic asset purchase program, announced by U.S. Treasury Secretary Timothy Geitner in March 2009 will be seeded with $75 billion to $100 billion in funds from the TARP program.

Presumably, this government pledge will be enough to attract funds from private investors (hedge funds, endowments, private equity funds, and institutional investors), to the tune of $500 billion to $1 trillion.

The premise is that hearty private investors will buy “toxic assets” from the banks, at a fraction of their book value. The Federal Deposit Insurance Corporation (FDIC) will get in on the deal by guaranteeing debt-financing issued by public-private entities.

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Is The Economic Stimulus Package Working?

As for 2009, it’s too soon to tell whether the $787 billion job creation and tax cut stimulus, the $275 billion mortgage stimulus, and the $1 trillion “toxic assets” purchase programs are working.

National Unemployment and the Economic Status

By Padmini Arhant

The ravenous economy has absorbed about $3.7 trillion dollars via bailouts and stimulus plans, (please refer to individual stimulus package topics for breakdown) yet the nation’s jobless rate rising like a tidal wave rather than settling along the shores. Several arguments mounting regarding the precarious job situation across the nation with some fifteen states like California, Michigan, Indiana, Ohio and others experiencing double digit in job losses accumulated over a period of time.

Not surprisingly, criticisms with an ominous prediction such as a possible return of the ‘Great Depression’ from various political and economic factions pouring against the current administration’s level of action and apparent inaction in averting the precipitous decline of the job market.

The irony being, President Obama’s opponents and fierce critics expressing deep concerns over the present generation’s children and grandchildren burdened with the burgeoning multi-trillion dollars national deficit from the ‘supposedly’ bizarre and revolutionary health care reform.

Unfortunately, the pervasive selective memory among the cynics forbids anyone from reminding the junkyard legacy by the previous administration. Nevertheless, it’s important to revisit the situation in order to find a pragmatic and an effective cure for the epidemic unlike a band-aid treatment tactic by the prior administration.

As detailed earlier on many occasions, the wild adventures in the past eight years eroded the fundamentals of the capitalist system. Immediately following the 9/11 attacks, the widespread panic about the United States economic and national security surely had an impact on the American investments ranging from housing to stock market including the exodus of some expatriates selling homes combined with the withdrawal of their investments.

The Bush-Cheney administration laid out the extravagant scheme to trump the situation with yet another war by invading Iraq when the mission in Afghanistan had barely begun. Conservative ideology dictates that wars promote prosperity. Actually, the notion might not be far-fetched because wars are highly beneficial to the nexus group gambling with others’ life and nation’s wealth.

When the administration inheriting a surplus economy engaged in a dubious agenda at the most improper and inconvenient time, the market conditions in 2002 and onwards became more volatile due to enormous speculations surrounding the United States affordability to wage another war.

The Bush-Cheney administration sailed through the storm with false assurances and blatant lies that Iraq war would be self-funded through oil revenues expected to be reaped exclusively by the United States in return for the establishment of democracy.

One must also not forget the administrations’ prophesy on the premature valentine’s day celebration by the cheering Iraqis handing out rose bouquets to the U.S. occupying forces at the expense of their blood and national treasury.

The excessive borrowing commenced at the dawn of the Iraq war with the fiscal conservatives now objecting to their constituents’ health care benefits, then turning a blind eye and signing a blank check to an unarguably a corrupt administration.

Funding two simultaneous wars converted the national surplus to national deficit adversely affecting the Treasury Notes and subsequently the U.S. currency in the international market. In the backdrop of the weakening Bond market, the stock market performance accelerated with investors’ confidence in the growth of different sectors specifically the oil and defense stocks due to the on-going wars, technology sector and the financial sector with hyperbolic balance sheets.

Above all, during that time the Federal Reserve and the Treasury’s overly cautious inflationary measure by reducing the interest rates beyond market conditions and unleashing the free market from necessary regulations in an utter conflict of interest essentially provided a fertile ground for the financial sector to exploit the unique opportunity in the lending activity.

In addition, the conglomerate like AIG and major investment banks extending towards the commercial bank’s activities risking long-term investments for short-term gains induced further competition for the traditional banking sector adopting strategies detrimental to the key components of the economy viz. the housing market, retail and commercial lending.

The financial sector’s unethical and unscrupulous practices in every aspect of lending targeting the nerve of the economic system i.e. the consumer, exacerbated the economic recession.

From the notorious sub-prime mortgages in the housing market now appropriately defined as ‘toxic assets’ bundled into the mortgage backed securities exchanged through international trading, to teaser rates offered on credit card later escalating to atrocious interest rates exceeding market affordability…are primarily responsible for the chronic ailments of the current real estate and the liquidity crisis.

Unequivocally the present woes of the economy are attributable to the overwhelming greed by the financial sector and the defiance for any rule of law until date. As clarified by President Obama during the press conference on date, the financial regulatory reforms are in order.

Since some prominent economists have been recently pushing for more stimulus over and above the total $3.7 trillion dollars, it’s necessary to obtain the facts and details on earlier investments to evaluate the methods applied as a result of the negative economic growth and dismal unemployment rate.

Please refer to stimulus package details followed by careful analysis in the subsequent segments.

Meanwhile, it’s imperative and incumbent on all bailout recipients and the previous administration officials regardless of hierarchy to come forward, testify under oath to Congress as the representatives of the American electorate, and explain exactly where and how the trillions of dollars have been invested.

Is it a coincidence that Goldman Sachs after being assisted by the former Treasury Secretary Henry Paulson in gobbling Bear Stearns and Lehman Brothers, emerges with a bumper profit rewarding its every employee with a despicable amount $700,000 bonus the past week ? – Absolutely not.

It’s about time the criminals of the financial world are brought to justice in order to avoid a twenty first century revolution in the world’s modern democracy.

Congress must act in the interest of the people and abide by the constitutional rule of law with an honest and thorough investigation of the massive bailouts carried out at the expense of the hard working American taxpayers.

Thank you.

Padmini Arhant

Saving Grace – California Fiscal Crisis

By Padmini Arhant

The beautiful Golden State pawned over obstinate leadership and legislature in Sacramento. If the minority representatives and the head of the state confined to their political dictum and ideology, the majority on their part let the myopic view of the state of affairs undermine the social challenges confronting the constituents.

There were too many opportunities aided with pragmatic solutions to resolve the ever-rising budget shortfall (previously at $24.3 billion and now increased to $26.3 billion deficit) without draconian cuts hurting the weak and the most vulnerable in the society.

Sometimes, when there is intellectual deficiency in the leadership to deal with crisis, a wise option for the authority in power is to display humility, heed to genuine concerns and adhere to remedy offered to the problems rather than a Kamikaze approach headed for a disaster. Although, the leadership ignoring sound advice implies personal egocentric satisfaction, the false notions and misguided policies rejecting the population’s misery have led to the status quo.

Sacramento could have averted California fiscal debacle back in November 2008 when the path towards the state budget appeared difficult and beckoning swift reactionary measures to reign in on the economy tumbling downhill.  Instead, the legislature and the leadership stalled action with no respect for the constitutional rule of law mandating the state budget reconciliation by a deadline. The reality being the deadlines have come and gone with no state budget in place.

To reiterate earlier statements, the embarrassing performance by the entire legislative force with the head of the state leading in this respect squandered taxpayers’ valuable resources in political bickering, finger pointing and even assigning the duty to the taxpayers/voters through Special elections on May 19, 2009.

Since Sacramento abdicated their legislative responsibility to approve a functional state budget and a rescue plan for the following year, California is in dire fiscal state with a direct impact on the national economy. The only action from Sacramento seen thus far is the sedative talks to calm anxious residents dependent on social programs and services and the rest of the population eager for the state’s economic recovery.

Contemporary politics seeks comfort in lip service rather than concrete action focused on relief to the victims.  With no end to the on-going tug ‘o war, the ruthless slashing of funds continues with respect to education, health care, environment and the overall economy wounding the present and the future of the society.

In the absence of state budget for the fiscal year, the state treasury forced to issue IOUs declined encashment by the major bailed out banks defaulting on their lending commitment during taxpayer bailout to stimulate the local and national economy. The cumulative effect of the incompetence in Sacramento obvious in the degradation of the once stellar credit rating of the Golden State possibly reduced to junk status in the near future.

As experienced by the national economy, budget financing and legislative funding for reform and economic revival depend on both revenues and savings through spending cuts. The recommendations to raise income taxes from the following sources at the bare minimum slighted when it could have adequately provided for the budget shortfall.

Tobacco and alcohol tax, Vehicle registration fee and most importantly closing loopholes for the Corporations evading state income taxes through tax havens, collecting hefty fines from the environmental polluters i.e. oil, aviation and automobile industry, overhauling of the criminal justice system viz. the state prisons absorbing enormous amount of the budget to name a few.

The administration’s cavalier approach in demolishing the society’s foundation i.e. education, health care, and small businesses…with merciless withdrawal of funds from the budget indicates governance in the barricades, the elitists out of touch with the plight of the populists.

Why California is important for the Naitonal Economic Recovery?

Source: Wikipedia.org – Thanks

Gross domestic product (GDP)

California is responsible for 13% of the United States’ gross domestic product (GDP). The state’s GDP is at about $1.7 trillion (as of 2006).

The GDP increased at an annual rate of 3.1% in the first quarter of 2005.[13]

According to the California Department of Finance, if California were an independent state, it would have had the seventh largest economy in the world.
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California is the epicenter for Science, Technology, and Entertainment besides representing every other sector —
Finance, Manufacturing, Construction, Health, Education, Hospitality, Energy as the pioneer of Green Technology, Environment, Trade, Transportation and Utilities, Information dealing with Motion Picture Broadcasting, Publishing, Internet businesses and Telecommunications to Agriculture and Mining are some of the many core activities creating jobs and contributing to the National GDP.

The impressive growth in California during the Silicon Valley boom stunningly boosted the National GDP with the state experiencing labor capital depletion in many industries. Subsequently the profit earnings in the California technology sector from 2002 to 2007 contributed to the stock market rally with the trend continuing until date. One of the reasons for the current enlarged National Unemployment figures is the double-digit jobless rate in California and the budget crisis exacerbating the national productivity.

With the escalating job losses and the stalemate in Sacramento holding the state budget and the children’s future hostage, the national economy will further deteriorate if the California budget shortfall not met immediately.

The taxpayers’ bailout of the finance sectors and the automobile industry with no accountability or transparency deprived the states like California from receiving generous federal funding to various programs. These bailouts primarily passed to enable liquidity in lending and job protection across the nation. Again, the proof of the pudding reflected in the dismal unemployment figures arising from defaults by the finance sector withholding lending to small and medium businesses as well as the average consumers.

Such violation of trust by the finance sector has attributed to poor consumer spending adversely affecting the retail sector with a ripple effect on the entire economy.

So much for the free market integrity and reliability in turning the economy around through capitalist mechanisms, that is generating job losses rather than job creation.

California on the other hand could emerge out of the existing crisis with federal assistance and approval of $26.3 billion in borrowing at nil interest rate. The amount returned progressively through state bonds over a set period would benefit both the state and the national economy in alleviating the financial meltdown. The Federal Reserve and Treasury could lend the necessary amount to California recovery plan from the residual amounts of the previously approved financial bailouts and TARP funds returned by some Investment banks like Goldman Sachs.

Meanwhile, the citizens of the great Golden State must engage in changing the political system with efficient bipartisan legislature and leadership in Sacramento. When the programs and services restored to benefit the people of the state, the interim relief and long-term stability to the nation’s largest GDP growth state is inevitable.

If the Federal Reserve or the Treasury unable to provide any relief to California then,

Considering the grave fiscal scenario facing the state of California, the SOS from the citizens of this state require urgent action by the Congress, Senate and the White House in the swift approval of the amount – $26.3 billion. Unfortunately, any opposition to the financial aid will have serious political backlash in 2010 and 2012 elections – demonstrated by the electorate during the special elections on May 19, 2009 rejecting both political parties for their insensitivity to the crisis.

As for the head of the state – The actions or the lack thereof until now evidenced in the areas identified below –

Following the electorate dismissal in the Special elections on May 19, 2009, the Governor appointed committee has business representatives with deep pockets favoring their own agenda against the less fortunate citizens to resolve the budget crisis, confirming the authority’s allegiance to the special interests.

The disingenuous remarks on the immigration issue related to the undocumented workers without any progress in issuing drivers license that could have not only generated state revenue but also moved the matter from the back burner is yet another political gimmick.

Recently the Governor’s controversial posturing threatening to fingerprint i.e criminalize the food stamp recipients targeting the disabled, the jobless and the elderly as the means to detect alleged fraud and forgery in an effort to saving costs against above mentioned nominal tax increases is beneath the humanitarian character and deplorable on all accounts.

The opposition minority has no time left to procrastinate by wasting taxpayer dollars to defend the ‘so-called’ fiscal-responsibility when the exercise proven counterproductive.

Similarly, the ruling majority must review and revise the union based workers’ and state employees’ disproportionate employment benefits costing taxpayers excessively, more relevantly in the public safety employment, and other government jobs.

A dilemma for the California voters is, if the right pledged to the appeasement of the Corporations investing thousands of dollars in political campaigns and legislative matter, the left compensated with the Unions and Corporations’ influence on the legislative issues.

Therefore, it is in the best interest of the nation to reform private contributions in political campaigns and promote public financing to implement checks and balances apart from maintaining costs at all levels of the electoral process. Also, the open primaries in the state elections will facilitate moderate representation from the right.

Given the unacceptable partisanship creating gridlocks and a colossal failure to balance the budget, it is appropriate for the State of California to end the term of the administration and those responsible in leading the state from prosperity to an economic ruin.

Effective immediately, the countdown begins for Sacramento to follow the guidelines by sparing the education, health care, energy, environment and all the essential programs and services benefiting the people and enacting the relevant tax increases with the elimination of redundant spending in other areas.

It’s incumbent on Sacramento to finalize on the meaningful state budget in order to settle the debts to different creditors and restore the pre-recession California image and credit ratings.

Thank you.

Padmini Arhant

Pulse of the Economy

By Padmini Arhant

With a finger on the pulse of the economy, the recent reports on employment, housing, financial and stock market post stimulus funding worth $787 billion approved by Congress in February 2009, has drawn both praise and criticism from different quarters. The praise is always welcome and encouraging for any administration and the Obama administration is no exception to the rule, particularly when they are relentlessly engaged in stabilizing the economy as the top priority.

Whereas, the criticism aimed at the President is no revelation considering the partisan Washington atmosphere. The results thus far, indicate the current national unemployment rate at 9.2% against 8% in the pre-approval stimulus package forecast. Further, the reports reveal the economy shed 1.6 million jobs with the White House claiming 150,000 jobs saved since the passing of the stimulus measure. Obviously, it’s a contentious issue for all Americans receiving pink slips for paychecks and IOU’s in the state of California respectively.

The main criticism being the Obama administration’s optimistic approach in selling the stimulus plan not correlating with the job market results, a fair analysis is due to clarify doubts and speculations on the stimulus plan prospects and its effect on the economy.

According to the White House and other reports, only $44 billion i.e. 5.6% spent from the $787 billion stimulus funds with an accelerated investment committed this summer. In light of the above scenario, the 150,000 jobs rescued towards 5.6% funding is a confirmation of President Obama’s cautious and calculated expectation from the economy.

Even at the present conservative trend, the job market results for the remaining 94.4% of the stimulus fund upon targeted investment should adequately restore the employment rate from the growing underemployment and unemployment status with a combined saved and created job ratio yielding approximately 2,528,571jobs in a similar environment.

It is not uncommon for the critics and analysts to focus on the dismal job market figures affected since the onset of the economic recession in December 2007. The skeptics’ myopic view neglecting economic progress in other areas is attention worthy. Various reliable sources confirmed the financial sector strengthening with the bailout funds interjection in an effort to amortize the toxic assets from the sub-prime mortgage debacle. The leading financial institutions such as Bank of America, J P Morgan and Chase and other banks in the top ten range enabled capital management viability proven in the balance sheets.

The rapid foreclosures primarily responsible for the declining housing prices nationwide conversely contributing to the median home prices plateau with the 47 percent foreclosed homes resold in the entire Bay Area in April 2009 compared to 52 percent in February 2009 – indicating the desirous regress in foreclosures and signs of early recovery in the housing market.

The reports also confirm the home sales and value up for month and down for the year attributing to the Obama administration’s strategy of “the combination of lower prices, average mortgage rates of 5 percent or less for smaller loans, and a new $8,000 federal tax credit for first-time buyers” in the anemic housing market.

When the foreclosures pervasively diminished or extinguished nationwide with the stimulus programs, the housing market rebound will be visible motivating the lenders to participate in the melting liquidity market. However, caution required with the rising bond market’s pressure on interest rates imperative in alleviating the housing market crisis.

In the stock market – the significant gains by the commodity market and technology sector reflected in the recent rally is invigorating. Other industries lagging behind in performance likely to benefit from the steadily easing financial market credit crunch, promoting private sector investments directly related to boosting the job market, housing market and consumer spending essential for speedy economic recovery.

As for the quasi investment deals in the GM takeover causing pandemonium among the well-wishers across the aisle, the taxpayers’ financial commitment to rescue jobs slighted for political bickering. The ‘bankruptcy’ triggered cynicism about the government imprudence in investment goals with taxpayer dollars, while conveniently ignoring the fact that the auto industry problem originated during the former administration’s era and their $17 billion initial investment in the corporation set for failure.

Ironically, the temporary and modest government intervention in the free market characterized as ‘nationalization’ of industries necessitating required action from colossal mismanagement.

Meanwhile, the Obama administration’s objective in the GM deal to avert the deepening crisis in the frail industry challenged by the competitive global market is a thoughtful approach. Now with taxpayers as the majority shareholder in the once iconic corporation the management goals anticipated to synchronize with the twenty first century demands ensuring excellence in purpose, productivity and profitability.

Moving on to the other pertinent and popular health care issue debated and discussed to reject rather than embrace the premise of the President Obama’s health care plan – choice, affordability and quality, the perfect remedy to relieve the economy from the health care burden costing the nation in trillions while leaving the uninsured in millions.

Despite the innuendoes and insinuations about the mounting debt, the investments miscategorized as ‘squandering’ in the national economy ranging from health care, education, energy, environment, housing to financial sector and other industries is a pledge towards substantial economic security for the present and future generation.

The controversy surrounding the diverse investments costs applied to two particular sources viz. borrowing from China and tax hikes on the corporations and wealthy groups. Contrarily, the tax breaks to the top ten percent in the highest income bracket and corporations evading tax through tax havens with limited free market regulation or deregulation in the past eight years aside from being counterproductive resulted in approximately $9.5trillion dollars national debt with a cumulative effect on the status quo of the economy.

There was no clamor over the increasing liabilities on the baby boomers and the younger generation in the extravagant spending on illegal wars with a guarantee to fund itself from oil revenues in Iraq…an unequivocal myth until date.

Then the financial sector bailout with respect to AIG and oligarchs to a tune of $700 billion and more in 2008 with no accountability or transparency exacerbated the liquidity crisis against the intended proposal. Interestingly, the past events currently dismissed as irrelevant claiming that Obama administration disavow the incidents pertaining to the prior administration yet owe an explanation for the phenomenal deficit, the previous administration’s legacy to its successor.

Only if the opposition’s present vigilance on fiscal responsibility existed from 2000-2008, perhaps the People’s Republic of China and The Kingdom of Saudi Arabia would be vigorous competitors to the world financier ‘The United States.’

The demands from the conservative right exceedingly high launched with rhetorical comments and negative attacks such as “false Prophet’s failed Presidency.”

In the absence of any ideas and solutions to the burgeoning crises created by the previous administration’s historical blunders serving testimony to the beacon of incompetence and failures in Presidential history, the political posturing is paradoxical.

With respect to the economy in the ‘Golden State of California’, the clock is ticking for the state and the local government authorities to resolve the budget crisis and close the $24 billion deficit in the state budget and $73 million in the San Jose City budget.

Even though the strategy in both situations is scrambling to wipe the deficit by any means with mostly eliminating the vital services and benefits to the weak, the poor and the vulnerable, the repercussions of draconian cuts with no tax increases will far outweigh the immediate illusory results not barring the political risks in the 2010 gubernatorial elections.

Following the special election results on May 19, 2009, it’s incumbent on the state legislature to adopt several guidelines and viable options provided by concerned citizens through many sources in resolving the fiscal crisis. There is no patent right on the thoughts in the matter affecting the entire state and the community at large. It is a patriotic and civic duty of every citizen volunteering suggestions to deal with the stalemate confronting the California state legislature.

Governor Arnold Schwarzenegger’s recent comments on undocumented workers and their plight aptly placed the sensitive immigration issue in perspective. It’s time for the Governor to translate into action by issuing drivers license to the undocumented workers in the State of California that would not only aid the budget but also enhance the opportunity as the preliminary step towards legalization of the Californian residents.

More often, the leadership is subject to test the will, wisdom and courage against the odds exclusively the unpopular decision eventually ending in greater good for all.

I wish Governor Arnold Schwarzenegger and Mayor Chuck Reed of San Jose ‘Good Luck’ in their decisions appropriate to defend many but might offend few in the process.

Thank you.

Padmini Arhant

Bailout Débācle

By Padmini Arhant

The past two weeks dominated with AIG and oligarchs debating over the controversial $165 million and now increased to $218 million bonuses to executives instrumental in driving the insurance giant to the brink of collapse along with the financial markets of the world.

As usual, Washington vs. Wall Street dispute contributed to media frenzy and aptly reflected in the roller coaster performance of the stock market. The interesting factor in the blame game is those pointing fingers at others fail to acknowledge that remaining fingers are pointing towards them as they are equal partners in this charade.

By now, well-educated American taxpayers upon the quest to secure their future convinced that both Wall Street and Washington have serious credibility issues in wealth management and nation governance.

The back and forth allegations in the political crossfire reveals the true sense of Washington politics and Wall Street free market systemic corporate management failure. Again, the beneficiaries in this deal are the legislators responsible for the bailout approval and the corporations rewarded with taxpayer’s funds for unprecedented incompetence in modern economic times.

They are the beneficiaries because the legislators secured their emoluments by rushing the operating budget $410 billion omnibus bill ladened with pork projects to the tune of $8 billion to curb ‘government shut down’ rather than passing the required operating budget and isolating the earmarks spending for individual scrutiny through separate legislation.

The Corporate executives in due diligence spared no opportunities to collect remuneration, bonuses retrospectively and in the foreseeable future to maintain their status among the top 10% wealthiest hierarchy.

Let’s not forget in the Darwinian "Survival of the fittest contest" the weak, fragile and frail average taxpayer doesn’t stand a chance against the ferocious Corporate executives (compared to sharks) and Capitol Hill crusaders.

Events unfolding in the entire scenario deserves attention from every citizen involuntarily pledged to carry the burden of national debt currently projected at $9.3 trillion i.e. $1 trillion budget deficits every year for a decade, 2010-2019.

It is worth examining the role of legislators, corporations and lobbyists in securing taxpayer bailouts more prevalent in the past year 2008 and continuation of it in 2009. Prior to the diagnostic procedure, it is essential to shed light on the alliances forged by the key cabinet members and Wall Street merchants.

According to http://www.wsws.org/articles/2008/sep2008/paul-s23.shtml – Thank you.

Published by the International Committee of the Fourth International (ICFI)

Who is Henry Paulson?

By Tom Eley, 23 September 2008

Henry Paulson rose through the ranks of Goldman Sachs, becoming a partner in 1982, co-head of investment banking in 1990, chief operating officer in 1994. In 1998, he forced out his co-chairman Jon Corzine “in what amounted to a coup,” according to New York Times economics correspondent Floyd Norris, and took over the post of CEO.

Goldman Sachs is perhaps the single best-connected Wall Street firm. Its executives routinely go in and out of top government posts. Corzine went on to become US senator from New Jersey and is now the state’s governor. Corzine’s predecessor, Stephen Friedman, served in the Bush administration as assistant to the president for economic policy and as chairman of the National Economic Council (NEC). Friedman’s predecessor as Goldman Sachs CEO, Robert Rubin, served as chairman of the NEC and later treasury secretary under Bill Clinton.

Agence France Press, in a 2006 article on Paulson’s appointment, “Has Goldman Sachs Taken Over the Bush Administration?” noted that, in addition to Paulson, “[t]he president’s chief of staff, Josh Bolten, and the chairman of the Commodity Futures Trading Commission, Jeffery Reuben, are Goldman alumni.”

Prior to being selected as treasury secretary, Paulson was a major individual campaign contributor to Republican candidates, giving over $336,000 of his own money between 1998 and 2006.

Since taking office, Paulson has overseen the destruction of three of Goldman Sachs’ rivals. In March,

Paulson helped arrange the fire sale of Bear Stearns to JPMorgan Chase. Then, a little more than a week ago, he allowed Lehman Brothers to collapse, while simultaneously organizing the absorption of Merrill Lynch by Bank of America. This left only Goldman Sachs and Morgan Stanley as major investment banks, both of which were converted on Sunday into bank holding companies, a move that effectively ended the existence of the investment bank as a distinct economic form.

In the months leading up to his proposed $700 billion bailout of the financial industry, Paulson had already used his office to dole out hundreds of billions of dollars. After his July 2008 proposal for $70 billion to resolve the insolvency of Fannie Mae and Freddie Mac failed, Paulson organized the government takeover of the two mortgage-lending giants for an immediate $200 billion price tag, while making the government potentially liable for hundreds of billions more in bad debt. He then organized a federal purchase of an 80 percent stake in the giant insurer American International Group (AIG) at a cost of $85 billion.

These bailouts have been designed to prevent a chain reaction collapse of the world economy, but more importantly, they aimed to insulate and even reward the wealthy shareholders, like Paulson, primarily responsible for the financial collapse.

Paulson bears a considerable amount of personal responsibility for the crisis.

Paulson, according to a celebratory 2006 Business Week article entitled “Mr. Risk Goes to Washington,” was “one of the key architects of a more daring Wall Street, where securities firms are taking greater and greater chances in their pursuit of profits.” Under Paulson’s watch, that meant “taking on more debt: $100 billion in long-term debt in 2005, compared with about $20 billion in 1999. It means placing big bets on all sorts of exotic derivatives and other securities.”

According to the International Herald Tribune, Paulson “was one of the first Wall Street leaders to recognize how drastically investment banks could enhance their profitability by betting with their own capital instead of acting as mere intermediaries.” Paulson “stubbornly assert[ed] Goldman’s right to invest in, advise on and finance deals, regardless of potential conflicts.”

Paulson then handsomely benefited from the speculative boom. This wealth was based on financial manipulation and did nothing to create real value in the economy. On the contrary, the extraordinary enrichment of individuals like Paulson was the corollary to the dismantling of the real economy, the bankrupting of the government, and the impoverishment of masses the world over.

Paulson was compensated to the tune of $30 million in 2004 and took home $37 million in 2005. In his career at Goldman Sachs he built up a personal net worth of over $700 million, according to estimates.
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Washington and Wall Street Analysis:

By Padmini Arhant

The beginning of the chain link usually found on the campaign trail, when corporations fund election campaigns through donation loopholes despite contribution limits by electoral commission and reign in on the successful candidate for the entire term.

After all, in the contemporary world focused on “What’s in it for me” deals, there is no free lunch with the exception of debt-consumed public yearning for believable change and better future offer available resources in terms of time, energy and money during the electoral process and beyond.

Who gets preference by the elected officials in the so-called democracy?

Indeed the Corporations due to the inter-dependency of sweetheart deals and brokering that take place throughout the election campaign. The deafening noise in the Capitol Hill about identifying the guilty party and pursuing disastrous course of action such as 90% tax on AIG bonuses after having approved without any stipulations predictably backfired at the victims none other than the average American taxpayers, presumably the majority shareholder at 80% of the multinational conglomerate.

In a bizarre development, more appropriately deterioration of the bailout fiasco, the headlines, news across the nation reverberate…
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AIG sues its biggest shareholder – us

By David S. Hilzenrath, Washington Post – March 21, 2009. Thank you.

As AIG takes billions of dollars from the federal government to stay afloat, it is suing the government for millions more.

The big insurer is trying to recover $306.1 million of taxes, interest and penalties from the Internal Revenue Service. Among other things, AIG is contesting an IRS determination last year that the company improperly claimed $61.9 million of tax credits associated with complex international transactions.

AIG has also asked a court to make the government reimburse it for money spent suing the government.

Given that the government owns 79.9 percent of AIG and has been using taxpayer money to fill a seemingly bottomless hole at the company, the lawsuit might seem like a case of biting the hand that feeds it. But an

AIG spokesman said the company has an obligation to press its case.

AIG believes it overpaid the IRS, and it “has a duty to its shareholders, including the government and other shareholders, to insure that it pays the proper amount of taxes,” spokesman Mark Herr said by e-mail.
Washington tax lawyer Martin Lobel agreed with that assessment.

‘If in fact they honestly believe that they’re entitled to a refund of those taxes, it would be a breach of their fiduciary duty not to” sue, Lobel said.

“On the other hand, the sense of entitlement from AIG is awesome,” Lobel said.

Because the dispute pits the government against a company that has essentially become a ward of the government, the only clear winners are likely to be lawyers, legal experts said. The legal expenses could consume millions of dollars, they said.

Lawyers at the firm Sutherland Asbill & Brenan, which is representing AIG, did not respond to an interview request.

For partners of similar stature to those representing AIG, fees can run $700 to $900 an hour, said Dan Binstock, managing director of BCG Attorney Search, a legal recruiter.

AIG’s dispute with the IRS focuses on taxes for 1997 and dates at least as far back as March 2008.”
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L.A. congresswoman defends actions

Husband Linked to Bank that got AID

By Richard Simon – Los Angeles Times – March 14, 2009 – Thank you.

Excerpts from the article:

Rep. Maxine Waters, D-Los Angeles, on Friday defended her efforts to help minority-owned banks – including one with ties to her husband – scoffing at the notion that she, a liberal Democrat, could influence George W. Bush’s presidential administration in deciding what financial institutions would receive bailout funds.

Waters, a senior member of the congressional committee that, oversees banking, has come under scrutiny because OneUnited Bank, on which her husband Sidney Williams had been a board member and stockholder, received $12 million in bailout funds. The money was provided in December, three months after Waters helped arrange a meeting between officials from the bank and other minority-owned institutions and Treasury representatives.

“I followed up on the association’s request by asking Treasury Secretary (Henry) Paulson to schedule such a meeting, as did other members of Congress,” she said.

She said she did not attend the meeting. She released letters by the National Bankers Association requesting the meeting and following up on it – signed by the group’s incoming Chairman Robert Patrick Cooper an officer with OneUnited.

Waters said the decision to provide bailout funds to OneUnited was “based on the merits of the bank’s request, not based on anything said at the September meeting and not based on political influence.”

She said that she has fully disclosed her husband’s ties to the bank. Williams served on the bank board until early last year and held at least $500,000 in investments in the bank in 2007, the most recent year for which public financial disclosure statements are available.

Waters could not be reached for an interview Friday. OneUnited Chief Executive Kevin Cohee said Friday he didn’t have time to speak with a reporter.

Melanie Sloan, executive director of the watchdog group Citizens for Responsibility and Ethics in Washington, said she found Waters’ behavior “inappropriate and certainly has the appearance of impropriety, even if it doesn’t rise to the level of an actual conflict-of-interest under House rules.”

Sloan said Waters’ comments that the meeting focused on the general problems of minority-owned banks “don’t seem credible” in light of statements from Treasury officials that the session became a discussion of one bank’s troubles. “At a minimum, Treasury officials should have been apprised of her interest in the bank before the meeting took place.”

Waters’ efforts, she said, raise a question: “How many members of Congress are having meetings with the Treasury Department pleading for funds for certain banks?”

“Treasury has said they’re going to list the lobbying contacts,” Sloan said.”
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Voice of the Electorate:

San Jose Mercury News – Readers’ Letters – March 18, 2009

Obama’s earmarks stance disappoints

I am disappointed that President Barack Obama backed off his campaign pledge to eliminate earmarks. The process subverts democratic government by avoiding votes on specific issues. It encourages our representatives to compete to spend more—if they fail to “bring home the bacon,” they may be seen as ineffective and not be re-elected. The further we move from specific votes for specific programs, the less inclined people are to support the government and the more inclined to resist taxes.

We must promote responsible stewardship. While many of the projects are meritorious, that hardly means they should be funded. Tax dollars are a scarce resource and every expenditure should be carefully scrutinized. Obama was right on this issue during the campaign; he is sliding off track now.

Christopher K. Payne

Stanford
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Ethical Lapse

By Padmini Arhant

The sparring political factions, the far left and the far right along with the centrists is in a strange dilemma today as they witness their reflection in the image of the accused parties in the most expensive soap opera entertainment.

As more Washington and Wall Street scandals are exposed, the more disingenuous the legislators appear to be in their pledge to turn the nation around.

An average citizen struggling to make ends meet asked the following questions –

“Why should I vote for anyone in the next election when I see politics as usual prevailing over the promised inevitable change?

Can the elected officials with public housing, guaranteed regular and several other sources of income, supreme health care, and free transportation relate to the suffering population dealing with job loss, foreclosure and other miseries?”

Unfortunately, the Washington atmosphere is secluded as elitist not making connection with the plight of the populist. The deepening of the recession combined with the multi-trillion dollar national debt forecast is a matter of great concern for the vast majority of population in precarious economic conditions due to job insecurity and declining prospects all around.

The American electorate enthusiastically elected the new administration with the hope to experience the “change” they deserve and the recent events are adversarial to the optimism built during the campaign.

Campaign promises involved Accountability, Transparency and changing Washington by eliminating corruption, cronyism and conventionalism. The passing of the $787 billion stimulus bill and subsequently the $410 billion omnibus spending bill loaded with earmarks confirms the status quo in Washington.

The pet projects, however meritorious they might be, cannot be more important than supplementing K-12 educational funding by retaining qualified teaching professionals and providing after school sports activities for students from lower income families and scores of other important social services for the constituents in California and other states.

It is obvious throughout the legislative process from the authorization of illegal invasion of Iraq war to Wall Street bailouts that lawmakers as representatives of the electorate in a democracy no longer consider it important to peruse the budget and other legislative bills because of the voluminous content. Hence, hastily resort to wasteful spending at taxpayers’ expense.

With the national debt projection in multi-trillion dollars, the wasteful spending in billions doesn’t seem to matter to the sponsors of the pet projects. Apparently, $8 billion added to the national debt for projects experimenting swine odor, road to nowhere, monuments ‘supposedly creating jobs’ when the industries are crumbling apart clearly signifies misplaced priorities by the legislators expected to be in touch with reality of their respective constituency.

The people are hurting and their mere existence is challenged by the hour while Washington and Wall Street continue to engage the nation in burgeoning financial crisis through legal and constitutional confrontations of the bailout débācle.

Perhaps it is time for the victims and the lame duck, the average taxpayers to rise to the occasion and execute power in the mid-term election to restore democratic values, ethical and moral standards desperately lacking in the corporate and political system.

It is best to eradicate the narcissistic culture that permeates the surroundings like weeds destroying the grassland and fertile grounds.

Evidently change is necessary and necessity is the mother of invention.

Thank you.

Padmini Arhant

Earmarks, Pork-barrel Spending

By Padmini Arhant

The budget vote delayed due to enormous ‘pork’ in the $410 billion spending bill. The defenders of various pork projects may have their own justification.

Nevertheless, Washington must relinquish wasteful spending through several pet projects carried out on behalf of lobbyists by lawmakers concerned about their own job security in the future elections.

As stated earlier in the article “Omnibus Spending” on the website www.padminiarhant.com , the nation is grappling with dire economic situation due to significant job losses and housing crisis at this time and families are desperately seeking relief from both free market system and the government.

Unfortunately, the free market system dependent on taxpayers’ bailout is barely capable of remaining solvent despite unprecedented capital infusion in modern financial history. The root cause of all these problems attributed to lack of ethics, accountability, transparency and importantly executive management failure.

The critics of taxpayers’ bailout argue in favor of non-interference in the market economy on the assumption the system would correct itself in due course. They fail to recognize the fact that the economic meltdown commenced in the early 2000, though the impact was not acknowledged up until late 2007.

During that limited or non-regulatory period, the capitalist system had ample opportunities to review and reassess their performance and prepare them for the worst scenario.

However, it did not happen, even though Wall Street witnessed and experienced the collapse of Enron, WorldCom, Tyco, Global Crossing all in the year 2002 resulting from failed Corporate management, unethical accounting practices and blatant greed.

Somehow, the free market advocates seem to have forgotten these events because of their inability then to envision the domino effect on the entire economy in the immediate future. Another reason for the denial of economic crisis previously was the skyrocketing of the technology stocks combined with oil and defense stocks at the phenomenal cost of American taxpayers’ dollars and human lives in Iraq war.

The financial sector created its own superficial boom during that time with the concoction of subprime mortgages and diverse toxic assets bundled together and sold by the hedge fund managers in the overseas markets. This entire taking place while the past administration was preoccupied in the implementation of unjust Iraq war.

It is unequivocally a miserable failure on the part of the predecessors in Federal Reserve, Treasury department as well as the Securities Commission primarily responsible for monitoring and evaluating the daily market events and executing necessary precautionary measures to prevent the economy from overheating.

Surprisingly, with the history of ‘Great Depression’, Oil crisis, economic recessions, one would assume that the authorities would remain alert and watch over the economy with prudent advice against extravagant spending in unnecessary wars or at least demanded the administration engaging in wasteful spending provide legitimate cost and benefit investment analysis.

The gridlock in Washington or State legislature is contributed by political ideologies resisting flexibility to resolve any crisis. The fiscal conservatives steadfast against tax increases, the predominant revenue source for any government, consistently target essential programs designed to promote consumer spending vital for economic recovery.

Similarly, the spendthrift legislators on both aisles with a penchant for pet projects or pork spending refuse to yield to frugality and prioritize their commitments to lobbyists and local governments assuring their re-election over national interest.

The electorate voted for Change in 2008 and change has hope only with representatives in Congress and Senate quitting habits that create rather than solving crisis.

It is evident that the $410 billion spending bill is injected with significant pork projects and it would be appropriate for the sponsors to present cost / benefit ratio in monetary terms to justify inclusion in the bill.

Again, these projects must be evaluated to benefit the taxpayers and the nation as a whole rather than the individuals regardless of them being legislators or the lobbyists.

The lawmakers have lately advised ordinary citizens to downsize their lifestyle according to their means, the same should apply to them as any sermons, preaching, and advice is meaningful when individuals demonstrate through action.

After all, shouldn’t one practice what they preach others?

No matter how one circumvents the legitimacy of earmarks particularly at these tough economic times, it is inappropriate now and in the future to squander taxpayers’ dollars for far-fetched projects with beneficiaries being the authorizing entity and/or special interests rather than the entire nation.

Please refer to the following articles from other sources for data confirmation on earmarks / pork barrel spending.

Thank you.

Padmini Arhant
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Senate Republicans force delay on budget vote:

GOP Members want to offer Amendments on $410 billion plan criticized for Pork – By Andrew Taylor,

Associated Press – Thank you.

Washington – Senate Republicans, demanding the right to try to change a huge spending bill, forced Democrats on Thursday night to put off a final vote on the measure until next week.

The surprise development will force Congress to pass a stopgap-funding bill to avoid a partial shutdown of the government.

Republicans have blasted the $410 billion measure as too costly. But the reason for GOP unity in advance of a key procedural vote was that Democrats had not allowed them enough opportunities to offer amendments.

Majority Leader Harry Reid, D-Nev., canceled the vote, saying he was one vote short of the 60 needed to close debate and free the bill for President Barack Obama’s signature.

The 1,132-page spending bill is stuffed with pet projects sought by lawmakers in both parties.

Democrats and their allies control 58 seats, though at least a handful of Democrats oppose the measure over its cost or changes in U.S. policy toward Cuba. That meant Democrats needed five or six Republican votes to advance the bill.

None of the GOP’s amendments is expected to pass, but votes on perhaps a dozen are now slated for Monday night, Reid said.

The huge, 1-132-page spending bill awards big increases to domestic programs and is stuffed with pet projects sought by lawmakers in both parties. The measure has an extraordinary reach, wrapping together nine spending bills to fund the annual operating budgets of every Cabinet department except for Defense, Homeland Security and Veterans Affairs.

Once considered a relatively bipartisan measure, the measure has come under attack from Republicans – and a handful of Democrats – who say it is bloated and filled with wasteful, pork-barrel projects.

The measure was written mostly over the course of last year, before projected deficits quadrupled and Obama’s economic recovery bill left many of the same spending accounts swimming in cash.

To the embarrassment of Obama – who promised during last year’s campaign to force Congress to curb its pork-barrel ways – the bill contains 7,991 pet projects totaling $5.5 billion, according to calculations by the GOP staff of the House Appropriations Committee.

Sen. John McCain, R-Ariz., Obama’s opponent in last fall’s presidential campaign, called the measure “a swollen, wasteful, egregious example of out-of-control spending.”

The earmarks run the gamut. There’s $190,000 for the Buffalo Bill Historical Center in Cody, Wyo., $238,000 to fund a deep-sea voyaging program for native Hawaiian youth, agricultural research projects, and grants to local police departments, among many others.”

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Further Excerpt of the article –

Sen. John McCain blasts $237,500 for Japantown museum – By Frank Davies, Mercury News Washington Bureau – Thank you.

Reps, Zoe Lofgren, D-San Jose, and Mike Honda, D-Campbell, secured that money to help the museum.
Honda, who is Japanese American, – “Jap. Museum boost tourism (thus jobs) in SJ Japantown, last of 3 authentic US Japantowns, Zoe & I proudly supported its funding.”
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