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Who did Congress bail out? By Alfredo Delgado This past week this country witnessed the consequences of unbridled greed and a fundamental lack of ethics in the finance industry. The financial titans of Wall Street, commonly referred to on Main Street as ‘fat cats,’ conspired with Congress to eliminate their unsecured debts with an enormous $700 billion bailout. The victims of this exploitation are the American people. Financial experts agree this preposterous grant could conceivably reach the $1 trillion mark for it does not include the $100 billion welfare package to support the Freddie Mac and Fannie Mae disaster. Add that sum to the already ridiculous $9 trillion national debt being intravenously fed by the senseless war in Iraq to the tune of $10 billion a month. Congress hasn’t a clue what to do with all this money. There isn’t a plan or process in place to disburse these funds. Amazing! Simply put, these reckless, greedy corporate giants asked for money, and congress coughed it up based on fears for our economic collapse. Now we are left holding the bill. Interesting that the person heading this turnaround in the financial industry is none other than Secretary of the Treasury Henry R. Paulson. He is already trying to recruit some of his old cronies at Goldman Sachs to help him turn this crisis around. Sounds like the fox guarding the hen house. The financial services industry, including banks, investment brokerage firms, some insurance groups and a few others, are regulated by the Securities and Exchange Commission (SEC), established in 1934 after the Great Depression. Its primary function is to enforce the financial industry’s compliance with regulations obliging banking institutions to maintain an adequate base of resources - cash - in the event of foreclosures, non-performing loans and other financial risks. However, there has always been a sense that huge amounts of money could be made if the cushion imposed by the SEC could be lessened to put more money out into the financial markets in the form of more traditional loans. Along comes former Texas Sen. Phil Gramm. Gramm, until recently a top adviser to presidential hopeful John McCain and noted for calling the American people a bunch of whiners, co-authored the now infamous Gramm-Leach-Bliley Act, allowing the deregulation of the financial services industry. It was signed into law by then-President Bill Clinton. This allowed for the cushion of cash reserves mandated by the SEC to be significantly reduced. Before this there was the Glass-Steagall Act having oversight on lending measures with strict controls over the line of credit financial institutions could allow and still remain solvent. During the late ‘90s, Gramm’s wife, Wendy Lee Gramm, was on the board of directors of the now defunct Enron Corporation. Gramm became Enron’s White Knight by sponsoring the Commodity Futures Modernization Act of 2000 that further deregulated the banking industry. Many in Congress believe this one piece of legislation helped ensure the Enron scandal. But there is more to this financial sleight of hand. In 2004, several huge Wall Street investment firms met with SEC commissioners, pleading again for lessening the cash reserves requirement. The commissioners agreed to their request. One of those investment behemoths asking for additional lending leeway was Goldman-Sachs, with then CEO Henry R. Paulson making the plea on their behalf. Goldman-Sachs got what they wanted and several years later Paulson moved on to become the U.S. Secretary of the Treasury and one of the chief architects of this $700 billion bailout to be paid by ordinary taxpayers like you and me. Goldman-Sachs avoided bankruptcy last week and morphed into a commercial bank. Meanwhile, the two largest mortgage lending giants in the country, Freddie Mac and Fannie Mae, were bailed out to the tune of $100 billion. In exchange, Congress insisted on immediate changes of the top leadership at both firms. Perhaps not so coincidently, however, the new head of Freddie Mac is David M. Moffett. Moffett has strong ties to both presidents Bush. He was a senior adviser to the Carlyle Group, a private equity firm that has a portfolio of $89 billion tucked away into investments in the aerospace, defense, automotive, energy (oil), telecommunications and transportation industries. It also enjoys a close relationship with Bechtel Corporation, Vice-President Dick Cheney’s former employer, which is heavily involved in Iraq. Any wonder why we are indiscriminately killing our youth and burning our money in Iraq? The foreign markets are also experiencing fallout from this calamity here in the U.S. China, Japan and England, which have lent the U.S. hundreds of billions of dollars each, are concerned whether they will ever recoup their loans. The FBI is investigating this crisis and looking for those responsible with possible criminal charges being enforced. Just a hint: they should start looking in the White House and certain members of the cabinet. This $700 billion gift to Wall Street will, in time, cost each taxpayer in this country approximately $30,000 in additional taxes. What were members of Congress thinking? One thing is certain, they were not thinking of us, the taxpayers.
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