Excellent Princeton economist Uwe Reinhardt explains Henry (‘Goldman alum’) Paulson’s current bailout plan in straightforward terms on Willem Buiter’s FT blog:
- While Paulson loathes the idea of giving U.S. taxpayers a genuine, voting equity stake in the banks taxpayers are forced to bail out… [he] sees nothing wrong with extending such voting privileges to foreign investors, including the sovereign wealth funds of Middle Eastern potentates or of Communist China. For example, Paulson most likely was cheered by news that Mitsubishi UFJ, Japan’s largest megabank, will receive a genuine equity stake of up to 20 per cent in Morgan Stanley for a cash injection of about $9 billion. On the other hand, for an injection into Morgan Stanley of $10 billion of their funds, U.S. taxpayers will receive merely non-voting, callable, preferred stock, which effectively tells U.S. taxpayers to sit at a separate table and to shut up, like good little children.
What prompts the Secretary of the Treasury to treat American taxpayers so contemptuously, as second-class stakeholders? Why is it so much more abhorrent to him to have designated representatives of U.S. taxpayers sit at a bailed out bank’s board table than granting that privilege to, say, a Middle Eastern sheik or a Japanese banker?
… If, after this deal, anyone still believes that our hyperkinetic Secretary of the Treasury works tirelessly for the American taxpayer, rather than for his former colleagues on Wall Street who helped push the nation to the current economic precipice, I would offer that true believer some choice ocean-front property in Iowa. As John Kanas, CEO of North Fork Bancorp was quoted on the bailout in The Wall Street Journal (October 15, 2008: A16): “It looks like a pretty good deal for the recipients and probably a pretty tough deal for taxpayers. It seems quite explicit that there’s no strings attached to this money. It seems like a gift.”
Just two more quick notes from me.
First: Why is no-one in Congress raising any serious protest about the fact that, shortly before Paulson announced the most recent bailout to US banks only, Goldman Sachs applied for– and was rapidly granted– permission to convert itself from a brokerage house into a bank?
The NYT has a good round-up of the extensive influence of the network of Goldman ‘alums’ inside the Bush– and Clinton– administrations, here. And ‘lest we forget,’ the NYT’s reporting on Goldman’s record-shattering 2006 profits and bonuses, is here. Bonuses that year averaged $622,000– though highly inequitably distributed amongst the employees…
Second, a gender note… Ever wonder, as I have, why all the pictures of people working on financial or commodities trading floors, or those ‘rogues’ galleries’ of the top execs of financial corporations– or, indeed, of the US Treasury Department– show images of overwhelmingly male participants??
Shannon Rupp tells us that Harvard researchers have figured out that,
- Wall Street’s red-suspendered boys… can’t help themselves because they have more testosterone than average, which makes them take big risks to earn big prizes. That’s an advantage when chasing woolly mammoths with wooden spears, but it’s likely to cause problems in money management…
I guess I could have guessed as much.
So now, what will the present President and Congress– or the next President and Congress– do about all this??
First: Why is no-one in Congress raising any serious protest about the fact that, shortly before Paulson announced the most recent bailout to US banks only, Goldman Sachs applied for– and was rapidly granted– permission to convert itself from a brokerage house into a bank?
Take that, Barney Frank!
We humble can only guess what our Finanzkapital betters are up to, naturally, but in this case I presume that there has been some thought given to the fact that these gentlepersons of leverage are not going to just go away any time soon.
Considering, then, that the affairs of Goldman Sachs Harvard Princeton & Associates has been managed far less badly than the rest, why should Uncle Sam not pick them to buddy up with against the other vultures?
Mortgagegate is not exactly a zero-sum game, is it? I mean, the GSHP folks have not been picking Sam’s pocket directly, have they?
So why not let’s make a deal?
Happy days.
There may be some shady, insider stuff going on, but one reason we have to treat foreign investors so kindly is that we owe them so much money. We need their money, because it’s how we live from day to day. So, if they want voting power, they get it. One reason we started down this bailout road was that we had to assure the Chinese, Saudis, and some Europeans that their American holdings, particularly Fannie Mae & Freddie Mac securities, would not become worthless. I think that Paulson is a loyal American who is putting US interests above Goldman Sachs, but certainly his years on Wall Street have influenced his viewpoint of what is best for the US.
¡POW! The GOP Geniuses have brought the Lesser Breeds Without back into the limelight with a bang:
The McCain campaign is now charging that the terrorists want Obama to win, while pretending they’re not really saying that. (…) Scheunemann seized on an article in today’s WaPo reporting that some members of al Qaeda are pulling for McCain to win [. . . and then] proceeded to read a recent quote from a Hamas adviser, in which he said that Palestinians would do better under an Obama administration’s foreign policy (…) The Washington Post did not find the time to write a story about that,” Scheunemann said.
The enterprise that Herr von Scheunemann presides over has recently begun to attract the adjective ‘erratic’. Each must judge for herself, of course. For its own part, the present keyboard is inclined to agree with Miss Conventional Wisdom on this occasion: the Fabulous Flyboy really does seem to be executin’ some pretty unaccountable political barrel rolls and loop-the-loops and figures-of-eight lately.
Is J. Sidney just showin’ off, then? Are the Holy-Homelanders expected to hand their Uncle Sam’s farm over to Cap’n M’Cain (and Oberleutnant R. J. von Scheunemann) on the basis of this unsolicited exhibition of stunt flyin’? One may take it for granted, I guess, that an enlisted type like Barry O’Bama can’t possibly match it. Paddy and I have noticed that poor Barry has been getting more and more earthbound — positively bogbound — even as the Commanderissimo of America’s other party swoops and soars all over the wild blue yonder. Barry’s campaign becomes more and more generic, less and less specifically O’Bamatan, with every day that has passed since Mortgagegate 2008 first began to interfere with Oberleutnant von Scheunemann’s well-laid plans.
Barry’s casual remark about how his portrait would look odd on a Federal Reserve note was not well received by the Secondpartyites when he first made it. Barry was accused of injecting you-know-what into the (else unsullied and virginal) purity of Holy-Homeland politics. Which, of course, is exactly what Barry meant to do, and did, as I recall, not without success. That, however was then, whereas this is now, when it is fortunate that one minor detail of colouration remains to distinguish B. Husáyn Obáma from a pammorphed composite photograph of every economic jackass from Mr. Van Buren of New York and General Jackson down through Mr. Clinton of Arkansas and ex-President Lawrence Henry Sommers. Whilst the Von Scheunemann Esquadrille has been performin’ aloft, America’s party has been engaged in hammering out what might be called the Obama Corrollary to the Carville Doctrine:
(1) It’s the economy, stupid! [The original C.D.]
(2) We Democrats have no NEW stupidity to say about the economy.
Oberleutnant von Scheunemann’s chief response to the corrolary has been to denounce the American Democracy as ‘socialists’ — about the best possible proof that we are back on the right track at last, after some unfortunate flirtation with the Delilahs of the Democratic Leadership Council. (But please let’s not recriminate too much until at earliest the late afternoon of Inauguration Day, jennies and gentledonkeys! There will be time enough for that afterwards.)
Happy days.