Amazing. Not only are trillions of dollars being passed around to bail out any business with at least a couple congressmen on its side. But the government won’t tell us who is getting how much or what they are doing with it. And we still call the U.S. a democracy!
Last week the government dispatched more of your money into the abyss. Through its “Term Auction Facility,” the Federal Reserve lent banks $63 billion – nearly half the cost of the entire savings and loan bailout from the 1980s, or what it takes to fight in Iraq for six months.
Who got the money? At what rates? What collateral did they put up? How will the proceeds be spent?
The Fed isn’t saying, and it’s fighting attempts to shed light. The Treasury Department, distributing its own bailout billions, is almost as clammed up.
Never has the country spent so much taxpayer money, so quickly, with so little disclosure. The bailout blackout threatens to match the information failure over mortgages and derivatives that caused this mess in the first place.
Obscurity and lack of accountability have followed the rescue from its start.
The Bush administration’s initial proposal, in late September, required only semiannual reports to Congress and made a stunning attempt to exempt bailout actions from review “by any court of law or any administrative agency.”
The final result isn’t much better. Two weeks ago the Government Accountability Office found that Treasury hadn’t yet issued final rules on conflicts of interest, hadn’t set up communication lines with Congress, hadn’t established a corporate reporting process, and hadn’t fully ensured that taxpayer dough isn’t financing executive pay and shareholder dividends.
More than $300 billion has already gone out the door.
There is “a heightened risk that the interests of the government and taxpayers may not be fully protected,” the GAO said, with typical understatement.
The Treasury fund, the “Troubled Asset Relief Program,” was supposed to be spent on soured mortgage bonds. It wasn’t. Instead, a throwaway sentence in the TARP bill authorized Treasury Secretary Henry Paulson to throw money at “any other financial instrument” he deemed necessary. So the money is buying bank preferred stock, automobile-maker loans and whatnot.
The Associated Press asked 21 banking companies, each receiving at least $1 billion, what became of the money. Not one would say.
Treasury’s program is floodlit transparency compared with the Federal Reserve’s. Not needing Congress’ approval, Fed Chairman Ben Bernanke gave himself what Paulson originally wanted: nearly unlimited authority to launch public funds into the economy.
At least in the TARP you know who’s getting the money. The Fed doesn’t even publish a list of recipients. The $2 trillion in allocations so far from the various Fed bailout programs is more than twice the size of the $700 billion TARP. Two trillion dollars is enough to pay every American household $15,000.
“Some have asked us to reveal the names of the banks that are borrowing, how much they are borrowing, what collateral they are posting,” Bernanke told Congress recently. “We think that’s counterproductive.”
Bloomberg News didn’t just ask for the names and other information. It sued in federal court to get the Fed to fulfill its obligations under the Freedom of Information Act to let the public know what government is doing. Bloomberg reporter Mark Pittman has been unsuccessfully trying to get basic Fed bailout information since May.
“It became an issue for taxpayers when the Fed not only instituted almost a dozen new emergency lending programs for financial institutions but on top of that began accepting collateral that isn’t investment-grade,” says Matthew Winkler, Bloomberg’s editor-in-chief. “That is a major shift. … Americans ought to know who’s getting the money.”
The bail-out state will have profoundly negative consequences over the long-term. Americans will find themselves in even greater debt. U.S. firms will have adopted the “profits we win, losses you lose” view of business. And Washington will have an excuse to meddle even more deeply in everything from executive compensation to loans made and goods produced.
Indeed, 2008 may prove to be the year when we should stop referring to the U.S. as a market economy. Whatever exists in the U.S. today, it isn’t market capitalism.