Naomi Kline on the bailout and social security.
November 10, 2008 § Leave a comment
She writes a detailed critique of the people and policies. Some quotes.
Rep. Barney Frank, chairman of the House Financial Services Committee, said the fact that so many law firms chose not to bid "shows that the guidelines are sufficiently rigorous."
Or it may just show that the bidder who won the contract — Simpson Thacher & Bartlett — takes a more relaxed approach to conflicts than its colleagues. The law firm is a Wall Street heavy hitter, having brokered some of the biggest bank mergers in recent years.
The first stage of the plan involves buying stakes in nine of the country’s top banks. Incredibly, Simpson Thacher has represented seven of the nine: JPMorgan, Bank of New York Mellon, Bank of America, Citigroup, Morgan Stanley, Goldman Sachs and Merrill Lynch.
The firm will also continue to work for the banks on a range of other lucrative deals — and that’s where the problem lies.
There is just one hitch: Neither Paulson nor Simpson Thacher got that "deploy" part in writing
Seventy firms applied for the gig; the winner was Bank of New York Mellon. Describing the scope of the megacontract, bank president Gerald Hassell said, "It’s the ultimate outsourcing — because the Federal Reserve and the Treasury do not have the mechanics to run the entire program, and we’re essentially the general contractor across the entire program. It’s going to cross our entire company."
Shortly after receiving the contract, Hassell told investors that his institution is now well-positioned to profit from the market meltdown. "There’s a lot of new business that’s going on even in this chaotic marketplace," he said, "and so some of those things have been very positive to us." Just how positive, we don’t know, because Treasury has blacked out the 10 lines of the "master custodian" contract that reveal how much Bank of New York Mellon will be paid. Though Treasury says it will release the information eventually, the secrecy goes beyond anything the Bush administration attempted in Iraq. Even Halliburton’s dodgy contracts came with price tags attached.
On the same day that he allocated the first $125 billion to the banks, Secretary Paulson announced the largest federal budget deficit in U.S. history. Buried in his statement was a preview of the next phase of the financial disaster. The deficit numbers, he declared, reinforce the need to "pursue policies that promote economic growth and fiscal responsibility, and address entitlement reform." He was referring to Americans who feel entitled to receive Social Security in their old age and Medicaid when they are sick. Those programs, Paulson implied, might not be able to survive the budget crisis he is currently creating for the next administration.