Paulson's Swindle Revealed
By William Greider
October 30, 2008 "The Nation" -- The swindle of American taxpayers is
proceeding more or less in broad daylight, as the unwitting voters are
preoccupied with the national election. Treasury Secretary Hank Paulson
agreed to invest $125 billion in the nine largest banks, including $10
billion for Goldman Sachs, his old firm. But, if you look more closely at
Paulson's transaction, the taxpayers were taken for a ride--a very expensive
ride. They paid $125 billion for bank stock that a private investor could
purchase for $62.5 billion. That means half of the public's money was a
straight-out gift to Wall Street, for which taxpayers got nothing in return.
These are dynamite facts that demand immediate action to halt the bailout
deal and correct its giveaway terms. Stop payment on the Treasury checks
before the bankers can cash them. Open an immediate Congressional
investigation into how Paulson and his staff determined such a sweetheart
deal for leading players in the financial sector and for their own former
employer. Paulson's bailout staff is heavily populated with Goldman Sachs
veterans and individuals from other Wall Street firms. Yet we do not know
whether these financiers have fully divested their own Wall Street holdings.
Were they perhaps enriching themselves as they engineered this generous
distribution of public wealth to embattled private banks and their
shareholders?
Leo W. Gerard, president of the United Steelworkers, raised these explosive
questions in a stinging letter sent to Paulson this week. The union did what
any private investor would do. Its finance experts vetted the terms of the
bailout investment and calculated the real value of what Treasury bought
with the public's money. In the case of Goldman Sachs, the analysis could
conveniently rely on a comparable sale twenty days earlier. Billionaire
Warren Buffett invested $5 billion in Goldman Sachs and bought the same
types of securities--preferred stock and warrants to purchase common stock
in the future. Only Buffett's preferred shares pay a 10 percent dividend,
while the public gets only 5 percent. Dollar for dollar, Buffett "received
at least seven and perhaps up to 14 times more warrants than Treasury did
and his warrants have more favorable terms," Gerard pointed out.
"I am sure that someone at Treasury saw the terms of Buffett's investment,"
the union president wrote. "In fact, my suspicion is that you studied it
pretty closely and knew exactly what you were doing. The 50-50 deal--50
percent invested and 50 percent as a gift--is quite consistent with the
Republican version of spread-the-wealth-around philosophy."
The Steelworkers' close analysis was done by Ron W. Bloom, director of the
union's corporate research and a Wall Street veteran himself who worked at
Larzard Freres, the investment house. Bloom applied standard valuation
techniques to establish the market price Buffett paid per share compared to
Treasury's price. "The analysis is based on the assumption that Warren
Buffett is an intelligent third party investor who paid no more for his
investment than he had to," Bloom's report explained. "It also assumes that
Gold Sachs' job is to protect its existing shareholders so that it extracted
from Mr. Buffett the most that it could.... Further, it is assumed that
Henry Paulson is likewise an intelligent man and that if he paid any more
than Mr. Buffett--if he paid $1 for something for which Mr. Buffett would
have paid 50 cents--that the difference is a gift from the taxpayers of the
United States to the shareholders of Goldman Sachs."
The implications are staggering. Leo Gerard told Paulson: "If the result of
our analysis is applied to the deals that you made at the other eight
institutions--which on average most would view as being less well positioned
than Goldman and therefore requiring an even greater rate of return--you
paid a$125 billion for securities for which a disinterested party would have
paid $62.5 billion. That means you gifted the other $62.5 billion to the
shareholders of these nine institutions."
If the same rule of thumb is applied to Paulson's grand $700 billion bailout
fund, Gerard said this will constitute a gift of $350 billion from the
American taxpayers "to reward the institutions that have driven our nation
and it now appears the whole world into its most serious economic crisis in
75 years."
Is anyone angry? Will anyone look into these very serious accusations?
Congress is off campaigning. The financiers at Treasury probably assume any
public outrage will be lost in the election returns. I hope they are
mistaken.
About William Greider
National affairs correspondent William Greider has been a political
journalist for more than thirty-five years. A former Rolling Stone and
Washington Post editor, he is the author of the national bestsellers One
World, Ready or Not, Secrets of the Temple, Who Will Tell The People, The
Soul of Capitalism (Simon & Schuster) and--due out in February from
Rodale--Come Home, America.
Copyright © 2008 The Nation
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http://www.informationclearinghouse.info/article21125.htm
#####
The World Tires of Dollar Hegemony
By Paul Craig Roberts
What explains the paradox of the dollar's sharp rise in value against other
currencies (except the Japanese yen) despite disproportionate US exposure to
the worst financial crisis since the Great Depression?
http://www.informationclearinghouse.info/article21122.htm
===
Don't waste your vote
Vote Independent or Boycott the Elections
By Reza Fiyouzat
Let us recognize the necessity of building a truly oppositional party. The
first step in that direction is to either vote for independent candidates or
conduct a boycott of these elections with the declaration that voting is bunk
until real political alternatives representing people's needs are built.
http://www.informationclearinghouse.info/article21123.htm
===
CIA allowed concealing torture documents:
Chief Judge Royce Lamberth of the Washington D.C. Circuit Court declined to
review torture allegations from men held in the CIA's prisons-because it could
put the nation at risk of grave danger if allowed to be made public.
http://blog.wired.com/27bstroke6/2008/10/cia-can-hide-to.html
===
DOD and CIA Can Decide Which Laws They Like:
The judge's reasoning highlighted one of the more disturbing aspects of the
recent revelations that the Defense Dept., with the aid of the Justice Dept.,
likely tortured prisoners in violation of U.S. and international law.
http://tinyurl.com/59pmwx
===
Europe's looming crisis:
It all started with sub-prime loans in the United States. Or did it? As the IMF
is called in to bail out failing economies, the scale of European exposure to
toxic debt is becoming clear
http://www.newstatesman.com/economy/2008/10/european-banks-crisis-imf
===
AIG used billions from Fed but hasn't said for what:
The American International Group is rapidly running through $123 billion in
emergency lending provided by the Federal Reserve, raising questions about how
a company claiming to be solvent in September could have developed such a big
hole by October. Some analysts say at least part of the shortfall must have
been there all along, hidden by irregular accounting.
http://www.iht.com/articles/2008/10/30/business/30aig.php
===
Goldman Sachs ready to hand out £7bn salary and bonus package... after its £6bn
bail-out:
Each of the firm's 443 partners is on course to pocket an average Christmas
bonus of more than £3million.
http://tinyurl.com/6cqew3
===
Taxpayers Could Cover Government Pension Shortfall:
Illinois taxpayers may soon be called on to bail out what is arguably the
best-funded public pension plan in the state thanks to $3.6 billion in fund
losses caused by the spiraling economy.
http://www.huffingtonpost.com/2008/10/29/taxpayers-could-cover-gov_n_139036.html
===
Exxon Mobil posts biggest US quarterly profit ever:
Exxon Mobil Corp., the world's largest publicly traded oil company, reported
income Thursday that shattered its own record for the biggest profit from
operations by a U.S. corporation, earning $14.83 billion in the third quarter.
http://news.yahoo.com/s/ap/20081030/ap_on_bi_ge/earns_exxon_mobil
===
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