I was in a good mood this morning. I WAS.
Then I read this, from the Washington Post:
The Obama administration is engineering its new bailout initiatives in a way that it believes will allow firms benefiting from the programs to avoid restrictions imposed by Congress, including limits on lavish executive pay, according to government officials...
At first, when the initiative was being developed last year, the Bush administration decided to apply executive-pay limits to firms participating in this program. But Obama officials reversed that decision days before it was unveiled on March 3 and lifted the curbs, according to sources who spoke on condition of anonymity because the discussions were private...
Yet as the Treasury has readied other programs, it has increasingly turned to creating the special entities. Legal experts said the Treasury's plan to bypass the restrictions may be unlawful.
The concerns persisted as the administration crafted other initiatives. Some private investors said, for instance, that they would not help the government buy toxic assets from banks if the congressional restrictions were applied to them. And every major provider of small-business loans has said that it will not participate in the government's program if it has to surrender ownership stakes to the government or submit to executive-pay limits.
I'm friggin' livid. Seriously. The OBAMA administration is so invested in Geithner's stupid fucking plan that it's willing to take possibly-illegal steps to preserve the profits for the same assholes who got us into this mess.
From the Wonk Room:
Last week, reports surfaced showing that bailed-out banks Citigroup and Bank of America were actively speculating on toxic mortgages with taxpayer money, potentially gaming the public-private investment fund that Treasury Secretary Timothy Geithner has created to clean up the banking system.
Eric Martin at Obsidian Wings is good and pissed too. And we all should be.
When I stop being searingly fucking angry, there are other things here to consider. The administration is still pushing, at the same time, for expanded options to nationalize and liquidate "too big to fail" financial institutions.
The U.S. Treasury and FDIC would immediately have the tools need to walk into America’s largest financial institutions, such as Citibank or Bank of America, and liquidate them, or rewrite their contracts and capital structures. Such powers are clearly useful: if the banks are undercapitalized, and private money is not available, then the government could force creditors to swap claims into equity, thus instantly recapitalizing the banks while avoiding use of taxpayer funds. With such steps, the problem of moral hazard, where creditors to banks are bailed out by taxpayers, would at once be forgotten. Shareholders in banks would lose through dilution, some (unsecured?) creditors would lose with debt-equity swaps, while the nation would be better off having a well-capitalized banking system. The banks would remain private but now be controlled by (ex)creditors.
The Treasury doesn't have those powers now, as the piece notes, and Geithner is not exactly the type of weasel that inspires confidence in me (or anyone else) when it comes to properly using them. But Geithner is inextricably tied to the current plan, and if it fails, he's probably out on his ass (I'd say not a moment too soon, but it might be redundant).
But what if this plan is designed to let the fat cats get complacent while the administration moves in for the kill (nationalization)?
I wonder. And yet I think that Obama IS essentially conservative on this--he's invested in keeping the status quo rather than making real change in the system--in this case, Wall Street. He wants to restore "the economy," even though he talks about change. Most of the "changes" he's discussed have simply been restoring the regulations that controlled the financial industry for decades before the deregulation revolution hit.
And I wonder, would the Fair Elections Act help with Congress's willingness to press for systemic change in Wall Street, when less of them have financial investors from Wall Street? It might not help with the president, but if only Connecticut and New York congresscritters could take money from Wall Street, the rest of 'em would be a lot more willing to take drastic action without fear of losing cash.
As always, follow the money.