the key big lies of the 2008-10 bailout of Wall Street

Big Lie #2

So Paulson came up with a more convincing lie. On paper, the Emergency Economic Stabilization Act of 2008 was simple: Treasury would buy $700 billion of troubled mortgages from the banks and then modify them to help struggling homeowners. Section 109 of the act, in fact, specifically empowered the Treasury secretary to “facilitate loan modifications to prevent avoidable foreclosures.” With that promise on the table, wary Democrats finally approved the bailout on October 3rd, 2008. “That provision,” says Barofsky, “is what got the bill passed.”

But within days of passage, the Fed and the Treasury unilaterally decided to abandon the planned purchase of toxic assets in favor of direct injections of billions in cash into companies like Goldman and Citigroup. Overnight, Section 109 was unceremoniously ditched, and what was pitched as a bailout of both banks and homeowners instantly became a bank-only operation – marking the first in a long series of moves in which bailout officials either casually ignored or openly defied their own promises….

Big Lie #3 (Jan 2009) So what did bailout officials do? They put together a proposal full of even bigger deceptions to get it past Congress a second time….

Summers laid out a five-point plan in which the bailout was pitched as a kind of giant populist program to help ordinary Americans. Obama, Summers vowed, would use the money to stimulate bank lending to put people back to work. He even went so far as to say that banks would be denied funding unless they agreed to “increase lending above baseline levels.” He promised that “tough and transparent conditions” would be imposed on bailout recipients, who would not be allowed to use bailout funds toward “enriching shareholders or executives.” As in the original TARP bill, he pledged that bailout money would be used to aid homeowners in foreclosure. And lastly, he promised that the bailouts would be temporary – with a “plan for exit of government intervention” implemented “as quickly as possible.”

The reassurances worked. Once again, TARP survived in Congress – and once again, the bailouts were greenlighted with the aid of Democrats who fell for the old “it’ll help ordinary people” sales pitch. “I feel like they’ve given me a lot of commitment on the housing front,” explained Sen. Mark Begich, a Democrat from Alaska.     http://www.rollingstone.com/politics/news/secret-and-lies-of-the-bailout-20130104#ixzz3CqxCCquW

Big Lie #1 Jamie Dimon at the original meeting in 2008 to deal with toxic paper spoke up at the Wall Street chiefs meeting with Paulson on what to do.  Should Wall Street bail themselves out?  No, said Dimon, I don’t want to pay for other banks’ toxic junk. Or, “Why should his bank be held financially accountable for the bad behavior at Bear and WaMU?” http://www.thenation.com/article/180991/jamie-dimons-13-billion-secret
  But the reality has come out.  Dimon as head of Morgan/Chase had generated tons of the toxic junk–http://www.bettermarkets.com/reform-news/fact-sheet-jamie-dimonjp-morgan-chase-settlement-department-justice#.VA9ntcJdVjw

 

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