by Deb Cupples | The Wall Street Journal is generating some interesting spin re: the federal government's recent decision to buy equity stakes in some of our nation's top financial institutions:
"The U.S. government is expected to take stakes in nine of the nation's top financial institutions as part of a new plan to restore confidence to the battered U.S. banking system, a far-reaching effort that puts the government's guarantee behind the basic plumbing of financial markets...."
"To kick off Tuesday's expected announcement, the government is set to buy preferred equity stakes in Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co., Bank of America Corp. -- including the soon-to-be acquired Merrill Lynch -- Citigroup Inc., Wells Fargo & Co., Bank of New York Mellon and State Street Corp., according to people familiar with the matter.
"Some of the big banks were unhappy about the government taking equity stakes, but acquiesced under pressure from Treasury Secretary Henry Paulson in a meeting Monday. During the financial crisis, the government has steadily increased its involvement in financial markets, culminating with a move that rivals the breadth of the government's response to the Great Depression. It intertwines the banking sector with the federal government for years to come and gives taxpayers a direct stake in the future of American finance, including any possible losses." (WSJ)
As though we taxpayers haven't "had a direct stake in the future of American finance" (or our nation's economy)?
If we taxpayers had chosen to leave reckless corporations to their "free market" fate, our nation's economy likely would have crumbled. Both credible economists and some Bush Administration officials told us so.
That, alone, gives us taxpayers an enormous stake in "the future of American finance."
And so do the billions of dollars we taxpayers have devoted -- this year alone -- to bailing out the various companies whose executives had driven said companies (and our nation's economy) into a ditch.
In March 2008, for example, when investment-banking giant Bear Stearns was on the verge of collapse, we taxpayers devoted about $30 billion to helping another giant (J.P. Morgan) buy Bear Stearns.
In September 2008, when insurance giant AIG was on the verge of collapse, we taxpayers devoted $85 billion to helping bailout that company -- specifically because we had a big stake in the financial system (and our nation's economy). A few weeks later, AIG had spent $61 billion of its bailout funds, and we taxpayers decided to lend another $37.8 billion to AIG.
In September 2008, when mortgage giants Fannie Mae and Freddie Mac were on the verge of collapse, we taxpayers devoted $200 billion to bailing out those companies (and the federal government took them over).
And let's not forget the $700 billion Bailout Plan that Congress passed and the President signed on October 3. Money for the forthcoming $250 billion "capital injection" into 9 of America's biggest seems to be coming from the $700 billion alloted by Congress and Mr. Bush.
Why did we taxpayers devote more than $1 trillion to bailing out reckless companies? Because, in fact, we have a big stake in America's financial system (and our nation's economy).
We've always had a big stake. It's just that much of the American public and our media were unaware of that stake -- until giant corporations started heading toward the cliff's edge with the speed of frenzied lemmings, which scared the Be-Jesus out of us over what would happen to our nation's economy.
It all sounds circular, because it is. That's because private interests are inextricably inter-connected to public interests -- despite the fact that many folks on Wall Street (and in the Bush Administration) view the public-private "partnership" as tremendously lopsided.
In short, the lopsiders want to be left alone (i.e., unregulated) to wreak havoc on our nation's economy, they want us taxpayers to save their companies from ruin after they've made terrible deciions, and they don't want to give much in return for our help.
'Talk about a sense of entitlement.
If we taxpayers have to clean up messes that well-compensated corporate executives made, you'd better believe that we deserve an equity stake -- and increased accountability on the part of those human beings that have been making (reckless) business decisions for the companies that employ them.
Would a private financier demand anything less?
Memeorandum has commentary.
Other Buck Naked Politics Posts:
* Execs Took Millions While Driving Companies into Ditch
* Fannie CEO Got $38 Million, Risky Buys Weren't his Fault?
*AIG's $85 Billion Bailout: see What Anti-Regulation Ideology can do?
* Lehman Execs Re-Distributed in Shareholder Wealth (to Themselves)
* Pentagon Wants $450 Billion Increase, Should Cut Waste First
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