Monday, November 10, 2008

The Foxes Guarding the Hen House II

The New Trough

It didn't have to be this way. Five days before Paulson struck his deal with the banks, British Prime Minister Gordon Brown negotiated a similar bailout - only he extracted meaningful guarantees for taxpayers: voting rights at the banks, seats on their boards, 12 percent in annual dividend payments to the government, a suspension of dividend payments to shareholders, restrictions on executive bonuses, and a legal requirement that the banks lend money to homeowners and small businesses.

In sharp contrast, this is what U.S. taxpayers received: no controlling interest, no voting rights, no seats on the bank boards and just five percent in dividend payouts to the government, while shareholders continue to collect billions in dividends every quarter. What's more, golden parachutes and bonuses already promised by the banks will still be paid out to executives - all before taxpayers are paid back.

No wonder it took just one hour for Paulson to convince all nine CEOs to accept his offer - less than seven minutes per bank. Not even the firms' own lawyers could have drafted a sweeter deal.


sense and should be immediately scrapped - a move that would also handily get rid of most of the crony contractors. As for purchasing equity in banks, the next round of deals - and there will be more - has to start from the premise that the banks are bankrupt and will therefore accept whatever terms we choose to impose, including real regulatory oversight. The possibilities of what could be done if a chunk of the banking system were genuinely under public control - from a moratorium on home foreclosures to mandatory investment in green community redevelopment - are limitless.

Because here is what George Bush and Henry Paulson are hoping we won't figure out: When a society no longer has enough money to pay for its most pressing needs, there are worse things than discovering you own the banks.



I hate to repeat myself endlessly but all I can do is wonder why we are bailing these assholes out instead of filing charges against them. I think all we are doing is postponing the inevitable. I suppose that must seem like a worthy goal to some, but I'd rather just get the inevitable over with first and then get onto the good stuff. Kind of like saving dessert for last, if you know what I mean.