Thursday, November 13, 2008

The Treasury, The Fed & Congress - The Criminals Continue Unabated

By Bill Van Auken
13 November 2008
The bailout bill passed by Congress on October 3 granted Paulson, the former CEO of Goldman Sachs, virtually unrestricted powers to dole out public funds to his former cohorts on Wall Street.

There is ample evidence that the banks, rather than lending the money gained from the Treasury injections, are hoarding it and preparing to use it to pay out dividends to shareholders and bonuses to top executives as well as to gobble up smaller competitors.

This is a fraud. Money for embattled workers and homeowners is "assistance" and "spending," while billion that are being provided to pay out bonuses and dividends to multi-millionaires are "investments" designed to "protect the taxpayer."


By Bill Van Auken
13 November 2008

An extra-legal measure quietly enacted by the Treasury Department in the shadow of the $700 billion Wall Street bailout package will hand the country's biggest banks another $140 billion windfall, the Washington Post reported this week.

In a five-sentence memo issued on September 30, on the eve of the first House vote on the bailout bill, the Treasury Department unilaterally overturned a two-decade-old tax law passed by Congress. The measure denied profitable companies the ability to shield their profits from taxation by buying up bankrupt firms as shell companies and using their losses as a tax dodge.

The law, section 382 of the tax code, was enacted by Congress in 1986. It was aimed at curtailing what was seen as an egregious corporate scamming of the tax system. The Republican right and corporate lobbyists have been pushing for the measure's repeal or amendment ever since.

Treasury Department spokesman Andrew DeSouza defended the action, telling the Post that the administration had the power to overturn a law passed by Congress as part of its mandate to interpret the tax code. He further insisted that the action was a necessary means of rescuing the banks from the financial meltdown.

"They basically repealed a 22-year-old law that Congress passed as a backdoor way of providing aid to banks."

The clear aim of the tax measure was to steer the hundreds of billions of dollars that have been injected into the biggest private banks into the profitable buying up of their weaker competitors, thereby facilitating the concentration of economic power in the hands of a few giant banks, allowing them to exercise monopoly control over the financial system.

The most revealing aspect of the Post article is its depiction of the reaction of the Democratic leadership in the US Congress to the Treasury Department's usurpation of power through the unilateral repeal of a law by executive fiat.

As the article makes clear, neither Treasury Secretary Henry Paulson nor anyone else in the department bothered to inform Congress of the action.

This extraordinary episode has exposed the complete subservience of the Democratic Party to the interests of Wall Street and the willingness of its leadership to submit to an effective dictatorship exercised by finance capital in violation of the law and the US Constitution.


Auto workers to pay for Big Three bailout

Barry Grey
13 November 2008

What will the government bailout of the US auto industry being pushed by President-Elect Obama and the Democratic Party mean for auto workers? The answer to this question is indicated by New York Times columnist Thomas Friedman in an op-ed piece published on Wednesday.

Friedman, a prominent voice of the American liberal establishment, attributes the near-bankruptcy of the Big Three auto companies—General Motors, Ford and Chrysler—to "the combination of a very un-innovative business culture, visionless management and overly generous labor contracts."

"In return for any direct government aid,' he wrote, ‘the board and the management [of GM] should go. Shareholders should lose their paltry remaining equity. And a government-appointed receiver—someone hard-nosed and nonpolitical—should have broad power to revamp GM with a viable business plan and return it to a private operation as soon as possible. That will mean tearing up existing contracts with unions, dealers and suppliers, closing some operations and selling others and downsizing the company."

Times columnist Friedman demands that tens of thousands more auto jobs be destroyed and that the wages and benefits of those who remain, as well as the pensions and health benefits of retirees, be gutted as part of any infusion of taxpayer money into the auto companies. But he demands no such conditions on the hundreds of billions of dollars being doled out to the banks.

The Paulson bailout, which the Times supports, imposes no restrictions on how the banks spend their government money, or how the Treasury allocates the $700 billion-plus slush fund. Since the program was passed by Congress last month, it has emerged that the big banks that are getting the bulk of the cash are refusing to use it to provide loans to businesses and consumers. Instead, the government windfall is going to pay dividends to satisfy major shareholders, finance some $40 billion in previously enacted compensation packages to top executives, and buy up smaller banks.

Also see:
Greenspan: Federal Reserve Is Above The Law

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