With all the outrage these days over ACORN, Czars, tort reform, and children singing songs about Obama, we should be focusing our attention on the TARP bailout. Treasury Secretary Henry Paulson and President Bush convinced Congress to hand over 700 billion dollars — our tax dollars — with no oversight, to banks and other financial institutions that were in the process of failing. Paulson lied about how the money would be used and can’t say where it went. Henry Paulson should be in prison right now for ripping off America.
The TARP bailout is a one half of the budget deficit, which is 1.4 TRILLION DOLLARS!
Elizabeth Warren, Chairman of the Congressional Oversight Panel talks about the $700 TARP bailout and her concerns about the U.S. economy.
ROMANO: There’s a wonderful moment [in Michael Moore's movie] when he asks you where the $700 billion is, and you look at him and you say, “I don’t know.” So the question is: why don’t you know?
WARREN: Well, we don’t know where the $700 billion is because the system was initially designed to make sure that we didn’t know.
When Secretary Paulson first put this money out into the banks, he didn’t ask “what are you going to do with it?” He didn’t put any restrictions on it. He didn’t put any tabs on where it was going to go; in other words, he didn’t ask. And if you don’t ask, no one tells. And so we have a system that originally put more than $200 billion into the financial institutions basically saying just take it.
ROMANO: And that money is gone. You have not been able to track where that money is?
WARREN: Well, we don’t know where the money went from the financial institutions.
The big conversation at the time was that the credit markets are frozen; if we put money into the financial institutions, they will start lending it because that’s what they do when they receive money. And you may remember we tend to have forgotten what the name of the program was initially. It was called the “Healthy Banks Program,” because the allegation was Secretary Paulson kept saying, over and over, these are investments in healthy financial institutions, no one needs any subsidy.
And so we put it in on the claim by Secretary Paulson that that money was going to be used in lending to small businesses and consumers and kind of get our whole credit market going again. That didn’t happen.
ROMANO: Are we going to look back in two, three years at this TARP expenditure and say, well, it worked?
WARREN: You know, everyone is going to have a point of view on this. Everyone is going to have a book about this.
But I think there are a couple of pieces of it that are already clear. One is there was a moment of panic, perhaps a moment of panic fueled by the Secretary of Treasury and a perceived need to have a strong response. TARP clearly accomplished that.
But the TARP money was spent in ways that really are ground breaking for America. They changed the rules of the game in fundamental ways.
When a business failed in the past and needed a bailout, we did it very rarely, but when we did, it was only after the shareholders had been wiped out, debt had taken a haircut; in other words, the losses had been borne privately to the extent that they could be borne privately.
What was so astonishing about the first expenditures under TARP was that taxpayer dollars were put into financial institutions that were still left all of their shareholders intact, that were still paying dividends, that paid their creditors a hundred cents on the dollar.
We put taxpayer money in without saying you’ve got to use up everyone else’s money first. We put taxpayer money in without saying you got to show us how this business plan is totally changed. We put taxpayer money in without saying you’ve got to tell us how in the future this is not going to happen again, how you have a plan that says going forward we’ll be nine little financial institutions instead of one aggregated, but something on the other side for this. And we didn’t do that.
Once that’s the case, I don’t know how you ever put the genie back in the bottle. I don’t know how you ever persuade either a large corporation or the wider marketplace that if you can just get big enough and tie yourself to enough other important people, institutions, that if something goes wrong, the taxpayer will be there behind it. That’s a game changer.
That is a whole different approach than any we’ve ever used before in the United States.
I think three years from now when we’ve all had a deep breath and we kind of figured out where we’ve come out of the recession, we’re going to look back at that one, and I think that’s going to continue to be a “wow” moment.
And, you know, at the end of the day, it’s about these economic factors, but we have to remember we have fundamentally changed as a country.
In the 1950s and the 1960s, coming out of World War II, we said as a government, as a people, what can we do to support the middle class. You know that’s what FHA was to help people get into homes, right? VA, GI loans on education, we looked at policies, like whether or not they strengthen and support the middle class.
Somewhere, that began to change in the late 1970s, early 1980s, and the middle class instead became like a resource to be pulled from, and you know, they became the turkey at the Thanksgiving dinner. Who could who could carve off a piece? Who can get this little piece? Who could make a profit from this piece and that piece or squeeze down on the wages? And the middle class has gotten shakier and shakier, hollowed out.
The consequences of that are far more than economic. The middle class is what makes us who we are. It’s affects the poor. A strong and vital middle class is a middle class that can offer a helping hand to the poor. A strong and vital middle class is a middle class that has room, is creating new jobs to ¿ basically to suck the poor up out of poverty and into middleclass positions. The middle class is what gives us political stability. It’s what gives us an America that’s all bought into the whole process that what we do is not just about a handful of folks at the top who profit from it. We all profit from it, and that’s why we work, and that’s why we vote, and that’s why we accept that the outcome of elections. And that’s why we’re safe to walk our streets, because we have a middle class for which this ultimately works, this country.
And every time we hollow that out, every time we take away a little piece of that, we run the risk that some of what we understood at America, some of what we know as America begins to die. That’s what scares me.