Guest Author - Tony Daltorio
I'm sure many of us may remember the classic 1984 Wendy's "Where's the Beef" ad where Clara Peller asks "Where's the beef?". I am wondering, when it comes to Wall Street and the Obama Administration, "Where's the change?".
It has been pretty much business as usual for Wall Street, which means that the US taxpayer is getting hosed. There are many recent examples of Wall Street's continued "bad" behavior.
First, there is the problem child - AIG - the insurance giant who has received a $180 billion bailout (and growing) from the government. Recently, more than 2,000 participants worldwide in the troubled derivatives market agreed to an overhaul which would make the opaque derivatives market much more open and easier to see the risks involved.
The AIG financial products unit that all but destroyed the company and nearly our financial markets too, has REFUSED to sign on to this agreement. Doesn't our government now basically own AIG? Why are the people in this unit not being told to cooperate?
Secondly with AIG, some of their "bad" derivatives contracts have been made "good" and paid off in full by the US government (taxpayers). Of the amounts paid out, the largest amount went to the politically well-connected Wall Street giant Goldman Sachs which received $12.6 billion!
Is it any wonder then Goldman Sachs recently reported robust earnings? A $12.6 billion "donation" from the taxpayers will definitely lead to great earnings. I'm sure there will be bonuses paid out based on those "good earnings".
Moving away from AIG, we have the recently announced plan to help the banks from Treasury secretary Tim Geithner. It is called PPIP or a public-private investment program. This program will allow participants to purchase toxic assets from the banks and is largely funded by the US government.
Who will be the largest participants in this plan? Why, the Wall Street banks themselves. They will be buying and selling assets from each other in order to get a hold of the government funds involved. This plan will not do anything to improve the lots of banks other than enrich some favored members of the Wall Street community at the expense of the taxpayers. Again.
Then there is the whole mark-to-myth accounting changes pushed through by Wall Street and Washington. The changes, from mark-to-market, will allow the banks to value their assets at whatever they wish them to be, rather than valuing them at true market levels.
The Obama Administration should be forcing banks to fess up to the true value of their assets (and their losses) and if necessary, temporarily take charge of these banks. Most likely, it is only the few very largest Wall Street banks (Citi, Bank of America) that are in trouble.
Right now the policy is to continue to give these elite banks life support, wasting tens of billions of taxpayers dollars in the process. At the same time, the unfortunate who do not have political connections are being thrown to the wolves. This policy needs to change.
One final note - many struggling insurance companies have recently purchased small banks. Why? So that these insurance companies can also access the government's TARP fund which is intended to "bail-out" banks. Why does the image of pigs feeding at a trough come to mind?
Please feel free to contact me directly with any comments or questions.
