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OpEdNews Op Eds    H3'ed 10/11/08

And For Other Purposes

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When the average person runs short of money, we are expected to cut back.  Responsible folks reduce expenses by cutting back on extras such as going to movies, eating out, driving less, and forego more expensive vacations for something closer to home.

For Wall Street companies in a fascist republic, they don't have to cut back anything.  They can splurge on expensive retreats, borrow trillions of dollars, and blow money as if there is no end to it. In the meantime, years of illegal mortgage practices, oil companies willfully and intentionally
bankrupting everything, executives of failing and bankrupt companies continue getting bonuses on top of their ridiculous compensation packages, and the same executives firing thousands of people to keep said bonuses hard-working Americans are being called "irresponsible."  

The truth is, the taxpayers were forced to give a loan as the Federal Reserve agreed to lend AIG $85 billion of taxpayer money over a period of two years.1  Of course, this didn't rescue the insurer, and the government agreed to another $38 billion.2  To date, the "agreement" has now grown
to $122.8 billion.  This in spite of the $440 thousand AIG squandered "for other purposes" at a California resort.3

This is on top of the $75 billion a day banks are already borrowing from the Federal Reserve, another "for other purposes" commitment forced upon the taxpayers.4  None of this is part of the additional $700 billion forced upon taxpayers via a mental health bill that included "other purposes."

The fact is, bailing out financial institutions has not been historically profitable.  Consider the government bailout of Franklin National Bank in 1974, at that time, the largest bank failure in U.S. History.  The government loaned the bank $1.75 billion after just a $64 million loss.  That is, taxpayers recouped 27 times the loss, but the bank failed anyway, due to fraud and illegal practices.5  After the FDIC took over and following a total taxpayer
investment of $7.7 billion, they sold off Franklin's assets to European American Bank, and lost $185.3 million.6

Ten years later, the government again stepped in to fix the failing Continental Illinois National Bank and Trust Company.  This failure topped Franklin as the largest bank failure.  Continental was labeled as being "Too big to fail".  Continental, like our banks of today, involved in predatory and risky loans, increasing a loan to asset ratio to unacceptable values.  As the bank was clearly failing, the company's executives vehemently denied these claims as rumors, and issued positive statements regarding their outlook.  Three days later, Continental took out a Federal Reserve loan of $3.6 billion.  
In the months that followed, the FDIC followed up with another $2 billion.  The Federal Reserve guaranteed another $5.3 billion in unsecured loans offered by 24 other banks, and the FDIC agreed to buy $4.5 billion in bad loans.In the end, the government took over an 80% ownership in the bank, and poured $9.5 billion over 7 years to keep the bank solvent.  The FDIC lost $1.8 billion.8

Before now, the most notable financial industry bailout was the famous Savings & Loan failures of the late 1980's.  In an interesting connection to today, President George Bush took $298.3 billion in taxpayer money to save the S&Ls by issuing the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) of 1989.This act gave two companies, Fannie Mae and Freddie Mac, the responsibility to support mortgages for low and moderate income families10, which is what has lead to the largest government bailout crisis today.  Like Father, like son!  FIRREA represented the largest bailout in history, prior to now.  Taxpayers lost $178.56 billion in the deal.

One of the biggest problems we have is the "for other purposes" clause in every single bill proposed.  This has to stop, and stop it must.  The fact is, Henry Paulson could choose to buy new shoes for every member of Congress with the $700 billion.  

If history represents anything of reasonable assessment of outlook, we stand to lose over $500 billion, while Wall Street executives and government golf-buddies ensure the fascist regime maintains their standard of living.  If true reform doesn't happen soon, and in a very profound way, the taxpayers will be left with the bill.  The best that can come of it, as in the connection between the S&L bailout of 1989 and today, is a much larger failure in the future!  Will there be another of the Bush family at the helm of our country then?  It is possible!

click here New York Times - Fed's $85 Billion Loan Rescues Insurer

  1. click here News Daily - AIG gets up to $37.8 billion in cash under NY Fed plan

  2. click here Associated Press - AIG execs' retreat after bailout angers lawmakers

  3. click here USA Today - Banks borrow record amount from Fed over the past week

  4. click here All Business - 1974: Franklin National Bank goes under

  5. click here - ProPublica - What Happens After a U.S. Government Bailout?

  6. click here History of the Eighties - Lessons for the Future

  7. click here - ProPublica - What Happens After a U.S. Government Bailout?


  9. click here Wikipedia - Financial Institutions Reform, Recovery and Enforcement Act of 1989


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Steven Saw Social Media Pages: Facebook page url on login Profile not filled in       Twitter page url on login Profile not filled in       Linkedin page url on login Profile not filled in       Instagram page url on login Profile not filled in

Steven Saw is an activist educating the public about the depth of government and corporate corruption in America. Steven runs a blog, has been published in a number of sites, and was a featured guest on FreedomFighterRadio.
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