We’ve Been Had!

Remember when Henry Paulson sat down in front of Congress and begged for $700 billion to bail out banks drowning in bad mortgage-backed securities? How he promised that the money would be used to buy out these bad assets so that these banks could remain viable and continue to make loans? How Congress made certain that there was a clause to assure Americans that public money would not be used to dole out multimillion-dollar bonuses for CEOs and bank executives?

We’ve been had! Credit is still dry as a bone, the mortgage crisis is still at Defcon 4, and the banks took the money and ran. Paulson changed the wording in the Troubled Asset Relief Program (TARP) agreement so that companies that accepted government money in mortgage-backed security auctions would have to limit executive pay. Instead of buying these securities at auction, Paulson just gave the $35 billion TARP first installment to the banks directly.

The whole auction thing went right out the window. So what Paulson and the Bush administration did was created a legal loophole in order to ignore the obvious intent of the law. Basically they lied to our faces, took our wallets and distributed the contents to their friends. A scam that is, from what I hear so far, completely legal.

This is just another example of Naomi Klein’s disaster capitalism theory. Klein asserts that corrupt governments like the Bush administration use the general public’s shock, created by national disasters, to push through unpopular legislation. This legislation is used, in many cases, to further enrich the already wealthy and powerful. In this case $700 billion was handed directly from the coffer to the open hands of bankers, whose greed and poor decisions got us into this mess in the first place. (Check out Klein’s The Shock Doctrine, it’s a good read.)

What do we do now? Will there be any money left for Obama to use to save the economy? Will there be anything left to save? Bush promised an easy transition, yet it seems like Obama will have his hands full just fixing all the things Bush is messing up on his way out. Someone should be going to jail for this. It’s a $700 billion scam! Bernard Madoff’s $50B “Ponzi” scheme looks like peanuts next to this. It took every ounce of restraint I had, when Rachel Maddow played B-roll of Bush and Paulson at a press conference, not to throw my shoe at my roommate’s TV.