Naomi Klein: The Borderline Illegal Deals Behind the $700 Billion Bailout
Continued from previous page
The other thing that the Fed won't disclose is what they have accepted as collateral in exchange for these loans. This is a really key point, because, of course, at the heart of the financial crisis is -- are these so- called distressed assets. The value of these assets is enormously controversial. They may be worth very little. So if the Fed has accepted distressed assets as collateral in exchange for these loans, there's a very good chance the taxpayers aren't going to be getting this money back. So Bloomberg News has launched a lawsuit in federal court to find out who has received the loans and what has been accepted as collateral, because they believe that this lack of transparency is illegal. So that's why we're calling this the "trillion-dollar crime scene" or the "multi-trillion-dollar crime scene." And they're really challenging lawmakers to call them out, the Treasury is.
And I think, you know, Amy, the last time I was on Democracy Now!, we were talking about Henry Paulson's original three-page proposal, the $700 trillion stickup, where he basically said, "Give me $700 trillion. Don't ask any questions. I can never be challenged by any arm of government or any court of law." Now, that aspect of the bailout was supposedly dealt with, and we were all reassured that there was going to be transparency, accountability, legality. But now we're finding out that, in fact, Henry Paulson has achieved his original goal by stealth, because there is no accountability, and lawmakers are very hesitant to challenge this, because they're afraid of causing a run on the banks, of causing more market instability. So, essentially, what the Bush administration has done is said, you know, "We dare you to challenge us and be responsible for the great depression." And the Democrats, not known for their firm spines, have so far failed to challenge them in anything other than rhetoric.
Goodman: And what's very interesting about this, of course, as I talked to you before the election, but now the election is over, and the Democrats are not in a weaker position, but in a far more powerful position, and they are meeting this week.
Klein: Right. They have a lot of leeway in which to act on this. You know, if Barney Frank means what he says, that this violates the act, then of course they can challenge the deals that have already been signed, these terrible equity deals that are so much worse than what Gordon Brown negotiated in Britain. I mean, let's remember, Gordon Brown got voting rights at the banks that they bailed out, seats on the boards, 12 percent dividends for UK taxpayers, as opposed to the five percent negotiated in the US and no voting rights and no seats on the board. Other thing Gordon Brown did is he got it in writing that the banks had to start lending, as opposed to Henry Paulson, who didn't get it in writing, and the banks are not lending.
So, there is room to move, but, you know, the logic that has really gripped lawmakers is that they can't rock the boat. And we hear this across the board, really, in the talk of, you know, who to appoint as Treasury Secretary, how to approach economic policy in this period. We hear all these phrases -- you know, continuity, smooth transition. And really, that's code for more of the same, because what the market wants is for there not to be tough regulation, is for the free money to keep flowing. What will upset the market, what will create a rocky transition, is if it's clear that there's a new sheriff in town, that they're going to have to follow the law, that they're going to cut off all of this corporate welfare, there's going to be real accountability, real conditions attached to the money. You know what? The market really doesn't want that.