Naomi Klein: The Borderline Illegal Deals Behind the $700 Billion Bailout

By Amy Goodman, Democracy Now!. Posted November 18, 2008.

One of the things that's really extraordinary about the Bank of New York Mellon contract is that, unlike the Halliburton contract or the Bechtel contract or the Blackwater contract, we actually don't know how much it's worth. It's quite extraordinary. It's redacted. The part of the contract that would tell taxpayers how much of their money is being given to this bank and how they're calculating the payment for Bank of New York Mellon is all blacked out. I was reassured by Treasury three weeks ago that they would be disclosing that information within days. They still haven't disclosed it.

Another contract that I look into in the Rolling Stone piece is for the first law firm that received a contract to advise Treasury on the equity deals, on those key equity deals that we've now found out are such bad deals, the ones that didn't get it in writing that the banks were supposed to start lending, the ones that only got five percent dividends for US taxpayers when Britain got 12 percent. Well, the law firm that got the contract to advise Treasury is called Simpson Thacher Bartlett. This is a Wall Street heavy-hitter firm. They've negotiated some of the largest bank mergers in recent years. And what we discovered in researching this piece is that Simpson Thacher had represented seven of the nine banks that received the equity deals that they were advising Treasury on. And, you know, what's important to understand is that these banks that Simpson Thacher represents on other matters represent far more of their revenue than US Treasury. So what I am arguing is that they are in a very large conflict of interest, because they really are a bankers' law firm, not a public interest law firm.

Goodman: Can you talk about what is happening right now in Washington, what took place over the weekend, the meeting of the G20?

Klein: Well, you know, this was an epic lost opportunity because I think a lot of people assume, certainly assumed originally, that what would come out of this catastrophe, what would come out of this crisis, would be a re-examination of some of the thinking that has underpinned so much of economic policy in the past thirty years. And, as I said earlier, Barack Obama turned his election campaign into a referendum on the mania for deregulation and free trade and really less trickle-down economics. He said the idea of giving more and more to the people at the top and waiting for it to trickle down to the people below, and that really resonated with voters, and they elected him on that platform. And let's remember, Amy, because this really is about democracy, that his campaign turned around when the economic crisis really hit Wall Street. He was losing ground to McCain when the crisis hit Wall Street, and Obama started using this language of really putting the ideology of deregulation on trial. That's when his numbers turned around. That's when he went on his winning streak that took him all the way to Election Day. And so, I think that there has been this assumption that, OK, now we're going to fix it.

But if we look at what just came out of the G20 summit, it's really been a reassertion of the very -- this very ideology of deregulation. On the one hand, you have the statement that you started the program with, where the world leaders said that this crisis was born of the shadow banking industry, not enough oversight, not enough regulation, too much complexity. At the same time, when they talk about solutions, they're calling for resurrecting the failed World Trade Organization talks that collapsed this summer. And we heard, if you recall, this summer, when the Doha talks collapsed, that globalization and the Washington Consensus were dead, because developing countries had rejected it.

The other thing that they're calling for is a greater role for the International Monetary Fund. And it's important to understand that the reason why the International Monetary Fund and the World Trade Organization and the whole free trade agenda, generally, has been in collapse in recent years is because countries around the world are no longer willing to accept the conditions attached to joining this club, the conditions attached to an International Monetary Fund loan. In reasserting a greater role for the International Monetary Fund, in calling for the World Trade Organization talks to get back on track, these world leaders are actually calling for more financial market deregulation, more of the same.

I'll give you one example: the Doha talks. Although much of the focus has been on agricultural subsidies, part of the Doha talks is about financial sector deregulation and the push, particularly from Britain and the United States, for countries like China and India to open up their financial services markets to US and British and European companies who want into these markets. And what's really striking is that you hear this language of anti-protectionism, you know, that we can't turn away from free trade. What this really means, Amy, is that Citibank and Barclays want to go into China, want to go into India, and they want to buy up Chinese and Indian banks, they want to get into these markets. But what's so incredible in this moment is the hypocrisy, just the rampant hypocrisy, because Barclays and Citibank and all of the other banks that would benefit from this type of free trade are of course the very banks that are receiving massive state protection from their own governments in the form of the bailouts that we've just been discussing. So these sort of corporate welfare bums now want to use the language of anti-protectionism to go into other countries and buy up their assets, but, of course, they are being subsidized so heavily by their own taxpayers. So it's a moment of high hypocrisy.

See more stories tagged with: naomi klein, bailout

Amy Goodman is the host of the nationally syndicated radio news program, Democracy Now!

Liked this story? Get top stories in your inbox each week from Corporate Accountability and WorkPlace! Sign up now »