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

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

It's also a moment of, as I said at the beginning, lost opportunities, because -- just to give you one example, think about what these leaders could do if they really wanted to, in terms of collaborating to harmonize regulation, so that banks were no longer able to pit governments against each other for who could offer the lowest taxes, who could give them the best tax havens, who could offer the lowest regulation. There was just a hearing on Friday about hedge funds that Henry Waxman convened. And before those hearings, we heard from one of the wealthiest hedge fund owners in the country, Ken Griffin, who's actually an Obama supporter. Ken Griffin, a billionaire hedge fund owner -- he owns Citadel Investment -- was asked by the committee whether he believed that hedge funds were sufficiently regulated and whether they should be more highly taxed. What Ken Griffin said was that if that happened, there would be even more jobs in the financial industry in the United States lost to Britain. And he talked about how his heart breaks when he goes to Canary Wharf in London and sees how many good jobs have been lost to Britain, which has, in many ways, lower -- less regulation of hedge funds.

But what's so striking about that, Amy, is that it would be so easy in this moment for the US government and the British government to actually harmonize their regulations so that they could -- so that companies like Citadel Investment and other hedge funds would really have nowhere to run. And when you have a crisis like this, which so clearly shows the need for those types of regulations, when you have an election like there just was in the United States, where people have said clearly that this is a priority, the leaders have an opportunity to act and to close down these tax havens, to prevent this ability of governments to be pitted against one another, and have a race to the top as opposed to a race to the bottom. But they blew that opportunity, and they actually called for less regulation.

Goodman: Just underscoring what you wrote on the whole issue of the difference in the bailouts, the British Prime Minister Gordon Brown extracting meaningful guarantees for taxpayers, voting rights on banks, seats on their boards, 12 percent in annual dividend payments to the government, a suspension of dividend payments to shareholders, restrictions on executive bonuses, a legal requirement banks lend money to homeowners and small businesses. Here in the United States, Washington Post reporting major US banks are on pace to spend more than half their bailout money on rewarding their shareholders. The thirty-three banks are set to receive some $163 billion in government bailouts; half of that sum will go to paying off shareholders over the next three years.

Klein: Yeah, this bailout is really not a bailout at all; it's a parting gift to the people that the Bush -- that George Bush once referred to jokingly as "my base." You know, in one of my columns recently, I likened it to what European colonial rulers used to do when they finally realized they had to hand over power; they would loot the treasury on the way out the door.

And the reason why there has been this dramatic change in policy just in recent days, where Henry Paulson has said, "OK, well, we're not going to do what we originally had said at all," which is use the bailout money to buy distressed assets, to buy bad debts, "Now we're going to go from these equity deals with the banks to bailing out credit card companies" -- the reason for that is that that first $250 billion was essentially money down the drain. They are admitting that it didn't do what it was supposed to do, which was increase lending. So, now they're making it up as they go along. It's take three, take four, take five. But we're supposed to somehow not notice that $250 billion, an astronomical sum, was just wasted, going to bonuses, going to shareholder payouts, going to CEO salaries. And now they're trying another method to get lending going. But it really was the parting gift.

And if we think about what this money means, and this is -- you know, this crisis isn't over, and the same people who justified this bailout, who clamored for this bailout, are the very people who are going to turn around and say to Barack Obama, "We can't afford for you to make good on your election promises. We can't afford universal healthcare. In fact, we can't afford what meager services Americans get in exchange for their tax dollars, like Social Security payments." We're already hearing this lowering of expectations now in the national discourse. So, the money -- this really is, you know, reverse Robin Hood gone mad. The money has been given to the people who needed it least, and it's going to be used to justify austerity measures imposed against those who need it most. It's going to be used to justify cuts to food stamps. It's going to be used to justify cuts to Social Security, to healthcare, let alone being used to justify why more ambitious plans for a national healthcare program, for green energy are not affordable. So people have to be ready for this. You know, the next shock is yet to come.

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

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