Treasury's Paulson Seeks More Bailout Funds, Obama Team Joins in Talks

Treasury Department officials are laying the groundwork for seeking the second half of the $700 billion financial rescue package from Congress and have approached President-elect Barack Obama's transition team in an effort to gain access to the funds, sources familiar with the matter said.

With lawmakers on both sides of the aisle expressing heated opposition to such a request, Treasury officials have come to realize that they need the president-elect's help to obtain the rescue money, the sources said.

The Treasury aired the possibility of seeking the second half of the funds with transition team officials, who said they would attend a meeting with lawmakers and the Bush administration if the department pulled one together.

Of the first $350 billion in rescue money provided by Congress, the Treasury has only $15 billion left, which may not be enough to save a major financial institution if it collapses. Just weeks ago, the Treasury committed to spending $25 billion in rescue money to prop up Citigroup; it had already provided the firm with a $25 billion infusion.

Treasury employees are working on several proposals to unfreeze the troubled credit markets, the sources said. But some of these initiatives may depend on the next installment of the rescue package.

Treasury Secretary Henry M. Paulson Jr. has been cautious about asking Congress for the next installment given the risk that his request would be denied, sources said. Such an event could wreak havoc on the financial markets.

Treasury spokeswoman Brookly McLaughlin said no decision has been made on requesting additional rescue funds.

Obama has not yet stated whether the Treasury should receive the rest of the funds. But in agreeing to allow his aides to meet with administration officials and lawmakers on the issue, Obama appears to be demonstrating his willingness to engage on the issue, two of the sources said.
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In a meeting with Treasury officials, Obama's transition team pressed them to use the second installment, if forthcoming, to help struggling homeowners.

Several congressional Democrats said the administration's case for the remaining rescue money would be vastly improved if the Treasury offered this assistance. But Paulson so far has been resistant to using the rescue funds to help homeowners.

Some congressional aides cautioned that even if the Treasury offers help for homeowners, rank-and-file lawmakers might not go along.

Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee, has said he is opposed to approving any more bailout money during the Bush administration because he thinks the funds have been misused. And House Financial Services Committee Chairman Barney Frank (D-Mass.) said yesterday that he has told Paulson and Obama that they won't get the money unless a substantial part of it goes toward reducing residential foreclosures, which continue to skyrocket.

"I have said to both parties that the key here is to get some money into foreclosure diminution and if they don't get that done, then they can forget about the second $350" billion, Frank said in an interview.

Frank has been critical of the Treasury for failing to use the money to help distressed homeowners, whose defaulting mortgages have helped spark a global recession. But Frank said he is also critical "a little bit of the Obama campaign for not being more forthcoming on this."

Frank said the financial bailout was sold to lawmakers in part as a way to help homeowners, and that Obama was helpful in making that point. But now, Frank said, "I think they are underestimating the importance of" following through on that pledge.

"Not just economically, which is very important, but politically," he said. "If they want to keep the confidence of the Congress in terms of these kinds of politically risky things, then they can't have people feel that they were misled."

Obama's transition team has been closely reviewing what the Treasury has done so far to rescue the financial system. The team assigned Lee Sachs, a former assistant Treasury secretary in the Clinton administration, to work out of a large office that faces the White House on the second-floor of the Treasury building. Sachs and a handful of others have been reviewing the Treasury's initiatives and have been in continual contact with senior officials on the rescue program.

Financial Meltdown: The Greatest Transfer of Wealth in History

"Admit it, mes amis, the rugged individualism and cutthroat capitalism that made America the land of unlimited opportunity has been shrink-wrapped by half a dozen short sellers in Greenwich, Conn., and FedExed to Washington, D.C., to be spoon-fed back to life by Fed Chairman Ben Bernanke and Treasury Secretary Hank Paulson. We’re now no different from any of those Western European semi-socialist welfare states that we love to deride."– Bill Saporito, "How We Became the United States of France," Time (September 21, 2008)

On October 15, the Presidential candidates had their last debate before the election. They talked of the baleful state of the economy and the stock market; but omitted from the discussion was what actually caused the credit freeze, and whether the banks should be nationalized as Treasury Secretary Hank Paulson is now proceeding to do. The omission was probably excusable, since the financial landscape has been changing so fast that it is hard to keep up. A year ago, the Dow Jones Industrial Average broke through 14,000 to make a new all-time high. Anyone predicting then that a year later the Dow would drop nearly by half and the Treasury would move to nationalize the banks would have been regarded with amused disbelief. But that is where we are today.1

Congress hastily voted to approve Treasury Secretary Hank Paulson’s $700 billion bank bailout plan on October 3, 2008, after a tumultuous week in which the Dow fell dangerously near the critical 10,000 level. The market, however, was not assuaged. The Dow proceeded to break through not only 10,000 but then 9,000 and 8,000, closing at 8,451 on Friday, October 10. The week was called the worst in U.S. stock market history.

On Monday, October 13, the market staged a comeback the likes of which had not been seen since 1933, rising a full 11% in one day. This happened after the government announced a plan to buy equity interests in key banks, partially nationalizing them; and the Federal Reserve led a push to flood the global financial system with dollars.

The reversal was dramatic but short-lived. On October 15, the day of the Presidential debate, the Dow dropped 733 points, crash landing at 8,578. The reversal is looking more like a massive pump and dump scheme – artificially inflating the market so insiders can get out – than a true economic rescue. The real problem is not in the much-discussed subprime market but is in the credit market, which has dried up. The banking scheme itself has failed. As was learned by painful experience during the Great Depression, the economy cannot be rescued by simply propping up failed banks. The banking system itself needs to be overhauled.
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Lehman Approved Huge Payoffs for Execs Days Before Going Bust

THE Lehman Brothers board signed off on more than $100m (£59m) in payouts to five top executives just three days before the bank went bankrupt leaving thousands of employees out of work in London.

The payoffs, approved on September 12 by the Wall Street giant’s compensation committee, included over $24m in severance packages to the collapsed firm’s top three London executives.

The committee agreed a $16.2m pay-off for Benoit Savoret, chief operating officer for Europe. This payment had been guaranteed by the firm after Savoret had turned down an approach to join a rival firm. Andy Morton, the fixed-income business head, was set for a $2m golden goodbye.

Both were forced out in a shake-up orchestrated from New York in the waning days at the troubled bank. A $5m package for Jeremy Isaacs, the European chief executive who also left, was approved as well.

The executives never received the payments – detailed in internal Lehman documents seen by The Sunday Times - because the company filed for bankruptcy protection the next working day, September 15.

According to Tony Lomas, the lead administrator, they will now be treated as unsecured creditors.

The committee also signed a $41m retention package for Eric Felder, the head of global fixed income in New York, and a $40m two-year deal for Jerry Donini, the US-based head of equities. These are understood to have been voided, replaced by new contracts under Barclays which bought the US business.

The pay deals will further inflame the debate raging about executive pay as the global financial crisis accelerates.

In the two years prior to Lehman’s collapse, the executives were generously remunerated while overseeing forays into risky commercial real-estate investments that helped to bring the company down.
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The Really Hard-to-Swallow Truth about the Bailout

Myriad cultural historians have noted the American belief that success is a sign of God's favor over the past couple of decades.

(In that time) He has had a downright lovefest with the already-rich -- so much so that the richest 400 Americans now have more money stashed away than the combined bottom 150 million Americans. Some $1.6 trillion.

This was accomplished by selling off or shipping out every available asset, from jobs to seaports, smashing usury and anti-monopoly laws, raiding the public coffers and manipulating the medium of exchange and blackmailing the peasantry regarding common needs such as health care and energy to keep their asses warm, to name a few. The ultimate coup was to convince the entire nation that the well-being of the rich, meaning the well-being of Wall Street, was indeed the common man's well-being.

All went well for a while. People went into credit card hock up to their noses in order to provide 26 percent credit card interest to Wall Street, etc. And when that became untenable, flimsy mortgages were cranked out by the millions, ensuring that every American who could hold a crayon could sign to purchase a home. To facilitate this, all sorts of shaky "mortgage instruments" were created -- balloon (sign here Jeeter, you're gonna flip it in a year and make a hundred K on this house trailer), interest only, and finally, negative-balance mortgages where you only paid part of the interest and the rest was rolled back into the principal balance. And joy of joys, you could refinance a couple of times while the inflated value of these houses was on the way up. Life was good for everybody.
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Why Wall Street CEO’s Must Go To Jail And Pay back Billions In Bonuses

“The truth is, through criminal neglect and competence, the people at the
top of these firms chose to look away, to take more risk, to enrich themselves
and to put shareholders and indeed, the country itself and the country’s
economy at risk. It is truly not only a shame, it is a crime” - 60 Minutes

Forget the blame game, forget the justified rants of anger. US taxpayers were asked to risk $700 Billion for a Wall Street bailout that may not even work - but do they really know why?

The rest of the world has been swept up in this crisis, with citizens all over the world afraid their banks are going to shut down - but do they really know why?

I’ll get to the why in a second.

In the meantime, as the world sweats, CEO’s at Lehman, Bear Stearns, AIG, Fannie, Freddie, etc., etc. each walked away with tens and even hundreds of millions of dollars in cash and stock. Lehman CEO, Richard Fuld, himself walked away with $480,000,000 (yes, 480 million) since 2000. That equates to $60,000,000 per year for a guy that drove Lehman into bankruptcy and significan
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H.R. 1424 - Congress Sells Soul to the Bankers & Gives Americans the Boot

It’s wait and see after Bush signs rescue planBy JIM ABRAMS, Associated Press Writer 2 hours, 18 minutes agoWASHINGTON - After two weeks of anguishing debate, Congress has passed and President Bush signed a massive plan to save the financial industry and the economy at large from an unthinkable free fall. Now, the world holds [...]

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$700 Billion Bailout Could Balloon to $5 Trillion

So now they try to solve the problem by having this credit bubble actually extended and I think the $700 billion will be like a drop in the bucket because the total credit market in the U.S. is something close to $60 trillion, then you have the CDS market credit default swap of [...]

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