For the most part, the American public has adopted an ovine attitude towards such secrecy, assuming that the “government knows best.”
Now, however, with the economic crisis, and the collapse of AIG, Citibank, Bank of America, Merrill Lynch, Bear Stearns, Lehman Brothers, General Motors, Chrysler and other leading US firms, and with bailouts that are putting taxpayers on the hook to the tune of trillions of dollars, the people are waking up, or at least are starting to get restless in their slumber.
Perhaps there will be a new awareness soon of the importance of transparency in all parts of government.
For now, the Obama administration, the Federal Reserve and Congress are all trying desperately to ease the citizenry back into a state of torpor by adopting a position of mock outrage at the $135 million in bonuses paid out by AIG to the very employees who created the disastrous and crooked Credit Default Swap market that precipitated the global economic collapse.
What they don’t want to happen is for people to start thinking about the $183 billion that Congress and the Fed approved for AIG, which we now have learned was simply a devious scheme for passing more money in secret through to troubled banks and investment banks – among them Citigroup, Bank of America, Goldman Sachs, Morgan Stanley and others – that had bought these CDOs.
Recall that back in September, when the crisis first hit in earnest and Treasury Secretary Henry Paulson first called for a bailout program, he asked—in a three-page proposal to Congress which he insisted they must pass or risk total economic collapse and the imposition of martial law!—for absolute authority as Treasury Secretary to hand out the $700 billion and for protection against any legal action for whatever he might choose to do with it.
Congress didn’t accede to his imperious request, though it did give him half the money he wanted: $350 billion, saying it would provide the second $350 billion later (the new Congress did hand the second half of the money over just before President Obama took office). A sizeable chunk of that huge sum of taxpayer money went to AIG, the giant insurance company that had devised a scheme to sell “insurance” for the mortgage-backed securities that banks were gorging on. The term insurance has to be placed in quotes, because since these contracts were not backed by any assets, they were really not insurance at all.
As rumors spread that much of the so-called Troubled Assets Relief Program (TARP) money that was provided to AIG was actually passed through to banks and investment banks that were already receiving TARP funds directly (including nearly $50 billion to foreign institutions), Congress and some news organizations, notably Bloomberg, sought to learn what firms were actually receiving the cash. AIG, the Treasury Department and the Bush and later the Obama administration initially fought such disclosure, as did all the bank recipients, claiming that releasing the names of the recipients would make investors doubt their stability.
Finally, thanks to the efforts of New York State Attorney General Andrew Cuomo, whose office has been pursuing the issue in the courts, we have the answer: the money was going primarily to the nation’s biggest banks.
But most troubling is that a disproportionate amount of the AIG bailout money--$13 billion -- went to Goldman Sachs, a company that until July 2006 was headed by Treasury Secretary Paulson himself. No wonder Paulson, AIG, Goldman Sachs and others wanted to keep this all under wraps. No wonder too that Paulson initially tried to get Congress to immunize him from the legal consequences of his bailout actions.
The truth is that Goldman Sachs and Paulson should be prosecuted for corruption. The deal that Paulson engineered in secret for shoveling taxpayer money into his former firm is surely one of the largest acts of official larceny of public funds in the history of the country.
Goldman Sachs even publicly announced in early February that it was returning $10 billion in TARP funds it had received last fall, saying it didn’t need the money. Well sure the company didn’t need the money—because it was getting even more in secret via the AIG conduit.
With this backdrop, the rest of the bailout might well be seen as a hugely expensive cover: give enough money to the rest of the big banks and investment banks, and nobody in the industry will squeal about the sweet deal Goldman Sachs was getting.
Of course, the corruption goes much deeper. While public money was being funneled into the banks and other financial institutions, those same institutions were using some of this taxpayer largesse to lobby Congress to do even more. Just between October 1 and the end of 2008, 18 recipients of TARP funds reported spending nearly $15 million on lobbying efforts in Washington. Among the biggest bailout-recipient/lobbyists: American Express ($1.1 million), AIG ($1.1 million), B of A ($$880,000), Citigroup ($1.5 million), Goldman Sachs ($720,000), JPMorgan Chase ($1.1 million), Wells Fargo ($580,000). These amounts represent quite an investment considering that these firms all received, in return for their TARP lobbying efforts, billions of dollars in bailout money.
Remember, Paulson’s original plan was to have even the TARP direct bailout grants kept secret from the public. That idea didn’t fly. But many of these companies that used their public funds to lobby for more public funds also received secret bonus bailouts via AIG.
So here’s what happens when you have secret government. The public gets royally shafted.
Now that the story is coming out, the crooks in Congress, the White House and at Treasury and the Fed are desperately trying to lull us all back to sleep by feigning anger at the relatively paltry sums AIG is handing out in bonuses to some of the crooks and scheisters on its staff.
We should not put our heads down on the pillow being offered, though.
The lesson here is that we need open government, and that we need to demand that our media not go for the cheap and easy story being handed out by government press release.
Also, there’s this last thought: If you thought that the banking mess was a horrible rip-off, just try to imagine what level of corruption there must be in the Pentagon and the Intelligence programs that have been operating in absolute secrecy and with no scrutiny for decades!
About the author: Philadelphia journalist Dave Lindorff is a 34-year veteran, an award-winning journalist, a former New York Times contributor, a graduate of the Columbia University Graduate School of Journalism, a two-time Journalism Fulbright Scholar, and the co-author, with Barbara Olshansky, of a well-regarded book on impeachment, The Case for Impeachment. His work is available at www.thiscantbehappening.net.
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Baltimore News Network, Inc., sponsor of this web site, is a nonprofit organization and does not make political endorsements. The opinions expressed in stories posted on this web site are the authors' own.This story was published on March 18, 2009.