Locking in the Loot at the Reagan Library

[Crewleader]

Paulson's Cascade of Lies

Weekend Edition
November 21 / 23, 2008

By MICHAEL HUDSON

On Thursday, November 20, Treasury Secretary Henry Paulson presented, even by his own lamentably low standards, an amazingly deceptive speech at the Ronald Reagan Presidential Library in Simi Valley, California. In its false framing of Washington’s financial giveaway to Wall Street it rivaled some of the outstanding fables created by the Master Imagineer himself, for whom the library is named.

What prompted the speech seems have been Congressional criticism of Mr. Paulson’s bait-and-switch transfer of public funds to Wall Street, and the Federal Reserve’s transfer of an amount twice as high as Congress’s $700 billion. His most urgent aim was to ward off accusations that the Treasury and Federal Reserve have acted illegally. “Federal law, and in particular the Anti-Deficiency Act, prohibits Treasury from spending money, lending money, and guaranteeing or buying assets without Congressional approval. The Federal Reserve can and does lend on a secured basis, but only if it expects not to realize losses.” (Italics added.)

But Congress did not approve the Treasury’s $250 billion of “preferred” stock investments in Wall Street banks. The happy recipients, their stockholders and officers evidently worried precisely that this “investment” would end up taking losses. That is why the Treasury stands in back of bona fide creditors. That is why “preferred” stock was preferred by existing stockholders to loans and guarantees (which have priority in case of bankruptcy), not to mention the conditions that Congress thought it had laid down calling for these institutions to renegotiate mortgages to bring them in line with the debtor’s ability to pay.

http://www.counterpunch.org/hudson11212008.html