Thursday, September 25, 2008

Another Trillion Dollars for the Bankers: United Mass Action Can Stop Giveaway to Wall Street Bankers

$1,000,000,000,000?: United mass action can STOP giveaway to Wall Street bankers

By Fred Goldstein
Published Sep 24, 2008 9:14 PM

Treasury Secretary Henry Paulson and Federal Reserve Chair Ben Bernanke have attempted to stampede Congress into handing them dictatorial financial authority so they can carry out a $700-billion bailout of Wall Street.

The aim of the Paulson plan is for the government to buy up the bad debts of banks, mortgage brokers, insurance companies and any other corporation that can be classified as a financial institution.

These loan sharks are the same institutions that made huge profits trafficking in subprime and other mortgage loans. Now home prices are declining, adjustable-rate mortgage payments are going up, the cost of living is skyrocketing, and the economy is shrinking—leaving workers with fewer jobs and smaller paychecks. Millions can no longer pay their mortgages.

While screaming crisis, the bankers are rushing to the front of the $700-billion bailout line.

If approved, the Paulson plan will raise the government’s bailout of the super-rich to one TRILLION dollars. It has already committed $315 billion to bail out giant insurer AIG as well as Fannie Mae, Freddie Mac and Bear Stearns banks.

What could be done with such a princely sum? It could be used to pay for universal health care, affordable housing, affordable education, day care, job creation and other basic needs. This money is urgently needed to deal with the real crisis of the workers and the oppressed.

The bankers’ books are filled with bad debts. They bought up these debts thinking to increase their profits through collecting interest payments from the workers. But now the gravy train of interest payments is over, so they want the government to come in and take the bad debts off their books.

Their front man is Paulson, who spent 32 years at the investment bank Goldman Sachs and was the biggest single shareholder in the company. Now secretary of the Treasury, he is coming to their rescue.

Attempt at a financial coup

Paulson tried to terrorize Congress and the entire population into quickly giving him unlimited authority to dole out hundreds of billions to the banks. He threatened that the “credit markets” would seize up, leaving people’s businesses, jobs and lives in jeopardy. In plain language, it means that these moneybags, already bloated with hundreds of billions in assets, will stop lending unless they get their hands on the Treasury’s money.

Paulson presented Congress with a paltry three-page proposal to explain why the Treasury needs to spend the $700 billion! It was virtually empty of any specifics other than the authoritarian demand in Section 8 that: “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”

In this grab for unlimited financial power, Paulson wants to operate unimpeded by any legal or constitutional restraints. It was an attempt at a financial coup by the so-called banking fraternity, headed by Paulson.

He has around him a whole team of former Goldman Sachs bankers. Bush’s White House Chief of Staff Joshua Bolten is also from Goldman Sachs. There’s John J. Mack, head of Morgan Stanley, another giant investment bank. Paulson called on him for advice on the bailout of Fannie Mae and Freddie Mac. And he consults with William Gross of PIMCO, a giant bond fund with $830 billion in assets.

As the quintessential Wall Street representative, Paulson fielded the requests of the financial industry as they lobbied to get in on the act. In an early draft of the proposal, security firms—i.e., stock brokers—were excluded from the bailout. In the final version, they were included. In the early version, only banks headquartered in the U.S. were included. The later version was broadened to include all financial institutions with operations in the U.S.

The feeding frenzy could not be hidden. “Even as policy makers worked on details of the $700 billion bailout of the financial industry, Wall Street began looking for ways to profit from it.” (New York Times, Sept. 22) The bankers successfully lobbied to have all manner of investments covered, not just mortgages.

They began to jockey for position to manage the same funds that the Treasury was going to take off the books of the banks. They stand to earn hundreds of millions of dollars a year in fees as Paulson draws up plans to hire his fellow bankers—the crooks who brought on the crisis—to advise on the bailout.

Trying to sell it to Congress

Paulson and Bernanke had to testify before the Senate Banking Committee on Sept. 23 to try to sell the bailout. It was clear that they had overreached. The senators were almost all forced to push back. Partly it was their usual demagogy and posturing meant for the benefit of the electorate. But it was also fear that Paulson and Bernanke did not really have any workable plan.

Committee members also voiced skepticism on the excessive demand for totally arbitrary authority and the complete lack of even the slightest gesture of concrete assistance to the masses. After being pummeled in view of the television cameras with demands for oversight, Paulson, who wrote the “non-reviewable” provision, declared himself to be an advocate of “oversight” and “accountability.”

Both Bernanke and Paulson stonewalled the committee over any measure to directly stop or even diminish home foreclosures. When Paulson was asked about the 10,000 foreclosures a day going on right now, he double-talked about how the plan would “eventually” lift the housing market and make it easier for people to stay in their homes—always predicting that without their plan, things would take an even more disastrous turn.

Much time was spent on the need to limit executive bonuses. It has become well known that in 2007 the bankers at Bear Stearns, Goldman Sachs, Merrill Lynch, Lehman Brothers and Morgan Stanley gave themselves a total of $39 billion in bonuses.

Both Paulson and Bernanke refused to budge on the issue, saying that the bailout program was voluntary and they did not want to be “punitive” or the bankers might not participate. The same argument was used to talk down a proposal made by some senators that the government have an ownership stake in any company that gets a bailout. Their reply: The bankers would never submit to such treatment and the whole program would fail.

There was endless posturing by the senators, many of whom are millionaires themselves, about helping Main Street, not Wall Street. As a popular slogan, this is very appealing and all the politicians used it. But the question is really not one of “streets.” It is a question of class.

It is the financial oligarchy of the capitalist ruling class that is being bailed out at the expense of the working class and the middle class. The African-American, Latin@ and other oppressed populations are suffering the most.

The working class has debts it cannot pay; the financial rulers have debts they don’t want to pay.

The masses face poverty and hardship. Some bankers and investors face getting down to their last millions.

Forcing workers to pay bankers’ debts

No matter how much this bailout is “improved” by some minimal concessions on secondary issues, such as limiting executive pay—if that ever happens—or any other palliative measure, the fact is that the working class is going to be forced deeper into debt to pay off the debts of the bankers who robbed the workers in the first place. This bailout is a ruling-class solution.

Paulson’s proposal, in whatever form it emerges from Congress, is predicated on there being only one choice: bail out the banks or suffer a Great Depression. There may well be a depression. But it will come as a result of capitalist overproduction inherent in the profit system. It cannot be stopped in the long run by a bailout of bankers.

To fight off the effects of a depression or any economic crisis, the workers must have their own program and advance their own demands.

After claiming for a year that the system was fundamentally sound, the financial bosses are now using the threat of an apocalyptic depression to terrorize everyone into accepting a bailout of billionaires and millionaires. This is calculated to promote fear, demoralization and passivity among the multinational working class, which is already struggling to survive.

According to Paulson and company, either the people give over $700 billion or risk losing their homes, jobs and retirement. Pay the bankers’ debts or the credit markets will “seize up.” This is the logic of unobstructed capitalism.

The working class must reject this dire choice. It is a choice posed by the bosses and their paid propagandists. Every struggling sector of society—youth and students; Black, Latin@, Native and Asian peoples; immigrants; women; the lesbian, gay, bi and trans communities; seniors and the disabled—will be affected and need to mobilize to fight back.

The bankers and the government can be made to change their tune when faced with a mass struggle demanding a moratorium on foreclosures and evictions. They can be pushed back by a movement demanding an end to layoffs and plant closings and the right to a job for all workers.

Housing is a right. Education and health care are rights. A job is a right. The only way to turn back this onslaught of foreclosures, evictions and layoffs, and stop the bailout at the same time, is to fight back in an organized, mass, militant way.

Workers have historically found ways of forcing open the pocketbooks of the bosses. Eighty years ago, no one thought the law would recognize the right to organize a union, the right to Social Security, the right to unemployment insurance, the right to Aid for Families with Dependent Children. These gains were won by struggles during the Great Depression of the 1930s.

Faced with an organized, militant population, the bosses, who had been crying poverty, finally came up with the money. They can do it again.

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