Naomi Klein: The Borderline Illegal Deals Behind the $700 Billion Bailout
Fantastic interview between Amy Goodman and Naomi Klein, author of Shock Doctrine:
The bailout is a parting gift to the people that George Bush once referred to jokingly as “my base.”
“And I think, you know, Amy, the last time I was on Democracy Now!, we were talking about Henry Paulson’s original three-page proposal, the $700 trillion stickup, where he basically said, “Give me $700 trillion. Don’t ask any questions. I can never be challenged by any arm of government or any court of law.” Now, that aspect of the bailout was supposedly dealt with, and we were all reassured that there was going to be transparency, accountability, legality. But now we’re finding out that, in fact, Henry Paulson has achieved his original goal by stealth, because there is no accountability, and lawmakers are very hesitant to challenge this, because they’re afraid of causing a run on the banks, of causing more market instability. So, essentially, what the Bush administration has done is said, you know, “We dare you to challenge us and be responsible for the great depression.” And the Democrats, not known for their firm spines, have so far failed to challenge them in anything other than rhetoric.
Goodman: And what’s very interesting about this, of course, as I talked to you before the election, but now the election is over, and the Democrats are not in a weaker position, but in a far more powerful position, and they are meeting this week.
Klein: Right. They have a lot of leeway in which to act on this. You know, if Barney Frank means what he says, that this violates the act, then of course they can challenge the deals that have already been signed, these terrible equity deals that are so much worse than what Gordon Brown negotiated in Britain. I mean, let’s remember, Gordon Brown got voting rights at the banks that they bailed out, seats on the boards, 12 percent dividends for UK taxpayers, as opposed to the five percent negotiated in the US and no voting rights and no seats on the board. Other thing Gordon Brown did is he got it in writing that the banks had to start lending, as opposed to Henry Paulson, who didn’t get it in writing, and the banks are not lending.
So, there is room to move, but, you know, the logic that has really gripped lawmakers is that they can’t rock the boat. And we hear this across the board, really, in the talk of, you know, who to appoint as Treasury Secretary, how to approach economic policy in this period. We hear all these phrases — you know, continuity, smooth transition. And really, that’s code for more of the same, because what the market wants is for there not to be tough regulation, is for the free money to keep flowing. What will upset the market, what will create a rocky transition, is if it’s clear that there’s a new sheriff in town, that they’re going to have to follow the law, that they’re going to cut off all of this corporate welfare, there’s going to be real accountability, real conditions attached to the money. You know what? The market really doesn’t want that.
Unfortunately for the market, voters have just voted for change. They voted for a candidate who really turned the election into a referendum on this economic policy of rampant deregulation. So you’ve really got a problem here. How do you reconcile the market’s desire for status quo with the voters’ demand for real change? There is no way to do that without a few bumps along the way. And I’m quite concerned that what we’re seeing from Obama’s team is an accepting of this logic that they need to give the market what it wants, which is continuity, smooth transition, which is really just code for more of the same. And when you hear names like Larry Summers being bandied about for Treasury Secretary, that’s feeding the market exactly what it wants, which is more of the same.
Goodman: I wanted to go more to these — what you’re calling “borderline criminal” deals, the Washington Post revealing as part of the bailout, lawmakers changed Tax Code Section 382, which limits the kinds of tax shelters companies can use to — during corporate mergers, created to stop companies who avoid paying taxes by acquiring shell companies valued by the losses on their stocks. And then, going on in the piece, it says congressional aides admitted lawmakers agreed to keep the change hidden to avoid public outrage. Staffers with Senate Finance Committee chair, Max Baucus, a Democrat, reportedly asked that an administration briefing on the tax code change be kept secret. One congressional aide said, “We’re all nervous about saying this was illegal because of our fears about the marketplace. To the extent we want to try to publicly stop this, we’re going to be gumming up some important deals.”
Klein: Right. I mean, this is — that’s an incredible statement, Amy, because really what they’re saying is, we can’t afford to enforce the law, because there is an economic crisis, that somehow, because there’s an economic prices, legality is a luxury that Congress can’t afford. That is a very scary statement. But this is what I mean by this logic that you have to — you know, the market, particularly a bear market, has the temperament of an ill-tempered two-year-old. I mean, it throws temper tantrums whenever it doesn’t get what it wants, whenever it is frightened. So it is really dangerous to pander to the tastes of the market in this period. It needs a little bit of tough love. That’s what people have voted for. But there will be a temper tantrum if there is a clear message that the law is going to be followed.
Read the rest of the article, here…
Robert Greenwald made a great documentary on the war profiteers, Iraq for Sale. I wish someone could get out a quick documentary on the bailout profiteers!
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