This is the opening line of Matt Taibbi’s latest article in Rolling Stone titled “The Real Wives of Wall Street.” He has penned yet another brilliant piece exposing how the wealthy and the federal government have stacked the deck against American working families. Thanks to Senator Bernie Sanders, who demanded that the Federal Reserve reveal who received bailout funds, we now know—if that were even possible—that things are worse than we thought.
While the White House and Capitol Hill are immersed in budget cutting hysteria, Taibbi wants us to “note just how scarce money isn’t in certain corners of the public-spending universe.” While both Democrats and Republicans are insisting on hacking away at social programs for the elderly and working families, Taibbi finds there is a “never ending taxpayer funded free lunch” for the wealthy and well-connected.
Taibbi’s explanation of the two budgets:
The official budget is public record and hotly debated: Money comes in as taxes and goes out as jet fighters, DEA agents, wheat subsidies and Medicare, plus pensions and bennies for that great untamed socialist menace called a unionized public-sector workforce that Republicans are always complaining about. . . .
Most Americans know about that budget. What they don’t know is that there is another budget of roughly equal heft, traditionally maintained in complete secrecy. After the financial crash of 2008, it grew to monstrous dimensions, as the government attempted to unfreeze the credit markets by handing out trillions to banks and hedge funds. And thanks to a whole galaxy of obscure, acronym-laden bailout programs, it eventually rivaled the “official” budget in size — a huge roaring river of cash flowing out of the Federal Reserve to destinations neither chosen by the president nor reviewed by Congress, but instead handed out by fiat by unelected Fed officials using a seemingly nonsensical and apparently unknowable methodology. . . .
It is as though someone sat down and made a list of every individual on earth who actually did not need emergency financial assistance from the United States government, and then handed them the keys to the public treasure. The Fed sent billions in bailout aid to banks in places like Mexico, Bahrain and Bavaria, billions more to a spate of Japanese car companies, more than $2 trillion in loans each to Citigroup and Morgan Stanley, and billions more to a string of lesser millionaires and billionaires with Cayman Islands addresses. “Our jaws are literally dropping as we’re reading this,” says Warren Gunnels, an aide to Sen. Bernie Sanders of Vermont. “Every one of these transactions is outrageous.
As an example, Taibbi relates a story about two wealthy Wall Street wives—Christy Mack, wife of John Mack, who at the time was CEO of Morgan Stanley, and Susan Karches, widow of Peter Karches, another Morgan Stanley executive—who, in June of 2009, started an investment company named “Waterfall TALF Opportunity.” They funded it with $15 million, which they invested in student loans and mortgages. The Fed quickly handed them almost $200 million in low interest loans that “guaranteed them millions in risk-free income.” To make things even more outrageous, Taibbi reports, FED loans like these were set up as “non-recourse loans,” so that the beneficiaries would keep 100% of the gains on the deals and the Fed and the Treasury (the taxpayer) would eat 90% of the losses. If they didn’t pay back the loans the FED would keep the worthless securities they put up as collateral and “call it even.” Of the $220 million the two wives got from the Fed, roughly $150 million had not been paid back as of fall of 2010.
The name of the program that Mack and Karches took advantage of is TALF, short for Term Asset-Backed Securities Loan Facility, one of the bailout initiatives cooked up by Federal Reserve chief Ben Bernanke and Treasury Secretary Timothy Geithner. According to Taibbi, it was designed to give “already stinking rich people gobs of money for no fucking reason at all.” And a lot of this money went to individuals and businesses with addresses on the Cayman Islands, where Waterfall TALF Opportunity is parked. So, a lot of the profits made on many FED loans were not even taxed.
But all that money was paid back, wasn’t it?
During the financial crisis, the Fed routinely made billions of dollars in “emergency” loans to big banks at near-zero interest. Many of the banks then turned around and used the money to buy Treasury bonds at higher interest rates — essentially loaning the money back to the government at an inflated rate. “People talk about how these were loans that were paid back,” says a congressional aide who has studied the transactions. “But when the state is lending money at zero percent and the banks are turning around and lending that money back to the state at three percent, how is that different from just handing rich people money?
The FED also made billions in loans to the Central Bank of Mexico, the Korea Development Bank, and the Arab Banking Corporation of Bahrain whose major stakeholder is the Central Bank of Libya. According to Taibbi, “Muammar Qaddafi received more than 70 loans for the FED along with the Real Housewives of Wall Street.”
At a time when working families are suffering from unemployment and foreclosure, and when the middle class is literally disappearing, the “unofficial budget” has distributed hundreds of billions to the wealthy who didn’t need it and who used it to make even larger profits. While over 10 million senior households can’t afford their rent or utilities, where one out of every three seniors is living below or near the poverty line, and over 6 million seniors don’t have enough to eat, Federal Reserve and Treasury Department policy continues to concentrate massive amounts of money in the hands of a very few, extremely wealthy individuals and the companies and institutions they run.
There’s plenty of money in this country. What we are missing is clear knowledge about how taxpayer money is being spent, and a demand, by the electorate, that it be used for the public good. Bernie Sander’s demanding transparency at the FED is an excellent start. Now if we can just get the electorate on board. . . Pitchforks anyone?