Hank Paulson's $800 Billion Taxpayer Bailout of Banks—Who Sold You Out?
Sept. 10, 2008 (EIRNS)—This release was issued on Sept. 8 by the Lyndon LaRouche Political Action Committee (LPAC).
1. What Is It?
What Hank Paulson announced over the weekend is an unlimited, Federal Treasury, taxpayer-funded credit line, to guarantee banks and financial funds all over the world 100% of the value of their mortgage-backed securities. It is a Federal bailout promise which will completely dwarf the $30 billion Federal Reserve bailout of the mortgage-backed securities of Bear Stearns in May. It will steal from American citizens and taxpayers on a scale they have never seen before, to the benefit of financial firms. This makes the bailout unconstitutional, a direct violation of the leading "General Welfare" clause of the U.S. Constitution.
This taxpayer bailout of banks and hedge funds, is called by Paulson's Treasury the "Secured Credit Lending Facility." It has been publicly presented as a takeover and rescue of Fannie Mae and Freddie Mac, the huge government-sponsored mortgage companies. But the bailout credit will pass through Fannie and Freddie to the holders of the mortgage-backed securities (MBS) they've issued—that is, to international banks, investment banks, hedge funds, foreign central banks, etc.
A clear tipoff that this bailout is not actually a rescue of Fannie and Freddie? The Treasury's "Secured Credit Lending Facility" will also go through the 12 Federal Home Loan Banks. Nobody's claiming the Home Loan Banks are being "rescued"; but they've been doling out big loans to bail out bankrupt subprime mortgage lenders like Countrywide Financial.
2. How Big Is It?
'Unlimited'—the Treasury Department insisted on that.
The only limitation on the size of this bailout, temporarily, is the U.S. Federal debt ceiling. And at the Treasury's frantic demand in July, the Congress raised the Federal debt ceiling, for this purpose, from $9.6 trillion to $10.4 trillion. So this bailout could rapidly use $800 billion of Federal borrowing, raising Treasury interest rates (it's already doing that) and piling on you, the taxpayer, another $40-60 billion a year in Federal debt interest charges.
There are $7 trillion in mortgage-backed securities (MBS) held by banks, hedge funds, "investors," etc. They are the means by which these investors bought collection rights on risky mortgage by the millions. They could and should be frozen and written off for the duration of the financial crisis; instead, Paulson's Treasury is guaranteeing them at 100% face value. Fannie Mae and Freddie Mac, between them, issued about $2 trillion of these, and bought another $1 trillion from other financial firms.
3. Who Authorized This Bailout?
The answer is The Housing and Economic Recovery Act of 2008, or HR 3221, passed into law in July, and known as the Dodd-Frank bill—for Rep. 'Bailout Barney' Frank of Massachusetts, and Sen. Christopher Dodd of Connecticut, who was the chosen Presidential candidate of fascist New York banker Felix Rohatyn.
The bill was a Federal bailout of mortgage lenders to begin with. But in July, just before Congress was going to pass it, Treasury Secretary Hank Paulson insisted that the Congress add to this bill, the 'unlimited' authority to bail out Fannie Mae's and Freddie Mac's mortgage-backed securities. Hank Paulson "delivered" the end of President Bush's threat to veto the Dodd-Frank bill, in exchange for adding this unlimited bailout.
The Housing and Economic Recovery Act of 2008 doesn't even go into effect until October 1; but this part went into effect immediately when the bill was signed into law in July.
Here are the primary sponsors:
Rep. 'Bailout Barney' Frank (D-Mass.)
Rep. Nancy Pelosi, Speaker of the House—her economic policies are set by Felix Rohatyn, fascist New York banker, speculator and drug legalizer George Soros, and Al Gore.
Rep. Steny Hoyer, House Majority Leader
Rep. Rahm Emanuel, (D-Ill.)
Sen. Christopher Dodd (D-CT)—head of the Banking Committee, "Senator from Wall Street," his Presidential campaign was pushed by Felix Rohatyn, fascist New York banker.
Sen. Charles Schumer (D-NY) also participated, along with Sen. Richard Shelby (R-Ala.)
4. Who Designed and Backed This Bailout?
The idea for the Dodd-Frank bill was put in circulation by British-linked anti-FDR economists at the New York Council on Foreign Relations: particularly, "world currency" promoter Ben Steil.
The bill was specifically designed by Wall Street—by Credit Suisse Bank in particular—working with the staffs of Barney Frank and Sen. Chuck Schumer, and with Paulson's Treasury. It was also pushed by Fannie Mae CEO Daniel Mudd—he lost his job in the big bailout push this weekend, but will probably leave with a very "golden parachute."
The direct bailout of mortgage-backed securities by the Federal government was also pushed by Morgan Stanley investment bank, it's CEO John Mack—Morgan Stanley became the Treasury Department's advisor in the bailout. And it was pushed on the Congress by chief economist Mark Zandi of Moody'sEconomy.com, run by Moody's Investors Service—the rating agency which helped trigger the mortgage bubble blowout by over-rating many billions in mortgage-backed securities.
Paulson's Sept. 7 bailout announcement was backed completely by Presidential candidates Barack Obama and John McCain. Obama probably didn't know when he voted for the Dodd-Frank bill in July, that it would lead to an 'unlimited' bailout—now he does not, and he says, "It had to be done." McCain wasn't present in the Senate when the Dodd-Frank bill was voted. Now he says of Paulson's mega-bailout, "It had to be done."