Note: This column originally appeared at Pajamas Media on Thursday morning.
Let’s see. There’s Treasury Secretary Hank Paulson’s “bailout fund.” There’s also the AIG money that’s separate from the bailout fund. Then there are the “efficient car” loan guarantees already on schedule to be provided for Detroit’s Big Three automakers. And don’t forget the “cash injections” heading to the coffers of Fannie Mae and Freddie Mac.
Oh, and do you see that long line stretching around the block? Those are all the entities, public and private, accompanied by their lobbyists, wanting in on the action. K Street has never had it so good.
It’s all one big SUCKUP — the Seemingly Unlimited Cash Kitty Under Paulson.
Monday, Martin Crutsinger of the Associated Press noted that over $158 billion has been disbursed so far to publicly-held banks in the financial services bailout portion of the SUCKUP. Additionally, over 6,000 — you read that right — privately held banks have December or later deadlines for staking their claims.
Nearly totally lost in the flurry of activity is perhaps the biggest financial bait-and-switch in human history. The original bailout bill, with its made-up $700 billion cost estimate, was sold to Congress on the idea that Treasury would buy “troubled assets,” primarily mortgage loans on homes and other properties in serious delinquency or foreclosure. Yet less than two weeks later, in a move that was never even hinted at during legislative discussions, Paulson decided that the government would instead take ownership positions in US banks. It is more than a little likely that many “yes” votes on the bailout bill would have been different had congressmen known how Treasury would really use the money. Too bad; now it’s too late.
It’s not only that Paulson changed his strategy almost immediately; it’s that he did so with such a heavy hand. A chilling October 14 exchange on CNBC, one that may someday be seen as a pivotal moment in the demise of the free market system as we know it, told us how it went down (bold is mine; the commentator cited is obviously speaking figuratively):
….. Paulson put all these egos in the room, and basically put guns to their heads, forcing them to take the money to bolster the banking system.
….. Some of the firms say they didn’t want the cash ….. And Paulson at one point said, “Listen, if you don’t want it, it doesn’t matter, gun to your head, you gotta take it.”
Thus, Paulson even forced government ownership on banks that believed they didn’t need it. Where in the world is the outrage?
In case you’re not having enough fun yet trying to keep up with the financial sector bailout’s thousands of potential SUCKUP applicants, there’s more. Much more. Big Three automakers GM, Ford, and Chrysler are desperately seeking SUCKUP money.
But wait a minute. Aren’t the Big Three already in line to receive $25 billion in loan guarantees for research? Indeed they are. But you see, that money has strings attached to it — that is, it has to be used for the purpose intended (imagine that). The Big Three just want additional cash that will go straight into their checking accounts so they can use it (read: burn through it) without making hard decisions that would displease the United Auto Workers Union).
Very few seem to have noticed that the loan guarantees alone dwarf the estimated $8 billion combined market value of all three companies. Fewer still have caught on to the fact that the UAW has flatly ruled out additional concessions, even though the Big Three’s total compensation per hour of production is a whopping 50% higher than Toyota’s.
As night follows day, the Big Three’s parts suppliers now want in on the SUCKUP bandwagon.
Don’t overlook Freddie Mac and Fannie Mae, known affectionately to the Wall Street Journal and yours truly as “Barney’s Rubble,” after their chief protector, Congressman Barney Frank of Massachusetts. For years, these two “government-sponsored enterprises” essentially dictated that there would be lower credit-approval standards in the mortgage marketplace, leading to untold billions of dollars in troubled and foreclosed loans. Also alternatively known as Fanron and Fredron, their resulting insolvency brought the financial-sector mess to a head several months ago. Having just reported a $25 billion loss, Fredron will get a cash injection of $13.8 billion. Fanron cannot be far behind.
Finally, government entities galore are clamoring for SUCKUP funds. It’s a lineup resembling the list recited in that 1960s hit song, “Dancing in the Streets” — except this time they’re “Beggin’ to the SUCKUP Beat”:
All they want is money,
They think money’s everywhere ….
McClatchy reports that 41 states are in fiscal trouble, and that the US Conference of Mayors wants $24 billion in SUCKUP money for “infrastructure” projects. Last week, Forbes cited outside research claiming that Uncle Sam is on the hook for $5 trillion already in the financial sector alone.
When will it end? I’m not sure it ever will — which is why SUCKUP may someday end up standing for the “Socialism Undid Capitalism Kitty Under Paulson.”