Monday, January 11, 2010

Following the Geithner Money Train: Paying Back Your Own Tax Dollars

Have you checked your credit cards’ interest rates recently? I hope you have been reading those changes in the TOS that Citibank, Chase and others have sent. You remember them…the companies that took your tax dollars as a bailout. Now that congress has passed so-called “credit card reform,” we get to reap the fruit of their labor: A huge jump in interest rates, fees, minimum payments and a reduction of credit limits in anticipation of new regulations that go into effect in February.

See, while congress told the public how they wanted to help consumers out, they gave the banks and agencies plenty of time to hike up interest rates and other fees in anticipation of other restrictions. All this while people are struggling to make ends meet and there’s double-digit unemployment. Most of what this bill has accomplished is making it harder for consumers to get out of debt.

While we’re at it, let’s quit the lie that republicans are for big business and democrats are for the little guy. Face it: Members of both parties are out for themselves. They both like to help banks and financial institutions because it benefits their campaign contributions. Look at either candidate in the 2008 presidential election. Both had significant campaign contributions from those in financial institutions.* Senator John McCain took money from donors in these institutions. His top five donors (just over 1.4 million) were financial institutions Merrill Lynch, Citigroup, Morgan Stanley, Goldman Sachs and JPMorgan Chase & Co. Goldman Sachs was President Obama’s largest private donor at almost one million. With the exception of Merrill Lynch, the same financial institutions donated to the Obama campaign at almost two million. (*Note: Donations don’t come technically from the organizations, but from the organization's PAC, its individual members, employees or owners and those individuals' immediate families.)

All of these institutions (Bank of America later purchased Merrill Lynch) took TARP money. All, except Citigroup, are reported as having paid the money back. But these banks, and others who spent the most money lobbying, were the ones who got the bailout money. And, although they claimed they needed these bailouts to make loans, lending declined after the bailout of these same institutions! Several paid back the loans only when it became evident that they wouldn’t be able to hand out huge annual bonuses.

You’d think all these money woes would mean income for the employees fell. Not so. In fact, Wall Street Journal reports Goldman Sachs’ projected compensation per employee for 2009 will average $743,112!

So Sachs is doing well, but that’s no surprise. Look who’s guarding the treasury hen house: Timmy “TurboTax” Geithner, former president of the Federal Reserve (who blamed TurboTax® for underpaying his own taxes). Later this month, Congress will question Geithner about emails involving deals between AIG and Goldman Sachs. Emails showing the New York Federal Reserve withholding information about AIG’s funneling taxpayer’s bailout money they had received over to Goldman Sachs and others. Initially, neither Geithner, previously accused of suspiciously close ties to Sachs, nor the Federal Reserve would name the banks benefiting, from “AIG's ‘backdoor bailouts.’”

At the same time, under the watch of the Federal Reserve, a competitor to Goldman Sachs, Lehman Brothers, was allowed to fail while AIG was proclaimed “too big to fail.” AIG’s $170 billion bailout allowed them to repay a 12.6 billion debt to Goldman Sachs. In fact, at the time of his nomination, Geithner was questioned about these ties. The questions are not going to be any friendlier this time around.
“Lawmakers reacted angrily Friday to revelations in e-mails sent in late 2008 and early 2009 between lawyers for the New York Fed and American International Group Inc. The exchanges show the New York Fed wanted AIG to withhold information about deals that sent billions from the taxpayer bailout of AIG to Goldman Sachs Group Inc., Societe Generale and other major banks.”
Isn’t that the way criminals launder money? Or maybe it’s a case of Goldman Sachs wanting to make sure they got their investment back before AIG went tits up.

I anticipate in the next week or so and right around the time of these hearings, we’ll start hearing a crescendo of consumers who just opened their Christmas bills and found their interest rate jumped from the teens to the twenties or more. Citigroup claims it just costs more to do business. This is bull—this writer opted out (i.e., canceled) my card. I had that card for almost 20 years. Back then, the prime lending rate was three times what it is now and yet my interest rate was lower then, even though I have a better rating now.

Citigroup has also recently announced that it will raise the billions needed to pay back the taxpayer loans. And although their stock price jumped slightly at the announcement they would be selling stock, being that it’s worth less than $5 a share, the idea is absurd. Not to mention that to sell, you have to have someone who actually wants to buy it. It will be interesting to see if there are any takers and their identity. However, it means that you’ll likely be paying back loans of your tax dollars, with more of your own money.

But isn’t that what Ponzi schemes are all about?

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