Trickle Up Poverty: Stopping Obama’s Attack on Our Borders, Economy, and Security

by Michael Savage

  Are you beginning to get the picture? It’s a recurring theme, the association of Goldman Sachs with the financial meltdown and ongoing corruption in the financial industry.

  In April, 2010, Congress opened hearings into SEC allegations that Goldman Sachs had created, in league with hedge fund trader John Paulson, a financial instrument based on mortgage-backed securities that was designed to fail and that, like Paulson, Goldman Sachs actually helped insure its failure by having their own traders sell it short while not advising their investors that there was a virtual guarantee that the instrument would fail. This caused Goldman Sachs clients to lose significant amounts of money as a result of their having followed the advice of their investment counselors at the financial giant, advice the counselors themselves were betting against.

  Am I the only one who has a problem with Congress holding their sham hearings on Goldman Sachs? It’s a classic case of the fox guarding the henhouse. Why do I say that? Aren’t the members of Congress to be trusted? Let me put it to you this way: One of the key players in the hearing, Senate Banking Committee Chairman Democrat Chris Dodd, is up to his ears in financial misdeeds himself. Dodd profited through being a preferred customer of Angelo Mozillo’s now discredited Countrywide Financial, receiving low-interest loans that saved him tens of thousands of dollars in interest charges.

  But it gets worse. Other recipients of favored treatment from Mozillo included Democratic Senator Kent Conrad of North Dakota, former Clinton Secretary of Health and Human Services Donna Shalala, and Obama advisor James Johnson, who resigned from Obama’s campaign after his involvement with Mozillo was made public.32 Add the nonexistent Congressional “oversight” responsibilities with regard to Fannie Mae and Freddie Mac, and you have the makings of a multi-pronged scandal that involves, not only corrupt financial institutions and hedge fund traders on Wall Street, but rampant corruption among those in Congress charged with protecting the public’s interest. In fact, when he had a chance to make sure Fannie and Freddie were appropriately regulated in 2006, Dodd cast a “no” vote as the legislation failed.

  President Obama campaigned hard for the financial reform bill. His underhanded tactics included having Michigan Democratic Senator Carl Levin order the release of internal Goldman Sachs e-mails that documented the fact that the company had sold short securities they advised their own clients to buy. Goldman, for its part, refused to release financial information that showed the profits it made from shorting the housing market while emphasizing the losses it sustained in that same market.

  The financial regulation reform legislation whose passage the Goldman Sachs fraud hearings were designed to assure in fact does very little to “regulate” the financial industry—especially given the fact that the current oversight bodies have proven woefully inadequate to do the job. The fact of the matter is that neither the Congress nor their partners in crime, the financial players, can be trusted to act in the public interest.

  Why? Once again, you must follow the money trail.

  According to a report by the Associated Press, during the last 20 years the barons on Wall Street have enriched the coffers of federal politicians to the tune of $2.3 billion.33 Don’t think for one minute that those deep pockets aren’t having an enormous sway over what gets passed in Washington. Money talks. Any bill that Congress passes into law will likely do next to nothing to muzzle those who would devour the little guy’s savings for their personal gain.

  The bill further consolidates the rapidly expanding power of the central government, authorizing it to interfere broadly with the financial markets. As Treasury Secretary Timothy Geithner, speaking about financial institutions in an MSNBC interview, put it, if financial firms do get into trouble, “we get to put them out of their misery, unwind them, you know, organize the elegant funeral for them.”34

  Let me put it to you this way.

  Geithner and his confederates are judge and jury.

  First, they decide who gets closed down. Then they’ll close them down.

  Tell me that’s not a formula for abuse by government hacks.

  The legislation gives regulators the power to break up banks and other financial entities that they deem have grown too big for their own good, but those regulators are still paid by the banks. Talk about letting the fox stay in the henhouse! Not much incentive for the regulators to do the job they’re supposed to. The legislation empowers the consumer protection agency, also under the control of the Federal Reserve Board, to set rules that are intended to curb unfair consumer loan and credit card practices.

  What’s more, the legislation contains a provision that requires banks, hedge funds, and other institutions to go through clearinghouses in an effort to make many trades more transparent. The problem is, though, that the legislation includes “loopholes and gaps that weaken their impact,” because many types of traders are exempt from this monitoring, including some hedge fund traders, those trading in the foreign exchange markets, and many financial institutions trading derivatives to reduce their risk.35

  In addition, the same regulators who allowed the 2008 financial crisis to happen are in charge of the same institutions that caused it. You might want to read that again. Instead of being hauled up on charges for allowing the meltdown in 2008 that destroyed the retirement savings of the middle class, these regulators get to keep their job of not doing their job. And the new law “does little to prevent big banks from getting bigger, meaning taxpayers might have to intervene again.”36

  To add insult to injury, the bill does nothing to regulate Fannie Mae and Freddie Mac. We, the taxpayers, are still on the hook for hundreds of billions of dollars—which may become trillions in the future—the result of continuing mismanagement by the people running these quasi-governmental financial sinkholes. As the Wall Street Journal has noted, it virtually “guarantees bailouts as far as the eye can see.”37

  There is also the possibility that the bill will drive an entire segment of the financial industry into unregulated territory. One of the things the bill does is prohibit banks from being in both the business of trading securities and the business of loaning money. This might force banks to sell off their trading businesses to other financial institutions, or to spin them off into separate businesses. In either case, that could mean that those businesses do not fall under the control of the regulatory agencies created by the financial regulation bill. They’re precisely the components of the banking industry that the bill seeks to regulate, and they’re precisely the components that will slip from regulators’ oversight with passage of the bill.

  Under the new financial regulation legislation, hedge funds, the engines of the financial manipulation that triggered the 2008 meltdown, are subject to somewhat greater regulation. Those funds managing over $100 million will be required to register with the SEC, and the SEC will be required to report to Congress how investors have been protected from risks posed by short sellers.38 There are questions about whether these provisions will effectively prevent short sellers from once again raiding the markets and causing another crash, though. In fact, only a ban on short selling will protect legitimate investors from returning to the market without risking having their investments devalued by hedge fund raiders. Rasmussen Reports sums up the likelihood that Congress is really addressing the root causes of the current economic situation with this headline: “72% Are Not Confident Congress Knows What It’s Doing When It Comes to The Economy.”39

  Don’t count on the Federal Government to start listening any time soon.

  Writing in Rolling Stone magazine, Matt Taibbi sums up the situation:

  Some parts of the new reforms border on insanity, threatening to vastly amplify Wall Street’s political power by institutionalizing the taxpayer’s role as a welfare provider for the financial-services industry. At one point in the debate, Obama’s top economic advisors demanded the power to award future bailouts without even going to Congress for approval—and without providing taxpayers a single dime in equity on the dea
ls.40

  In the most sensible solution yet proposed for the AIG bailout, the website DotPenn.com envisions a scenario in which a Samurai is brought in to train AIG executives to commit seppuku, Japanese ritual suicide, because, as the Samurai explains to his audience, “you have dishonored your families, your company, and your nation.”41

  Put the Brakes on Auto Bailouts

  TARP funds were also used to prop up failing automakers General Motors and Chrysler. The Bush administration released $17.4 billion to the two automakers in December, 2008.42 A year later, GM and Chrysler had gone through more than $40 billion in additional TARP funds.43 In taking over the two auto giants, the Obama administration ignored the law and awarded huge stakes in the companies to the auto unions, offering stockholders pennies on the dollar while reducing them to minority status. The United Auto Workers (UAW) labor union now owns about 40 percent of GM and 55 percent of Chrysler and effectively controls both companies, something Karl Marx himself would have applauded!

  The General Motors bailout is a perfect example of what this corrupt Obama regime considers fair: Unions got a hundred cents on the dollar, primary shareholders, who should have been first in line, were forced by government fiat to settle for twenty cents on the dollar. Illegal, unconstitutional, done deal. But the corruption and inequity don’t stop there. You might be familiar with the commercials that aired in the spring of 2010 in which the then-new president of General Motors, Ed Whitacre, an Obama appointee who is paid nearly $10 million annually, brags about how his company is paying back the bailout funds it received.

  In a turn of events typical of this administration’s perverted notion of fairness, General Motors robbed Peter to pay … Peter. The former automotive giant “paid back” the federal bailout money given to it by taking money from another chunk of government bailout money that it had sitting in an escrow account. GM lost billions of dollars in its first year as a ward of the state, and so it was little wonder that eyebrows were raised when it “paid back” some of the “loan” from taxpayers.

  Of course, as it turned out, GM didn’t pay it back at all. We’re still on the hook for a company none of us would likely have bought stock in the first place, if we hadn’t been forced to by the Obama administration. By the way, the Ford Motor Company, which refused federal bailout money, announced a $2.1 billion profit for the first quarter of 2010. The company also announced that it was adding employees and expanding production. That means nothing to Obama, who thinks Washington is the answer to the questions Detroit faces.

  The crisis that faced America’s big three auto manufacturers before the government bailed out GM and Chrysler arguably had a single source: legacy costs resulting from union contracts negotiated half a century ago. The financial burden thus incurred weighed down their balance sheets to such a degree that, even if the industry in which they compete had been thriving, it would have been extremely difficult for them to maintain long-term profitability.

  As automobile manufacturing became a global industry, the foreign manufacturers that expanded their operations into the United States flourished. But while Toyota and Honda, along with relative latecomers Hyundai and Kia, have a significant manufacturing and sales presence in the United States, they don’t have the staggering labor-related financial obligations under which GM, Chrysler, and Ford are struggling.

  GM, for instance, has some 450,000 retirees. That’s more than three times the number of its current full-time employees, to whom GM pays pensions and for whom it provides medical care. By some estimates, medical costs for retirees alone add more than $1,500 to the average cost of each GM automobile.44 Need I point out the obvious? The higher sticker price to cover these perks contribute to stalled sales. What’s more, the company faces an unfunded liability of more than $80 billion, about half its annual pre-downturn gross sales, for future healthcare costs for employees and retirees and their dependents.45

  Without the balance-sheet-killing albatross resulting from union contracts, foreign manufacturers have been doing very well in the United States. When Obama bailed out the auto industry by nationalizing GM and Chrysler, he put the burden of saving the industry from the consequences of union contracts negotiated by his leftist political forbears squarely on the shoulders of American taxpayers. In doing so, he virtually assured that these companies would either sink into oblivion or become permanent corporate wards of the state, with American taxpayers footing the bill.46

  Unions have been losing members and influence in the private sector for years. Unfortunately, in the public sector, their presence has continued to grow. Andy Stern, president of the 2.2 million-member Service Employees International Union (SEIU), has logged more visits to the Obama White House than any other outsider. Stern is what conservative commentator Kimberly Morin describes as a “progressive, anti-business, anti-American left wing extremist who deserves no place in the White House.”47 The SEIU contributed more than $60 million to Obama’s presidential campaign.

  Like Hitler’s brownshirts, Obama’s purple-shirted SEIU-member supporters, who seem to appear everywhere he speaks, are his equivalent of union storm troopers. They’ve showed up in several cities to “drown out” the voices of town hall meeting attendees protesting Obama’s policies. They turned out in Massachusetts in support of Martha Coakley in her unsuccessful campaign against Scott Brown for the Senate seat vacated by Teddy Kennedy. They assaulted Kenneth Gladney, one Tea Party protestor, beating him badly in order to intimidate him and prevent him from selling “Don’t Tread On Me” flags.48

  Union membership is declining dramatically in the private sector. In 2009, there were more unionized employees in government (7.9 million) than in the private sector (7.4 million). By this year, union membership had dropped to 12.3 percent of wage and salary workers from more than 20 percent in 1983, with 37.4 percent of public sector workers unionized while only 7.4 percent of private sector workers are. It means that private industry in our free market has discovered that unions are budget-busters and done something about it. It also means that, being a Marxist president who was ushered into office in no small part because of union support, Barack Obama is going to do anything he can to reward those supporters.

  That, in turn, plays out as support for such policies as “card check,” the elimination of the secret ballot for workers faced with voting for or against unionizing their shops. And it means that every industry the president is able to nationalize will soon become a unionized industry, helping the president and his union thug allies consolidate their power and gain ever-increasing control over our lives and our jobs. The fact that Obama is clearly using his relationship with the SEIU to further union interests in the United States attests to his ongoing push to bring labor unions back to an unearned and undeserved position of prominence in America.49

  When Obama “rescued” GM and Chrysler, he committed American taxpayers to underwriting the leftist agenda of the past half century, as manifested in labor agreements antithetical to capitalism. That it’s taken so long for this leftist tactic, in tandem with the current exacerbating financial crisis, to finally bring the American auto industry to its knees is a testament to the resilience of capitalism. That Obama’s “solution” to this crisis might spell the end of American automobile manufacturing should not be lost on those of us who will have to bear the financial burden of “saving” it.

  For all the manipulation and downright fraud that went into the passage of TARP legislation, one of the most egregious aspects of the law is that it creates a permanent debit on our balance sheet. When banks do pay back their TARP loans, guess what? The money doesn’t go back to the taxpayers who are underwriting the government borrowing that made it possible. It is treated as part of the general revenue of the federal government, to be spent by our elected and appointed officials on whatever they decide they want to spend it on. All repayment of TARP money does is give the government license to increase its TARP spending.50

  And so, Barack Obama “inherited” a situation
any leftist would love.

  Left leaning hedge fund managers and their cronies appear to have engineered a financial crisis that they could blame on the “capitalist pigs” and, in turn, elect one of their own on the grounds that the capitalists themselves had undermined the very foundations on which they built their empires. Obama used this phony leverage to enact, less than a month after his inauguration, a nearly 1,000-page “stimulus” bill that requires the government to borrow upwards of $800 billion. This added to the national debt and tying up capital that would otherwise be available to fund private sector expansion that might actually create jobs.

  The bill, which Mike Huckabee named the Congressional Relief Action Program (CRAP), was designed to “create” or “save”—as if saving jobs can be measured—more than three million jobs, according to it supporters. After a year, the White House’s own website declares that 1.2 million jobs have been “funded.” It appears as though the administration has given up trying to claim that any jobs were actually created or saved.

  The primary things funded by the bill include expanded unemployment benefits, food stamps, healthcare subsidies for those out of work, and aid to states. The “aid to states” category is where most of the jobs have been funded.51 It also proposed to fund “shovel ready” local, state, and federal construction projects, although there were almost no such projects ready to be funded, thanks in no small part to the difficult process of satisfying all the leftist environmental-interest-group-related paperwork required to initiate such projects. A year after its passage, the bill has had little effect, except to contribute to international credit ratings agency Moody’s threat to downgrade the U.S. credit rating.