ÿþ<html> <head> <meta http-equiv="content-type" content="text/html;charset=iso-8859-1"> <title>OnlineColumnist®.com: Putin Punishes Georgia</title> <meta name="generator" content="Adobe GoLive 4"> <style type="text/css"> .style2 { font-size: large; font-weight: bold; font-family: Arial; } .style3 { height: 69px; } .MsoNormal {} </style> </head> <body bgcolor="white" vlink="black"> <center> <table cool width="624" height="2719" border="0" cellpadding="0" cellspacing="0" gridx="16" showgridx gridy="16" showgridy> <tr height="79"> <td width="133" height="118" rowspan="2" valign="top" align="left" xpos="0"><a href="aboutdiscobolos.html"><img height="110" width="62" src="images/discobolos.logo.transp.gif" border="0"></a></td> <td width="7" height="118" rowspan="2"></td> <td width="482" height="79" colspan="2" valign="top" align="left" xpos="140"><img height="75" width="450" src="images/banner.GIF"></td> <td width="1" height="118" rowspan="2"></td> <td width="1" height="79"><spacer type="block" width="1" height="79"></td> </tr> <tr height="39"> <td width="182" height="39"></td> <td width="300" height="39" valign="top" align="left" xpos="322"><a href="aboutdiscobolos.html"><img height="14" width="267" src="images/divisionofNEW.GIF" border="0"></a></td> <td width="1" height="39"><spacer type="block" width="1" height="39"></td> </tr> <tr> <td width="624" colspan="6" valign="top" align="left" xpos="0" class="style3"> <table border="0" width="100%" bgcolor="black" cellspacing="0"> <tr> <td> <table border="0" width="100%" bgcolor="#99ffcc" cellspacing="0" cellpadding="4"> <tr> <td align="center"> <div align="left"> <a href="index.html"><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong> HOME</strong></font></a><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong> &#8226; <a href="articlesindex.html">ARTICLES</a> &#8226; <a href="books.html">BOOKS</a> &#8226; <a href="teflon.html"> THE </a><a href="teflon.html">TEFLON</a><a href="teflon.html"> REPORT</a> &#8226; <a href="mailto:letters@onlinecolumnist.com"> REACTIONS</a> &#8226; <a href="aboutdiscobolos.html">ABOUT DISCOBOLOS</a></strong></font></div> </td> </tr> </table> </td> </tr> </table> </td> </tr> <tr height="2"> <td width="133" height="2">&nbsp;</td> <td width="489" height="2576" colspan="3" rowspan="2" align="left" xpos="133" content valign="top" csheight="2573"> <p class="style2">Fed&#39;s Money Pit</p> <p><b><font face="Arial,Geneva,Helvetica">by John M. Curtis</font></b><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><b><a href="books.html"><br> </a></b></font><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><b> (310) 204-8700</b></font></p> <p><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><i>Copyright November 25 2008<br>All Rights Reserved. </i></font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p> <p class="MsoNormal"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When Congress approved Federal Reserve Board Chairman Ben S. Bernanke and Treasury Secretary Hank Paulson s bailout plan Oct. 3, it was for a measly $700 billion.<span style="mso-spacerun: yes">&nbsp; </span>No one, other than Fed officials, could have imagined that the real taxpayer liability was closer to 7.7 trillion, a staggering sum more than half of the 2007 U.S. Gross Domestic Product.<span style="mso-spacerun: yes">&nbsp; </span>Bernanke and Paulson sold Congress on their  toxic assets relief plan, something Paulson reneged on Nov. 12.<span style="mso-spacerun: yes">&nbsp; </span>He claimed the government s cash was best-spent buying preferred stock, refusing to disclose the institutions to which cash was going.<span style="mso-spacerun: yes">&nbsp; </span> Whether it s lending or spending, it s tax dollars that are going out the window and we end up holding collateral we don t know anything about, said House Financial Services Committee Member Rep. Scott Garrett (R-N.J.).<span style="mso-spacerun: yes">&nbsp; </span>Garrett sees the Fed operating without accountability.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Bernanke sees the Fed s draconic rescue as necessary to prevent a 1929-like depression, where bank and corporate failures snowball around the country.<span style="mso-spacerun: yes">&nbsp; </span>No one at the Fed or Treasury have any explanation for why the U.S. financial system collapsed.<span style="mso-spacerun: yes">&nbsp; </span>Blaming the mess on the so-called  subprime lending crisis doesn t add up.<span style="mso-spacerun: yes">&nbsp; </span>Other past real estate meltdowns had comparable default and foreclosure rates.<span style="mso-spacerun: yes">&nbsp; </span>Federal mortgage agencies Fannie Mae and Freddie Mac, responsible for funding and selling loans as  mortgage-backed securities, went bankrupt.<span style="mso-spacerun: yes">&nbsp; </span>While there s much speculation why, there s few facts about waste, fraud and mismanagement that led the way.<span style="mso-spacerun: yes">&nbsp; </span> Despite the failure of both agencies, there s no explanation for what happened.<span style="mso-spacerun: yes">&nbsp; </span>Some suspect piracy and greed but no grand juries have been convened to hold former Fannnie CEOs Franklin Raines and Daniel Mudd accountable.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Before the seizure of Fannie Mae and Freddie Mac by federal regulators Sept. 7, their CEOs extracted massive compensation.<span style="mso-spacerun: yes">&nbsp; </span>Fannie Mae CEO Daniel Mudd and Freddie Mac CEO collected over $40 million in executive compensation in 2007, while both agencies incurred massive losses.<span style="mso-spacerun: yes">&nbsp; </span>Freddie Mac s CEO Richard Syron received $19.8 million while the company hemorrhaged into insolvency.<span style="mso-spacerun: yes">&nbsp; </span>No grand juries have been convened to investigate the most egregious piracy since Enron filed for bankruptcy Dec. 2, 2001.<span style="mso-spacerun: yes">&nbsp; </span>Enron was small change compared to the collapse of Fannie Mae and Freddie Mac, costing taxpayers over $200 billion.<span style="mso-spacerun: yes">&nbsp; </span>Both agencies cover more than $30 trillion in U.S. mortgages.<span style="mso-spacerun: yes">&nbsp; </span>No one expected the scope of the U.S. financial collapse, causing Bernanke to pony up trillions to keep U.S. banks from the 10,000 failures in the Great Depression.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Former Fed Chairman Alan Greenspan called the current financial mess a  once in a century event, far eclipsing the $4.2 billion 1979 Chrysler bailout or $209.5 billion 1990s Savings and Loan fiasco.<span style="mso-spacerun: yes">&nbsp; </span>He compared the event to the 1907 Financial Panic that led to the 1913 creation of the Federal Reserve.<span style="mso-spacerun: yes">&nbsp; </span> While President-elect Obama has put his economic team together, including naming New York Fed President Timothy Geithner as Treasury Secretary, there s no indication his rescue plan differs one iota from President George W. Bush and his Treasury Secretary Hank Paulson.<span style="mso-spacerun: yes">&nbsp; </span>Both rely heavily on Bernanke to supply endless cash needed to fund destitute financial institutions, freezing assets in recent months.<span style="mso-spacerun: yes">&nbsp; </span>Bernanke has resisted disclosing the names of financial institutions receiving the Fed s cash.<span style="mso-spacerun: yes">&nbsp; </span>Bernanke fears revealing names would weaken bond and share prices.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>When Obama takes office Jan. 20, Bernanke s job could be on the line.<span style="mso-spacerun: yes">&nbsp; </span>His refusal to name names belies the promise he and Paulson made to Congress Oct. 3 that they intended to be more  transparent. <span style="mso-spacerun: yes">&nbsp; </span> There s a lack of transparency here, and given the Fed is taking on a huge amount of credit risk now, it would seem to me as a taxpayer there should be more transparency, said Paul Kasriel, chief economic at Chicago-based Northern Trust Corp.<span style="mso-spacerun: yes">&nbsp; </span>As long as the Fed holds taxpayers responsible, the Fed has an obligation to reveal the names and amounts of the cash.<span style="mso-spacerun: yes">&nbsp; </span> We think that s counterproductive, Bernanke told Nov. 18 the House Financial Services Committee, refusing to divulge the names and amounts of bank borrowing.<span style="mso-spacerun: yes">&nbsp; </span>If the Fed lent the cash at zero percent, or no new debt to taxpayers, then Bernanke could justify keeping the names and amounts silent.<span style="mso-tab-count:1">&nbsp; </span><span style="mso-spacerun: yes">&nbsp;&nbsp; </span> </p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-spacerun: yes">&nbsp;</span><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Beranke and Paulson owe the public an explanation how and why U.S. financial markets collapsed.<span style="mso-spacerun: yes">&nbsp; </span> Blaming the whole mess on faulty mortgage-backed securities doesn t tell the whole story of how otherwise stable financial institutions became insolvent.<span style="mso-spacerun: yes">&nbsp; </span> This is the worst capital markets crisis in modern history, said Ethan Harris, co-head of Barclays Capital Inc.<span style="mso-spacerun: yes">&nbsp; </span> So you have the biggest intervention in modern history, justifying the Fed s extreme actions.<span style="mso-spacerun: yes">&nbsp; </span>No one begrudges the Fed supplying the capital needed to keep financial markets afloat.<span style="mso-spacerun: yes">&nbsp; </span>Congress and taxpayers simply want to know the names and amounts of capital promised to various financial institutions.<span style="mso-spacerun: yes">&nbsp; </span>Whether Bernanke admits it or not, depositors, bondholders and shareholders have a right to know the solvency of financial institutions.<span style="mso-spacerun: yes">&nbsp; </span>Keeping the public in the dark only adds to the economic uncertainty plaguing markets..</p> <p class="MsoNormal"> <bAbout the Author</u><b>John M. Curtis</b> writes politically neutral commentary analyzing spin in national and global news.&nbsp; He's editor of OnlineColumnist.com and author of <i><a href="books.html">Dodging The Bullet</a> </i>and <i><a href="books.html"> Operation Charisma</a></i>.</p> </td> <td width="1" height="2576" rowspan="2"></td> <td width="1" height="2"><spacer type="block" width="1" height="2"></td> </tr> <tr height="2574"> <td width="133" height="2574" valign="top" align="left" xpos="0"><img height="172" width="111" src="images/johninframe3.jpg"></td> <td width="1" height="2574"><spacer type="block" width="1" height="2574"></td> </tr> <tr height="1" cntrlrow> <td width="133" height="1"><spacer type="block" width="133" height="1"></td> <td width="7" height="1"><spacer type="block" width="7" height="1"></td> <td width="182" height="1"><spacer type="block" width="182" height="1"></td> <td width="300" height="1"><spacer type="block" width="300" height="1"></td> <td width="1" height="1"><spacer type="block" width="1" height="1"></td> <td width="1" height="1"></td> </tr> </table> <table border="0" cellpadding="0" cellspacing="2" width="597"> <tr> <td><font size="1" face="Arial,Geneva,Helvetica"> <hr noshade size="1"> </font><a href="index.html"><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong> Home</strong></font></a><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong> || <a href="articlesindex.html">Articles</a> || <a href="books.html">Books</a> || <a href="teflon.html">The Teflon Report</a> || <a href="mailto:letters@onlinecolumnist.com"> Reactions</a> || <a href="aboutdiscobolos.html">About Discobolos</a></strong></font> <div align="left"> <p><font size="1" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular">This site designed, developed and hosted by the experts at</font><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"> <a href="http://www.cmeonline.net" target="_blank"><img height="30" width="138" src="images/cmelogoANIM.gif" border="0" align="absmiddle"></a></font></p> </div> <p><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular">©1999-2005 <a href="aboutdiscobolos.html"> Discobolos Consulting Services, Inc.</a><br> (310) 204-8300<br> All Rights Reserved. </font></td> </tr> </table> </center> </body> </html>