Robert Reich's Proposal

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Registered: 08-19-2007
Robert Reich's Proposal
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Sun, 09-21-2008 - 3:10pm

What Wall Street Should Do To Get Its Blank Check

By Robert Reich - September 21, 2008, 1:48PM


The frame has been set, the dye cast. Treasury Secretary Hank Paulson, presumably representing the Bush administration but indirectly representing Wall Street, and Fed Chief Ben Bernanke, want a blank check from Congress for $700 billion or possibly a trillion dollars or more to take bad debt off Wall Street's balance sheets. Never before in the history of American capitalism has so much been asked of so many for (at least in the first instance) so few.

Put yourself in the shoes of a member of Congress, including our two presidential candidates. The Treasury Secretary and Fed Chair have told you this is necessary to save the economy. If you don't agree, you risk a meltdown of the entire global financial system. Your own constituents' savings could go down with it. An election is six weeks away. Besides, in the last two days of trading, since rumors spread that the Treasury and the Fed were planning something of this sort, stock prices revived.

Now - quick -- what do you do? You have no choice but to say yes.

But you might also set some conditions on Wall Street.


The public doesn't like a blank check. They think this whole bailout idea is nuts. They see fat cats on Wall Street who have raked in zillions for years, now extorting in effect $2,000 to $5,000 from every American family to make up for their own nonfeasance, malfeasance, greed, and just plain stupidity. Wall Street's request for a blank check comes at the same time most of the public is worried about their jobs and declining wages, and having enough money to pay for gas and food and health insurance, meet their car payments and mortgage payments, and save for their retirement and childrens' college education. And so the public is asking: Why should Wall Street get bailed out by me when I'm getting screwed?

So if you are a member of Congress, you just might be in a position to demand from Wall Street certain conditions in return for the blank check.

My five nominees:

1. The government (i.e. taxpayers) gets an equity stake in every Wall Street financial company proportional to the amount of bad debt that company shoves onto the public. So when and if Wall Street shares rise, taxpayers are rewarded for accepting so much risk.

2. Wall Street executives and directors of Wall Street firms relinquish their current stock options and this year's other forms of compensation, and agree to future compensation linked to a rolling five-year average of firm profitability. Why should taxpayers feather their already amply-feathered nests?

3. All Wall Street executives immediately cease making campaign contributions to any candidate for public office in this election cycle or next, all Wall Street PACs be closed, and Wall Street lobbyists curtail their activities unless specifically asked for information by policymakers. Why should taxpayers finance Wall Street's outsized political power - especially when that power is being exercised to get favorable terms from taxpayers?

4. Wall Street firms agree to comply with new regulations over disclosure, capital requirements, conflicts of interest, and market manipulation. The regulations will emerge in ninety days from a bi-partisan working group, to be convened immediately. After all, inadequate regulation and lack of oversight got us into this mess.

5. Wall Street agrees to give bankruptcy judges the authority to modify the terms of primary mortgages, so homeowners have a fighting chance to keep their homes. Why should distressed homeowners lose their homes when Wall Streeters receive taxpayer money that helps them keep their fancy ones?

Wall Streeters may not like these conditions. Well, you should tell them that the public doesn't like the idea of bailing out Wall Street. So if Wall Street doesn't accept these conditions, it doesn't get the blank check. http://tpmcafe.talkingpointsmemo.com/2008/09/21/what_wall_street_should_do_to/index.php

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iVillage Member
Registered: 03-25-2007
Sun, 09-21-2008 - 3:31pm
That's all good!

Sopal

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Registered: 01-28-2004
Sun, 09-21-2008 - 4:02pm

Gee Robert, wasn't this guy

iVillage Member
Registered: 08-19-2007
Sun, 09-21-2008 - 4:03pm

I would add that some of the money already awarded for bad management (those huge, huge bonuses) should be seized back to help defray some of that $700+ billion that is to be given to bail out the failures.

iVillage Member
Registered: 08-19-2007
Sun, 09-21-2008 - 4:07pm

My prediction is that Paulson will nationalize the losses of the Carlyle Group as quickly as he can.



Carlyle Group asserts fund losses will not spread



LONDON: Carlyle Group, the U.S. private equity firm run by David Rubenstein, said Wednesday that losses at its $16 billion mortgage-bond fund would not hurt the company's 59 other private equity and venture capital funds.


The $150 million credit line Carlyle Group extended to Carlyle Capital Corp. was provided by the firm's executives, not investors in its private equity and venture capital funds, the Washington firm said. The partners own about 15 percent of Carlyle Capital, or CCC.


Carlyle Capital is in talks with creditors to avert a sale of assets after some lenders said it had defaulted on margin calls. The fund, which had $670 million of equity in total at the end of December, used loans from 12 banks, including Citigroup and Deutsche Bank, to buy about $22 billion of AAA-rated mortgage debt issued by Fannie Mae and Freddie Mac.


"They're reassuring investors in their private equity business that it's not their money that's at stake," said Philip Gisdakis, senior credit strategist at UniCredit in Munich. "As a private equity company, you don't want a fund with your name on it marked 'default.' "


Carlyle Capital dropped as much as 49 percent in Amsterdam. Its shares are down more than 80 percent since its first sale to the public in July.








Today in Business with Reuters

"The challenges facing CCC will have no measurable impact on any other fund," Carlyle said. Carlyle Group is working "tirelessly" with Carlyle Capital to "maximize value for all interested parties," the firm added.


Stung by almost $190 billion in losses and writedowns from the subprime mortgage market's collapse, banks are asking for extra collateral on even the safest forms of debt.


The spread between 30-year agency mortgage bonds and 10-year U.S. Treasuries widened to more than 200 basis points Wednesday, the highest since 1986, data compiled by Bloomberg showed. http://www.iht.com/articles/2008/03/12/business/carlyle.php






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Edited 9/21/2008 4:14 pm ET by glitter_girl_5000
iVillage Member
Registered: 08-20-2008
Sun, 09-21-2008 - 4:17pm
The military/industrial/financial corporation complex at it's finest.
iVillage Member
Registered: 09-18-2008
Sun, 09-21-2008 - 4:24pm
Good grief . . . now I see "$16 billion" and think, Chump change.
iVillage Member
Registered: 08-19-2007
Sun, 09-21-2008 - 5:14pm

Well, this story might put some lift in your step:


Carlyle Capital bankrupt, to wind up fund

NEW YORK/AMSTERDAM (Reuters) - Investment company Carlyle Capital Corp CARC.AS said on Sunday its shareholders have voted unanimously in favor of a compulsory winding up.


The company said it will now start winding up and sell its remaining assets under Guernsey law, and NYSE Euronext said that the fund's shares would trade under a separate category as it goes through the process.


Carlyle Capital Corp (CCC) is a separate legal and business entity from U.S. private equity firm Carlyle Group, and the group said last week that the listed fund would not have a measurable impact on Carlyle's other funds, investments and portfolio companies. The fund is 15 percent-owned by Carlyle Group executives.


Caryle Capital's share price plunged 58 percent on Monday in light trade to $0.30. The initial public offer price 10 months ago was $20.


Carlyle Capital, an affiliate of U.S.-based buyout firm Carlyle Group CYL.UL, said it has received default notices from its last two remaining lenders and believes that its lenders have now taken possession of substantially all of its U.S. government agency AAA-rated residential mortgage-backed securities (RMBS).


It said it recommended to shareholders to vote in favor of the winding-up after extensive analysis of its prospects.


Carlyle's administrator and lawyers in Guernsey, the British offshore dependency where it is based, did not return calls seeking comment.


Carlyle Capital was hit severely by the impact of the credit crisis on leveraged investors and comes as JPMorgan Chase (JPM.N: Quote, Profile, Research, Stock Buzz) moves to buy stricken rival Bear Stearns BSC.N for a rock-bottom price while the U.S. Federal Reserve set an emergency interest rate cut and opened direct lending to Wall Street. ID:nN16500718


The crisis was triggered last year when risky mortgages made to U.S. borrowers went sour putting pressure on lenders to tighten credit and making it difficult to value collateralized debt, mortgage portfolios and other fixed-income securities.

iVillage Member
Registered: 08-20-2008
Sun, 09-21-2008 - 5:16pm
Great - we'll see if they will fall under one of those foreign financial institutions that
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Registered: 04-04-2003
Sun, 09-21-2008 - 5:53pm

The Carlyle Group....Now that's ringing some old bells:


http://www.globalresearch.ca/articles/NEW304A.html



Directors of one of the world’s largest armament companies are planning on meeting in Lisbon in three weeks time. The American based Carlyle Group is heavily involved in supplying arms to the Coalition forces fighting in the Iraqi war.


It also holds a majority of shares in the Seven Up company and Federal Data Corporation, supplier of air traffic control surveillance systems to the US Federal Aviation Authority. The 12 billion dollar company has recently signed contracts with United Defence Industries to equip the Turkish and Saudi Arabian armies with aviation defence systems.


Top of the meeting’s agenda is expected to be the company’s involvement in the rebuilding of Baghdad’s infrastructure after the cessation of current hostilities. Along with several other US companies, the Carlyle Group is expected to be awarded a billion dollar contract by the US Government to help in the redevelopment of airfields and urban areas destroyed by Coalition aerial bombardments.


The Group is managed by a team of former US Government personnel including its president Frank Carlucci, former deputy director of the CIA before becoming Defence Secretary. His deputy is James Baker II, who was Secretary of State under George Bush senior. Several high profile former politicians are employed to represent the company overseas, among them John Major, former British Prime Minister, along with George Bush senior, one time CIA director before becoming US President.


The financial assets of the Saudi Binladen Corporation (SBC) are also managed by the Carlyle Group. The SBC is headed up by members of Osama bin Laden’s family, who played a principle role in helping George W. Bush win petroleum concessions from Bahrain when he was head of the Texan oil company, Harken Energy Corporation - a deal that was to make the Bush family millions of dollars. Salem, Osama bin Laden’s brother, was represented on Harken’s board of directors by his American agent, James R. Bath.


The connection between the Bush and bin Laden families can also be traced to the collapse of the Bank of Credit and Commerce International (BCCI) in the 1990s. Members of the Anglo Pakistani bank’s board of directors included Richard Helms and William Casey, business partners of George Bush senior and former CIA agents. During their time at BCCI both Helms and Casey worked alongside fellow director, Adnan Khasshoggi, who also represented the bin Laden family’s interests in the US.


The Portugal News has been told by a reliable source that the Carlyle Group meeting in Lisbon will discuss the relationship between the Saudi Binladen Corporation (SBC) and Osama bin Laden. Many US officials claim that the SBC continues to finance his political activities, and has done so for many years. If true, this would place George Bush senior and his colleagues at the Carlyle Group in an embarrassing position. As managers of SBC’s financial investments they might well be accused of indirectly aiding and abetting the United States’ number one enemy.


http://www.culturechange.org/CarlyleEmpire.html


Carlyle Empire

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Registered: 10-01-2004
Sun, 09-21-2008 - 6:08pm

Wonder why Reich didn't propose all these reforms when he was in Clinton's cabinet????

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