"TARP did bar recipients from a whole range of exorbitant pay
practices, which is one reason the biggest banks, like Goldman Sachs,
worked so quickly to repay their TARP loans.
"But there were all sorts of ways around the restrictions. Banks could
apply to the Fed and other regulators for waivers, which were often
approved (one senior FDIC official tells me he recommended denying
"golden parachute" payments to Citigroup officials, only to see them
approved by superiors). They could get bailouts through programs other
than TARP that did not place limits on bonuses. Or they could simply pay
bonuses not prohibited under TARP. In one of the worst episodes, the
notorious lenders Fannie Mae and Freddie Mac paid out more than $200
million in bonuses between 2008 and 2010, even though the firms (a)
lost more than $100 billion in 2008 alone, and (b) required nearly $400
billion in federal assistance during the bailout period.
"Even worse was the incredible episode in which bailout recipient AIG
paid more than $1 million each to 73 employees of AIG Financial
Products, the tiny unit widely blamed for having destroyed the insurance
giant (and perhaps even triggered the whole crisis) with its reckless
issuance of nearly half a trillion dollars in toxic credit-default
swaps. The "retention bonuses," paid after the bailout, went to 11
employees who no longer worked for AIG."
* * * * * * *
"Even worse, the $700 billion in TARP loans ended up being dwarfed by
more than $7.7 trillion in secret emergency lending that the Fed awarded
to Wall Street – loans that were only disclosed to the public after
Congress forced an extraordinary one-time audit of the Federal Reserve.
The extent of this "secret bailout" didn't come out until November 2011,
when Bloomberg Markets, which went to court to win the right
to publish the data, detailed how the country's biggest firms secretly
received trillions in near-free money throughout the crisis.
"Goldman Sachs, which had made such a big show of being reluctant
about accepting $10 billion in TARP money, was quick to cash in on the
secret loans being offered by the Fed. By the end of 2008, Goldman had
snarfed up $34 billion in federal loans – and it was paying an interest
rate of as low as just 0.01 percent for the huge cash infusion. Yet that
funding was never disclosed to shareholders or taxpayers, a fact
Goldman confirms. "We did not disclose the amount of our participation
in the two programs you identify," says Goldman spokesman Michael
Duvally."
* * * * * * *
"So what exactly did the bailout accomplish? It built a banking system
that discriminates against community banks, makes Too Big to Fail banks
even Too Bigger to Failier, increases risk, discourages sound business
lending and punishes savings by making it even easier and more
profitable to chase high-yield investments than to compete for small
depositors. The bailout has also made lying on behalf of our biggest and
most corrupt banks the official policy of the United States government.
And if any one of those banks fails, it will cause another financial
crisis, meaning we're essentially wedded to that policy for the rest of
eternity – or at least until the markets call our bluff, which could
happen any minute now."
