As you all know, President George W. Bush is on his book/rehabilitation tour — hitting every MSM and cable news show from the Today Show to Hannity, plus Oprah, Rush Limbaugh, and beyond.

His candor, decency, self-effacement, and clear love of country stand in stark contrast to the current antagonist-in-chief at the White House, so it’s understandable that many on our side of the political aisle are feeling a bit wistful and nostalgic as Bush makes the rounds. (Pundit Press has a nice list of Bush positives.)

After two years of incessant demonization, for example, it’s a relief to hear kind words from the former president about the Tea Party and participatory democracy:

Former President George W. Bush says the tea party movement is a sign that “democracy works in America.”

In an interview with Fox News’s Sean Hannity set to air Monday night, Bush heralds the grass-roots conservative movement as a “good thing” for the American political system.

The problem, of course, is that Bush nostalgia is indelibly marred by his disastrous domestic policy legacy of big government, big spending, and betrayal of core fiscal principles — the very impetus for the Tea Party movement upon which he now heaps glowing praise.

Take yourselves back to 2007. The headline on my blog on December 3, 2007:

Hillary and Bush agree: Government should bail out homeowners.

Two days later, Bush Treasury Secretary Henry Paulson announced a subprime mortgage bailout and I wrote in my syndicated column that week:

If you thought Hillary Clinton’s government takeover plan for health care was bad, wait ’til you see what she has in store for the housing sector. As always with the Clintons, the market is the problem and Big Nanny is the solution. Unfortunately for taxpayers, Hillary has bipartisan company in the Bush administration on this issue. Their election season prescription? Rewarding bad behavior. Punishing responsible behavior. Doing more harm than good.

In case you’ve been living in a cave, there’s a painful credit crunch underway. The culprit is the subprime mortgage — a species of risky home loans to buyers with dubious credit and income. Cash-rich lenders doled out the subprimes hoping rising home prices would compensate for any failed bets. But when housing prices started plummeting and interest rates began rising, many borrowers started defaulting. Insolvency looms for countless lenders.

Instead of letting lenders and subprime mortgage-holders suffer the consequences of their actions, politicians and grievance-mongers are riding to the supposed rescue. In a supreme irony, the very same champions of the needy in the Democrat Party who complain constantly about the lack of “affordable housing” are now fighting tooth and nail to keep housing prices high…

… Let’s boil this down to fundamentals: Why should the rest of us have to shoulder the burden because some buyers made poor choices, overextended themselves and bought more house than they could afford? Why should other business owners bear the costs of lenders’ failed bets? And why are falling home prices such a catastrophe to be “fixed” in the first place?

… Fiscal conservatives ought to be balking at Hillarycare for housing. But President Bush’s treasury secretary, Hank Paulson, is singing a similar tune. He proposed a new safety net to stem the tide of home foreclosures through a bailout plan for homeowners with bad credit scores. They’d be eligible for relief from paying hundreds of dollars in additional monthly payments when their mortgage rates reset. Those who have been responsible enough to maintain good credit, however, will be out of luck. In addition, Federal Reserve Chairman Ben Bernanke has proposed that government-sponsored mortgage enterprises Fannie Mae and Freddie Mac be allowed to raise their loan limits and have their debt explicitly guaranteed by the public dole.

Lawmakers on both sides of the aisle are colluding to protect the reckless and keep home prices high on the backs of prudent taxpayers. Who’ll bail us out from this perversion of the American Dream?

In January 2008, Bush floated another massive housing entitlement package, followed by an economic stimulus plan in excess of $150 billion, and passage of the $2.7 billion Bush housing boondoggle.

In September 2008, I raised the alarm over the banking bailout from DAY ONE — excoriating Paulson’s pathetic track record on the subprime crisis and calling on fiscal conservatives to stand up against the Bush GOP capitulationists.

Flashback September 19, 2008, a day that will live in infamy:

Bush Treasury Secretary Hank Paulson just wrapped up his press conference announcing the Mother of All Bailouts. He said a “bold” approach was needed to achieve “stability” in the market.

Let me translate that.

“Bold” = Massively massive, taxpayer-funded rescue.

“Stability” = Privatizing profits and socializing losses on a scale we have never seen before in our lifetimes.

I have had it with Pollyanna conservatives who continue to parrot the “fundamentals of the market are great!” line.

The fundamentals of the market suck. The fundamentals of capitalism have been sabotaged.

Yes, yes, crony Democrats are to blame for much of how we got here. You don’t need to recite all the talking points back to me. I’ve been writing about the Fannie/Freddie debacle for years.

But it is September 19, 2008. And this is a Republican White House presiding over the Mother of All Bailouts. Every step along the way since stimuluspalooza began last summer, we’ve heard that every bailout step was just a one-off. Each step was supposed to calm the markets. Each new government intervention and allocation of taxpayer dollars was supposed to achieve “stability.” Each new package of goodies rewarding irresponsible behavior and bad financial decisions was supposed to prevent new ones.

None did. And now, here we are.

This is your Bush legacy — not Pelosi’s, not Reid’s, not Obama’s: A ginormous bailout of every last, failing, panicked financial institution’s illiquid assets that may reach into the trillions — TRILLIONS – when all is said and done.

Reader John in Venice, CA e-mails: “Going forward there is no debate a conservative can win when pitted against a liberal wanting to spend money on social programs. What would the argument be against spending money on terrible social programs? Government money does not work? Conservatives who are supporting this welfare bailout are no different than Maxine Waters or Barbara Boxer. We have lost. Conservatism has absolutely no more moral high ground to speak from.”

Fiscal conservatism has been on life support for quite some time. Bush/Paulson pulled the plug permanently today.

Bush then oversaw the $85 billion bailout of AIG and prepared the $25 billion auto bailout. In October, the Republicans swallowed the Bush crap sandwich and blindly bowed to naked emperor Paulson, and John McCain proposed a $300 billion mortgage bailout that dwarfed Obama’s campaign proposal.

As he rode into the sunset in December 2008 after pre-socializing the economy for Barack Obama, Bush wrote his own epitaph, which was one of the items on my list of things I don’t miss about Bush.

Reminder:

1) joined with open-borders progressives McCain and Kennedy to try to force shamnesty down our throats;

2) massively expanded the federal role in education;

3) championed the Medicare prescription drug entitlement using phony math;

4) kowtowed to the jihadi-enabling Saudis;

5) stocked DHS with incompetents and cronies;

6) pushed Hillarycare for housing;

7) enabled turncoat Arlen Specter;

8. nominated crony Harriet Myers to the Supreme Court;

9) pre-socialized the economy for Obama by embracing TARP, the auto bailouts, the AIG bailout, and in his own words:

“I’ve abandoned free-market principles to save the free-market system.”
– George W. Bush

Some of us haven’t forgotten. And we’re not going to let the GOP leadership in Washington forget, either.

My syndicated column today shines light on all the Goldman Sachs company men in the Obama administration’s midst. The GOP wants SEC correspondence disclosed. Here’s that story. In related news, Goldman Sachs cheerleader and beneficiary Rahm Emanuel met with NYC business elite about the financial reform plan. Listen up:

Another attendee, who spoke anonymously to discuss remarks that were intended to be private, said the chief-of-staff emphasized that there was a “12-week legislative calendar” to get the administration’s main goals accomplished.

Related must-read from Conn Carroll at The Foundry: The Crony Capitalist Threat to Our Economic Freedom.

***

All the president’s Goldman Sachs men
by Michelle Malkin
Creators Syndicate
Copyright 2010

While President Obama assails the culture of greed and recklessness practiced by the men of Goldman Sachs, his administration is infested with them. The White House can no more disown Government Sachs than Da Boss-in-chief can disown Chicago politics.

Obama is headed to Wall Street on Thursday to demand “financial regulatory reform” — just as the U.S. Securities and Exchange Commission has filed civil suit against Goldman Sachs for mortgage-related fraud. Question the timing? Darn tootin’. There are no coincidences in the perpetually orchestrated Age of O. Everyone from disgraced former New York Attorney General Eliot Spitzer to analysts at the Brookings Institution and Barclays Capital to the GOP leadership and Rush Limbaugh has noted the reeking political opportunism in the air.

As the New York Post reported Tuesday, the Democratic National Committee immediately bought sponsored Internet ads on Google that direct web surfers who type in “Goldman Sachs SEC” to Obama’s fundraising site. “It’s time to hold the big banks accountable,” the money-grubbing DNC message bellows. But just like his crony capitalist predecessor George W. Bush, Obama has relied on Goldman Sachs and Wall Street power brokers to engineer massive government interventions to “rescue” failing businesses with the tax dollars of ordinary Americans.

While irony-challenged Democratic candidates like mob-linked banker Alexi Giannoulias in Illinois (who hopes to fill Obama’s old Senate seat) call on Republicans to return their fat-cat Goldman Sachs donations, the Democrats are silent on the $994,795 in Goldman Sachs campaign cash that Obama bagged. The class-warfare Dems are also mum on all the president’s Goldman Sachs men sitting in the catbird’s seat:

– Goldman Sachs partner Gary Gensler is Obama’s Commodity Futures Trading Commission head. He was confirmed despite heated congressional grilling over his role, as Reuters described it, “as a high-level Treasury official in a 2000 law that exempted the $58 trillion credit default swap market from oversight. The financial instruments have been blamed for amplifying global financial turmoil.” Gensler said he was sorry — hey, it worked for tax cheat Treasury Secretary Tim Geithner — and was quickly installed to guard the henhouse.

– Goldman Sachs kept White House Chief of Staff Rahm Emanuel on a $3,000 monthly retainer while he worked as Clinton’s chief fundraiser, as first reported by Washington Examiner columnist Tim Carney. The financial titans threw in another $50,000 to become the Clinton primary campaign’s top funder. Emanuel received nearly $80,000 in cash from Goldman Sachs during his four terms in Congress — investments that have reaped untold rewards, as Emanuel assumed a leading role championing the trillion-dollar TARP banking bailout law.

– Former Goldman Sachs lobbyist Mark Patterson serves under Geithner as his top deputy and overseer of TARP bailout — $10 billion of which went to Goldman Sachs. Left-leaning government watchdog Melanie Sloan of the Citizens for Responsibility and Ethics in Washington responded: “It makes it appear that they are saying one thing and doing another.” Paul Blumenthal of the Sunlight Foundation noted that, while at Goldman Sachs, Patterson lobbied against executive pay limits that Obama had crusaded for as senator (before, that is, his administration carved out exemptions for AIG). While Patterson agreed to recuse himself on any Goldman Sachs-related issues or related policy concerns, Blumenthal wrote, it “still creates a serious conflict for Geithner, as Treasury is being partly managed by a former Goldman lobbyist. Geithner is also placed in a tough position considering that his chief of staff is limited in the areas in which he can work (supposedly).”

– Obama’s close hometown crony, campaign finance chief and senior adviser Penny Pritzker was head of Superior Bank of Chicago, a subprime specialist that went bust in 2001, leaving more than 1,400 people stripped of their savings after bank officials falsified profit reports. Pritzker’s lawyer at O’Melveny and Myers, Tom Donilon, is now Obama’s deputy national security adviser. He earned just shy of $4 million representing her and other high-profile meltdown clients including Goldman Sachs.

– White House National Economic Council head Larry Summers reaped nearly $2.8 million in speaking fees from many of the major financial institutions and government bailout recipients he now polices, including JP Morgan Chase, Citigroup, Lehman Brothers and Goldman Sachs. A single speech to Goldman Sachs in April 2008 brought in $135,000. Summers has prior experience negotiating government-sponsored bailouts that benefit private concerns. In 1995, he spearheaded a $40 billion Mexican peso bailout that bypassed Congress. Summers personally leaned on the International Monetary Fund to provide nearly $18 billion for the package. Summers’ boss, then Secretary of the Treasury Robert Rubin, was former co-chairman of Wall Street giant Goldman Sachs — the Mexican government’s investment banking firm of choice.

Rubin continues to mentor another former employee of his with regular visits and chats — Treasury Secretary Geithner, who was head of the New York Federal Reserve, which pushed bailed-out insurance conglomerate AIG to cover up sweetheart deals for investment banks that benefited, you guessed it, Goldman Sachs.

As Obama harangues Wall Street to clean up its house, all the president’s Goldman Sachs men have their feet on the coffee table at his.

***

Update: Well, well, well. Take a look at the White House visitor logs, courtesy of McClatchy:

While Goldman Sachs’ lawyers negotiated with the Securities and Exchange Commission over potentially explosive civil fraud charges, Goldman’s chief executive visited the White House at least four times.

White House logs show that Chief Executive Lloyd Blankfein traveled to Washington for at least two events with President Barack Obama, whose 2008 presidential campaign received $994,795 in donations from Goldman’s political action committee, its employees and their relatives. He also met twice with Obama’s top economic adviser, Larry Summers.

…Goldman’s connections to the White House and the Obama administration are raising eyebrows at a time when Washington and Wall Street are dueling over how to overhaul regulation of the financial world.

…According to White House visitor logs, Blankfein was among the business leaders who attended an Obama speech on Feb. 13, 2009, and he also joined more than a dozen bank CEOs in a meeting with Obama on March 27, 2009.

Blankfein also was supposed be among the CEOs who met with Obama in December, but he and two others phoned in from New York, blaming inclement weather.

He and his wife, Laura, were listed on the logs among 438 presidential guests at the Kennedy Center Honors the previous week.

The WSJ broke the news on Friday about Obama’s new “pay czar,” Kenneth Feinberg.

His official title as executive-pay-limiter-in-chief: Special Master of Compensation.

Can’t wait to see his logo.

Next up: Obama appoints the…

…Distinguished Overlord of Oxygen Intake (to limit individual human carbon emissions);

…Royal Captain of Calorie Consumption (to limit weight gain and end obesity);

…Exalted Diva of Diversity Broadcasting (to enforce the Fairness Doctrine and limit exposure to excessive, poisonous conservative opinion on the airwaves).

***

History footnote: The term “special master” is a legal term referring to court-appointed volunteers who ensure that judicial orders are followed. In common law, “special masters in lunacy” handled psychiatric cases.

“Masters in lunacy” fits the Obama administration nicely, doesn’t it?

You know that bank bailout program to buy up toxic assets that morphed into a capital injection plan and then back again? Well, now TARP is going to be expanded to cover life insurers.

Yes, life insurers:

The Treasury Department has decided to extend bailout funds to a number of struggling life-insurance companies, helping an industry that is a lynchpin of the U.S. financial system, people familiar with the matter said.

The department is expected to announce the expansion of the Troubled Asset Relief Program to aid the ailing industry within the next several days, these people said.

The news will come as a relief to a number of iconic American companies that have suffered big losses made worse by generous promises to buyers of some investment products. Shares of life insurers have fallen more than 40% this year. Their troubles led to a string of rating-agency downgrades that, in a vicious cycle, made it more difficult for some insurers to raise funds.

The life-insurance industry is an important piece of the U.S. financial system. Millions of Americans have entrusted their families’ financial safety to these companies, so keeping them on solid footing is crucial to maintaining confidence. If massive numbers of customers sought to redeem their policies, it could cause a cash crunch for some companies. And because insurers invest the premiums they receive from customers into bonds, real estate and other investments, they are major holders of securities. If they needed to sell off holdings to raise cash, it could cause markets to tumble.

The decision by the Treasury Department adds a third industry to the banks and auto companies that have already received bailouts from the government. While American International Group Inc. is a major insurer and is the biggest recipient of government money, its problems weren’t caused by its life-insurance operations, but derivative bets that went bad.

Only insurers that own federally chartered banks will qualify for the program. Treasury had said last year that life insurers could be eligible for TARP funds if they owned bank-holding companies, but it hadn’t officially decided to give funds to these companies as it focused much of its energies on banks and auto makers.

Those insurers better think long and hard before they take TARP money. Be careful what you wish for.

***

The Saturday Night Live skit this weekend ridiculing President CEO-in-Chief picking and choosing which industries to take over was indeed too close for comfort. Not funny at all.

Chilling.

85 House Republicans, I shall remind you again, voted for the AIG/CYA confiscatory bonus tax.

Some of them have learned their lesson, but not all.

Today, 10 Republicans joined the Grabby Hands Democrats in passing the new “Pay for Performance Act” — to curb “excessive” employee pay at financial firms that receive government bailout funds, “a measure that could supplant [the] earlier effort to heavily tax executive bonuses.” The bill passed 247-171.

Here are the 10 House Republicans who think it is government’s job to determine what “excessive” pay is in every workplace except their own (full roll call vote here):

Bilirakis
Brown-Waite, Ginny
Cao
Diaz-Balart, L.
Diaz-Balart, M.
Duncan
Jones
McHugh
Rohrabacher
Ros-Lehtinen

At least this bonus-taxing bunch of appalling GOP turncoats is consistent in supporting radical government meddling.

Oh, and look who voted “present:”

Cantor

!!!!

As for those who had a change of heart: Sorry, you don’t deserve wine and roses for doing what you should have done in the first place. There’s no rational reason or fixed principle the rest of the class of 85 House Republicans who voted for the first bonus restrictions can give you for supporting that measure while opposing the new salary controls — harbingers of worse things to come. And they know it.

The 85 AIG bonus-taxing House Republicans, led by Minority Whip Eric Cantor, revealed their arbitrary and capricious commitment to fiscal conservatism. They can’t be trusted to stand for what’s right when the heat is on. And they shouldn’t be allowed to forget it.

***

Here is Cantor’s explanation:

House Minority Whip Eric Cantor (R-Va.), who caused consternation in his party by voting in favor of taxing AIG executive bonuses, voted “present” Wednesday on a second bill aimed at tackling bonuses.

In a statement, Cantor said he voted present because his wife works for an institution that could be affected by the legislation. He also criticized the bill as a “misguided” intrusion by the federal government into the private sector.

“This misguided bill gives the federal government unprecedented new power to dictate compensation levels for private citizens employed by companies,” Cantor said in the statement.

“However, I believe that every Member of Congress must take all of their responsibilities seriously, and since this legislation may affect my spouse, in accordance with House rules and with an abundance of caution, I voted ‘present’ and submitted my rationale to the official Congressional record.”

So, he voted “present” because the bill might affect his wife’s bank. But he voted “yes” on the AIG bonus tax…which also may have affected his wife’s bank, and which, by the way, received bucket loads of TARP money. Hmmm:

The earlier measure that Cantor supported would impose a 90 percent tax on bonuses at firms that receive at least $5 billion in government aid. The measure, which is unlikely to be taken up by the Senate, would have applied to individual or family income exceeding $250,000. A spokesman for Cantor said the lawmaker’s spouse may not be affected by that bill.

Diana F. Cantor runs a Virginia-based subsidiary of New York Private Bank and Trust, according to ProPublica, a non-partisan investigative journalism organization. The New York bank received $267.2 million from the U.S. Treasury’s Troubled Asset Relief Program on Jan. 9.

Are you buying this (especially given his past weaseling on this issue)?

***

Best reaction to Cantor on Twitter:

@andylevy:

That’s weird – I was under the impression that the Whip was like a leadership position or something. Guess not!

I’d like to hear his rationale for why taxing bonuses at 90% is okay, but the PfPA is “misguided intrusion.” And I’d like that rationale to be something other than the fact that one doesn’t affect his wife and one does.

***

More: GOP Rep. Bilirakis tries to explain his rationale for sponsoring the bill…

“I have opposed each of the bailouts that have passed through this body, and I am a believer in free markets. Under normal circumstances, I would argue that executive pay is best left to the company and its shareholders. However, when companies are receiving billions of dollars of taxpayer monies, full disclosure can help guide our future legislative decisions on the use of taxpayer money,” Bilirakis said. “Policy makers and those we represent should have the benefit of this information.”

In addition to the database, a Bilirakis amendment was adopted which clarifies that an institution which is not a TARP recipient will not be subject to the requirements of the bill as a result of doing business with a TARP recipient.

“As we work together to force TARP recipients that refuse to voluntarily change their excessive and unreasonable compensation practices, we must be careful not to overreach and inadvertently restrict compensation at firms that are not TARP recipients,” Bilirakis said. “This language gives assurance to non-TARP recipients that it is OK to do business with those firms on taxpayer life support.

GOP Rep. Dana Rohrbacher also echoed this rationale in an exchange we had on Twitter last night.

The problem is that this bill neglects the real-world consequences of its effect. This is paving the path for Barney Frank’s wider power grab. And no matter how the Republicans might try to insulate responsible businesses from those consequences, the Left’s desired government salary control is here. Yes, I believe that taxpayer money should come with strings attached. Go ahead: Force them to disclose how they spend the money. But dictating compensation for the sake of mollifying the mob? Is that fiscally conservative? What do “excessive” and “unreasonable” mean? Who defines it?

If you don’t want companies spending our money on “excessive” bonuses, do not give them the money in the first place. Period.

This is not a surprise. Grabby Hands Barney Frank has been signaling his salary control plans for weeks. In early February, you’ll recall, he told Business Week that compensation restrictions might be restricted to all US companies, not just TARP recipients.

Now, via Byron York:

[I]n a little-noticed move, the House Financial Services Committee, led by chairman Barney Frank, has approved a measure that would, in some key ways, go beyond the most draconian features of the original AIG bill. The new legislation, the “Pay for Performance Act of 2009,” would impose government controls on the pay of all employees — not just top executives — of companies that have received a capital investment from the U.S. government. It would, like the tax measure, be retroactive, changing the terms of compensation agreements already in place. And it would give Treasury Secretary Timothy Geithner extraordinary power to determine the pay of thousands of employees of American companies.

The purpose of the legislation is to “prohibit unreasonable and excessive compensation and compensation not based on performance standards,” according to the bill’s language. That includes regular pay, bonuses — everything — paid to employees of companies in whom the government has a capital stake, including those that have received funds through the Troubled Assets Relief Program, or TARP, as well as Fannie Mae and Freddie Mac.

The measure is not limited just to those firms that received the largest sums of money, or just to the top 25 or 50 executives of those companies. It applies to all employees of all companies involved, for as long as the government is invested. And it would not only apply going forward, but also retroactively to existing contracts and pay arrangements of institutions that have already received funds.
In addition, the bill gives Geithner the authority to decide what pay is “unreasonable” or “excessive.”

And it directs the Treasury Department to come up with a method to evaluate “the performance of the individual executive or employee to whom the payment relates.”

The bill passed the Financial Services Committee last week, 38 to 22, on a nearly party-line vote. (All Democrats voted for it, and all Republicans, with the exception of Reps. Ed Royce of California and Walter Jones of North Carolina, voted against it.)

But you can thank the 85 Republicans, led by Minority Whip Eric Cantor, who helped pave this path with their hysterical vote for the 90 percent AIG bonus tax.

Simple question from Glenn Beck today to the crusading Connecticut Attorney General still on his anti-AIG witch hunt:

Under what law are you going after the AIG bonuses?

Blumenthal hemmed and hawed for a painful six minutes before coming up with this:

“Because they are undeserving of it.”

Remember those six chilling words:

“Because they are undeserving of it.”

After blubbering that the law doesn’t require that AIG pay the bonuses, Blumenthal then sputtered that it was bad public policy.

Blumenthal also explained that while he didn’t have the authority to go after corruptocrat Sen. Chris Dodd because he was a federal official, he did feel it right, just, and necessary as state AG to do something more about federal tax money spent on AIG.

Finally, he muttered something about the State Wage Act, tucked his tail between his legs, and slunk off the set — no doubt to go wield his legal powers against other targets (Congress exempted!) that he has deemed “undeserving” of their pay.

Blumenthal gives new meaning to AIG:

Asshats In Government.

Financial blogger Zero Hedge has a provocative post that will raise your blood pressure this morning. This is worth fist-pounding and investigation in Congress:

Exclusive: AIG Was Responsible For The Banks’ January & February Profitability

It’s complicated, but it boils down to this: Banks bragged about their wonderful performance the first two months of the year. The market responded positively. But Zero Hedge makes the case that the profitability was illusory — and that the feds surreptitiously funneled money to the banks via AIG.

ZH writes:

For those to whom this is merely a lot of mumbo-jumbo, let me explain in layman’s
terms:

AIG, knowing it would need to ask for much more capital from the Treasury imminently, decided to throw in the towel, and gifted major bank counter-parties with trades which were egregiously profitable to the banks, and even more egregiously money losing to the U.S. taxpayers, who had to dump more and more cash into AIG, without having the U.S. Treasury Secretary Tim Geithner disclose the real extent of this, for lack of a better word, fraudulent scam.

In simple terms think of it as an auto dealer, which knows that U.S. taxpayers will provide for an infinite amount of money to fund its ongoing sales of horrendous vehicles (think Pontiac Azteks): the company decides to sell all the cars currently in contract, to lessors at far below the amortized market value, thereby generating huge profits for these lessors, as these turn around and sell the cars at a major profit, funded exclusively by U.S. taxpayers (readers should feel free to provide more gripping allegories).

What this all means is that the statements by major banks, i.e. JPM, Citi, and BofA, regarding abnormal profitability in January and February were true, however these profits were a) one-time in nature due to wholesale unwinds of AIG portfolios, b) entirely at the expense of AIG, and thus taxpayers, c) executed with Tim Geithner’s (and thus the administration’s) full knowledge and intent, d) were basically a transfer of money from taxpayers to banks (in yet another form) using AIG as an intermediary.

For banks to proclaim their profitability in January and February is about as close to criminal hypocrisy as is possible. And again, the taxpayers fund this “one time profit”, which causes a market rally, thus allowing the banks to promptly turn around and start selling more expensive equity (soon coming to a prospectus near you), also funded by taxpayers’ money flows into the market. If the administration is truly aware of all these events (and if Zero Hedge knows about it, it is safe to say Tim Geithner also got the memo), then the potential fallout would be staggering once this information makes the light of day.

…This wholesale manipulation of markets, investors and taxpayers has gone on long enough.

***

Surprise, surprise: Geithner Says Some Banks Need ‘Large Amounts’ of Assistance

It’s not like Tim Geithner can afford to lose any of the few officials who are actually working at the Treasury Department with him, but last night, he put one on leave. Very curious — especially given the sacked employee’s recent increased visibility for his public statements about the government’s (mis)handling of AIG. The WSJ reports:

The acting director of the Office of Thrift Supervision has been put on leave pending a review of the agency’s role in the backdating of capital infusions by some banks, the agency said Thursday evening.

OTS said in a surprise statement that Scott Polakoff, who has been serving as acting director of the OTS, would be replaced by OTS Chief Counsel John Bowman during the review by the Treasury Department.

The OTS, a division of the Treasury Department, has come under fire after it was revealed last year that the agency had allowed IndyMac Bancorp Inc. (IDMCQ) to backdate a May 2008 $18 million capital infusion to the first quarter. IndyMac failed a few months later, a collapse that cost the Federal Deposit Insurance Corp. $10.7 billion, the costliest failure in U.S. history. A subsequent review of the issue by the OTS uncovered four other cases of backdating by banks, cases which the agency said in a January letter to U.S. lawmakers “were not acceptable to current OTS standards.” Allowing the banks to backdate capital infusions to earlier quarters could allow firms to avoid regulatory penalties for having too little capital.

The Treasury Department Inspector General is investigating the matter, and it is unclear what sparked Polakoff’s sudden departure…

Did Polakoff rubber stamp the backdating of those capital infusions or take a more active role in dishonestly and unethically engineering them? Like the WSJ says, it’s “unclear.” He was second-in-command during the period being investigated. Geithner has installed John E. Bowman, the agency’s deputy director and chief counsel, to take Polakoff’s place.

Meantime, go back and read this via CNN:

When Ben Bernanke told the Senate Budget Committee that American International Group (AIG) “exploited a huge gap in the regulatory system” and that “there was no oversight of the Financial Products division,” it seemed to make sense. The Federal Reserve Chairman went on to say, “This was a hedge fund basically that was attached to a large and stable insurance company.”

If nobody was keeping an eye on them, well no wonder it blew up.

But it turns out Mr. Bernanke was not quite accurate when he said “no oversight.” He made that statement on March 3rd.

Just two days later a man hardly anybody has ever heard of explained to yet another Senate committee that — hold the presses — there WAS a regulator for the Financial Products unit of AIG…

That man was Scott Polakoff and he’s the Acting Director of the Office of Thrift Supervision (we call that OTS). OTS is the regulator for thrifts and savings banks. Polakoff has told any committee that will listen that OTS had responsibility for AIG FP. Why was OTS involved? Because among the seventy odd companies and units that make up AIG, one of them happened to be a Savings & Loan Bank.

When you think of a Savings & Loan it’s hard not to picture Jimmy Stewart facing down the evil banker Mr. Potter, but at AIG, Potter was trading derivatives at the FP unit, and FP was attached to the S&L as far as the regulator was concerned.

“We were clearly responsible as a consolidated regulator for FP,” says Polakoff, and adds, “We, in 2004, should have taken an entirely different approach than what we wound up taking regarding the credit default swaps.” By now, the term credit default swap is practically a barbershop term, but basically it’s just a sort of insurance policy on another financial product like a mortgage-backed security (often stuffed with foreclosed mortgages, as we have all learned to our sorrow).

So when Mr. Polakoff says they should have taken a different approach, what he’s really saying is that the OTS regulators weren’t sophisticated enough to realize that FP was heading for BIG trouble. And why should they have been that prepared? OTS mostly regulates S&L’s which generally take deposits and then make loans for houses and other purposes. Would you expect these civil servants to really understand the risks attached to derivatives that are designed by Math PhD’s to play the odds on pieces of paper that “derive” their value from a mortgage backed security that can’t be valued itself (except maybe by another math nerd).

Curious.

My syndicated column today continues the theme I blogged about two days ago in the “Rule of the Mob” post. Keep an eye on next week’s G20 summit in London. Thousands of anti-capitalism zealots will be amassing there to intimidate and harass bankers. The vandalizing of the Scottish ex-banking executive’s home in Edinburgh is just a prelude. The protests are slated to start tomorrow and last all week; President Obama leaves for the summit on Tuesday. The images above are graphics and posters being disseminated online by protest organizers.

The anarchists are reportedly using Google Streetview and Twitter to organize riots, hang businessmen in effigy at the behest of a university professor known as “Mr. Mayhem,” call for guillotining bank execs, and — get this — target London firms that fail to turn off their lights to commemorate that moronic “Earth Hour” event I wrote about earlier this week. If shops don’t worship at the altar of environmentalism, they will be broken into:

Sir Paul Stephenson said ‘old faces’ from British protest groups – thought to be behind earlier anti-globalisation riots – were also expected in London. Activists have dubbed April 1 Financial Fools Day and are planning to march on the Bank of England, the European Climate Exchange in Bishopsgate and the U.S. embassy. At least 2,000 demonstrators are expected. The first demonstration in London will come tomorrow with ‘Earth Hour’ – targeting City firms that fail to turn off their lights by 8.30pm. Organisers say every office block in London with lights on will be fair game and have warned that they are prepared to break in and put the lights out themselves. The protest group Climate Camp has already released a map of potential targets in the City for its demonstration on April 1, including the Royal Bank of Scotland, carbon offset and trading companies and ‘green-washing’ PR firms.

Think this madness couldn’t happen here? Think again.

***

The new vigilantes and their unaccountable enablers
by Michelle Malkin
Creators Syndicate
Copyright 2009

If you think there are no consequences to hysterical, anti-corporate grandstanding in Washington, pay attention to what’s happening across the pond: “This is just the beginning.”

So warned a public letter signed this week by a vigilante group called “Bank Bosses are Criminals.” The thugs claimed responsibility for vandalizing a former financial executive’s home and car in Edinburgh, Scotland. The bank official, Sir Fred Goodwin, was excoriated by U.K. politicians for refusing to give up company pension benefits dubbed “obscene,” “grotesque,” “unjustifiable and unacceptable.” The vigilantes were stoked by a former newspaper editor, one Max Hastings, who wrote a diatribe exhorting citizens to violence:

“The time has come to address the entire robber banker culture. Investment banks have been run not for the benefit of society, customers, or even shareholders, but exclusively for the advantage of the bankers themselves…This is why we must stand outside their homes throwing rocks through the windows until they do.”

This is no marginal movement. Some 3,000 protesters from around the world are expected to wreak havoc on the G20 summit next week in London. What happened at Sir Fred’s house is a mere dress rehearsal. Bankers are being told to dress down to disguise themselves and avoid becoming riot targets.

Demonstrators are threatening to hang effigies. Protest organizer and university professor Chris Knight vowed worse: “We are going to be hanging a lot of people like Fred the Shred from lampposts on April Fool’s Day and I can only say let’s hope they are just effigies. To be honest, if he winds us up any more I’m afraid there will be real bankers hanging from lampposts and let’s hope that that doesn’t actually have to happen.”

How soon before we see this same kind of anarchic domestic terrorism on this side of the Atlantic? It’s already here.

Animal rights’ terrorists have firebombed researchers’ homes and Molotov cocktail-bombed their cars and been convicted of inciting threats, harassment, and vandalism against employees of a private company engaged in animal research.

Environmental terrorists have set developments on fire.

Anti-globalization anarchists in Seattle caused $2.5 million in damage to stores and downtown businesses in 1999.

Self-proclaimed “bank terrorist” Bruce Marks of the government-supported Neighborhood Assistance Corporation of America, whom I reported on last March, has been threatening bank employees in their homes and harassing their children for years.

And last weekend, of course, the radical ACORN mob and its corporate shakedown allies chartered a bus — with twice as many outrage-stoking MSM photographers in tow — to menace AIG executives in their homes.

Democratic Rep. Barney Frank shrugged off testimony from AIG president Edward Liddy concerning death threats leveled against the company’s employees. GOP Sen. Charles Grassley recklessly called on executives who accepted retention bonuses to commit hari kiri. Left-wing billionaire George Soros’s ground troops in the ANSWER coalition waved signs decrying, “CAPITALISM IS ORGANIZED CRIME! STOP AIG!” And 85 House Republicans, led by Minority Whip Eric Cantor, abetted the demagoguery by voting for the 90 percent retroactive bonus tax.

Pundits on both sides of the aisle demonized the business people whose sin was continuing to work for a company that accepted taxpayer funding from Chicken Littles in Washington who forked it over in a blind frenzy. Washington scribe Mort Kondrake joked about boiling the execs in oil. But the families who received the following threats through AIG’s website can’t afford to be so glib. Among the vile messages disclosed this week in response to a Freedom of Information Act request by NBC Connecticut and Hearst Newspapers:

– All you motherf***ers should be shot. Thanks for f***ing up our economy then taking our money.

— Watch your backs because someone will come to get you, you can be sure.

Federal authorities are investigating and will take action against warped vigilantes. But when will the enablers on the Hill, in newsrooms, and on TV sets be held to account?

The AIG bonus-bashing, backside-covering sound and fury signifying nothing fizzles out. Curtains close on Kabuki Theater of Outrage…until the next act comes along:

A House panel endorsed a gentler approach Thursday to trying to stop bailed-out financial institutions from giving their employees big bonuses, as lawmakers indicated they were willing to put down their pitch forks and partner with industry to salvage the economy.

The bill directs Treasury Secretary Timothy Geithner and financial regulators to set standards that would determine whether a bonus is “unreasonable or excessive.”

It would exempt institutions that agree to participate in a government-sponsored program aimed at buying up $1 trillion of bad debt, or “toxic assets,” sitting on the books of major banks. Geithner proposed the new investment program on Monday.

The House Financial Services Committee adopted the measure by voice vote, paving the way for a floor vote as early as next week.

The bill, sponsored by Democratic Reps. Alan Grayson of Florida and Jim Himes of Connecticut, was in stark contrast to the approach taken last week by lawmakers furious at insurance giant American International Group Inc. AIG distributed nearly $165 million in employee bonuses after the government committed more than $182 billion to keep the company afloat.

Fueled by populist anger, the House voted 328-93 to tax away 90 percent of any bonuses agreed to in 2008 and paid this year by AIG or other recipients of bailout money.

But that measure stalled in the Senate, as President Barack Obama warned not to “demonize” every investor. Geithner also said industry’s help would be needed to buy up the billions of dollars of sour mortgage securities, or “toxic assets,” sitting on the books of major banks.

“We cannot solve this crisis without making it possible for investors to take risks,” Geithner wrote in an editorial published in The Wall Street Journal.

Rep. Barney Frank, D-Mass., the panel’s chairman, said Democrats decided to exempt firms willing to participate in the effort because “we do want to encourage wide participation.”

(link)

Translation: Never mind.

***

Sen. James Inhofe weighs in on the root of the problem:

The reason many are seeking expedited consideration of an AIG bonus bill is clear enough—to cover up the past mistakes of the majority party and the Treasury Secretary. There was a provision buried deep in the Democrats’ stimulus bill that allowed these bonuses to be paid, and it was inserted at the behest of the Treasury secretary, Tim Geithner. And this gets us to the root of the problem: the bailout approach that Secretary Geithner epitomizes. There is a complete lack of any policy framework, explanation of principles, or coherent approach in dealing with our financial situation. I believe there is a lack of any transparency whatsoever and a seeming indifference to the taxpayers’ interests. The $700 billion bailout bill last October was Congressional ratification of Tim Geithner’s approach to big banks: bail them out.

Well, we are now trillions of dollars past that line and we’re beginning to comprehend the course on which that decision has set us. And I personally believe that trillions of dollars past that line, we’re no better off. I say enough. Tim Geithner’s bailout approach has taken us too far. Instead of Congress using the AIG bonus issue to cover up Tim Geithner’s mistakes on allowing those bonuses, we should take it as an opportunity to fundamentally reevaluate Geithner’s bailouts thus far and put an end to any more bailouts. With the revelations of how AIG is being used to funnel money to foreign banks to make them whole on bad investments at the expense of the US taxpayer, we need to put an end to the Geithner approach on bailouts. The taxpayer deserves no less. Under Tim Geithner, the $180 billion in taxpayer money AIG has received is being used to funnel money to AIG’s counterparties, mostly big investment banks and foreign banks.

In light of all of this, I introduced legislation yesterday to do more than deal with the bonuses. My legislation gets to the root of the problem, the $180 billion we’ve already given to AIG. It’s my understanding that the last $30 billion for AIG from TARP has been agreed to by Treasury, but has not been drawn down yet. My legislation would prevent that from going forward. The taxpayer has given AIG about $150 billion so far. I think it’s completely reasonable to say that once a single company gets $150 billion from the taxpayer, it should be cut off from getting more.

It’s the handiwork of an “anti-capitalist vigilante group calling itself Bank Bosses Are Criminals.” The broken window is in the home of Sir Fred Goodwin, the former chief executive of the Royal Bank of Scotland. His car was also vandalized. The thugs are threatening other targets:

The ex-banker’s £3 million Edinburgh house was targeted in the early hours, with at least four ground-floor windows smashed and a black Mercedes vandalised. Police were called at around 4.15am to Morningside, a leafy suburb of the Scottish capital lined with substantial, stone-built homes.

A storm of controversy has engulfed Sir Fred over the £16.9 million pension he negotiated as he was made to leave RBS last October for his part in bringing the bank to its knees. The 50-year-old financier has already started to collect an annual pension of around £700,000, and refused invitations to hand it back..

Less than an hour after the attack, an e-mail was sent to local media outlets, signed by Moira McLeod, claiming responsibility and threatening further vigilante assaults. The e-mail account used to send the warning was named “Bank Bosses Are Criminals”.

It read: “We are angry that rich people, like him, are paying themselves a huge amount of money, and living in luxury, while ordinary people are made unemployed, destitute and homeless. This is a crime. Bank bosses should be jailed.

“This is just the beginning.”

How soon before we see this same kind of anarchic domestic terrorism on our side of the pond?

It’s already here.

Animal rights’ terrorists have firebombed researchers’ homes and Molotov cocktail-bombed their cars and been convicted of inciting threats, harassment, and vandalism against employees of a private company engaged in animal research.

Environmental terrorists have set developments on fire.

Self-proclaimed “bank terrorist” Bruce Marks, who I reported on last March, has been threatening bank employees in their homes and harassing their children for years:

IT MAY SEEM LIKE AN UNUSUAL CHOICE, given that Marks is a controversial character who once infamously called himself a “bank terrorist.” But this is no ordinary time, and it seems uniquely suited to Marks’s curious blend of in-your-face activism, customer-focused service, Machiavellian angling, and social-justice passion.

Over the years, as part of his permanent campaign to browbeat banks into giving fair loans to low- and moderate-income people, Marks and his yellow-T-shirted followers have swarmed shareholders’ meetings with enough force to shut them down. They have picketed outside the schools attended by the children of bank CEOs, pressing the youngsters in signs and chants to answer for the actions of their daddies. And they even once distributed scandal sheets to every house in one CEO’s neighborhood, detailing the affair he was allegedly having with a subordinate. In time, that CEO, like most of the others that NACA targeted, sat down with Marks and signed a deal.

To those who found his tactics an outrageous invasion of bank executives’ personal lives, Marks refused to acknowledge any line between home and work. “What you do is who you are,” he says. “It’s all personal.”

And last weekend, of course, the ACORN mob chartered a bus — with twice as many outrage-stoking MSM photographers in tow — to menace AIG executives in their homes.

Keep all this context in mind as you read the resignation letter of AIG exec Jake DeSantis:

DEAR Mr. Liddy,

It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context:

I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.

After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself…

…The profitability of the businesses with which I was associated clearly supported my compensation. I never received any pay resulting from the credit default swaps that are now losing so much money. I did, however, like many others here, lose a significant portion of my life savings in the form of deferred compensation invested in the capital of A.I.G.-F.P. because of those losses. In this way I have personally suffered from this controversial activity — directly as well as indirectly with the rest of the taxpayers.

I have the utmost respect for the civic duty that you are now performing at A.I.G. You are as blameless for these credit default swap losses as I am. You answered your country’s call and you are taking a tremendous beating for it.

But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments, and that you didn’t defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut.

Is there a party in Washington that stands for the rule of law? How can the 85 House Republicanswho aided and abetted the AIG-bashing, backside-covering demagogues read this resignation letter and look themselves in the mirror?

How can they be trusted not to help the Democrats pick up the next figurative rock — and hurl it through the windows of the next target of the Capitol Hill vigilantes and their media enablers?

Back in Britain, the vandals have been encouraged by…a former newspaper editor:

Sir Fred’s home has already attracted the attention of protesters, with hostile banners posted outside, branding him a “scumbag millionaire”.

The violent assault on Sir Fred’s home came two days after Sir Max Hastings, a military historian and former newspaper editor, called for members of the public to throw stones through the windows of failed bankers.

“The time has come to address the entire robber banker culture,” he wrote in the Daily Mail on Monday. “Investment banks have been run not for the benefit of society, customers, or even shareholders, but exclusively for the advantage of the bankers themselves. . . This is why we must stand outside their homes throwing rocks through the windows until they do.”

The mob rules.

OBAMA: “It took us a couple of days because I like to know what I’m talking about before I speak.”

File that one away for the future. It explains a lot.

***

Ed Morrissey designates this moment “The Obamateurism of the Day.”

The problem with this is that it took him a couple of days — and he still got it wrong. If you’ll recall, Obama and his team first claimed to know nothing about the bonuses, and then modified that claim to knowing nothing about the amendment in the omnibus plan that allowed them to get paid. Subsequently, we discovered that not only did Tim Geithner and Congress discuss the bonuses on March 3rd (and that Geithner wrote an e-mail about them while with the New York Fed in November), but that it was Geithner and his staff that directed Chris Dodd to make the necessary changes to the amendment that enabled the bonuses. In otherwords, Outraged Obama made the bonuses possible.

Even the press laughed at this Obamateurism. Even after a couple of days on an issue, Obama doesn’t know what he’s talking about.

The Senate took its role as a deliberative body seriously and has buried the demagogic, backside-covering corporate bonus tax bill passed last week by the House. They’ve kicked the can down the road.

The Hill reports:

President Obama and Senate Democrats have buried a bill passed last week by the House that would have heavily taxed executive bonuses at bailed-out firms.

Despite the public outcry over $165 million in bonuses awarded at troubled insurer AIG, Senate Majority Leader Harry Reid (D-Nev.) showed little inclination Monday to bring the explosive issue to the floor this week or next. Instead, Reid is likely to delay action on executive compensation until late April, after the Senate returns from a two-week recess starting April 4…

…Senate Republican Whip Jon Kyl (Ariz.) said there is very little chance the Senate will act this week to recoup bonuses passed out at AIG and other corporations receiving bailout funds.

I still have seen very little questioning of the 85 Grabby Hands House Republicans, led by minority whip Eric Cantor, who went along with this abomination. How can they be trusted not to lose their heads when the next Kabuki outrage comes along? How can they be counted on to resist
the next confiscatory scheme down the road — say, this one?

Here’s Rep. Tom McClintock’s unpersuasive justification for voting yes; compare with Rep. John Campbell’s statement on why he voted no.

I’m re-publishing all the names of the confiscatory Republicans again, because they deserve to be called out:

Aderholt
Alexander
Barton (TX)
Biggert
Bilbray
Bilirakis
Blunt
Bono Mack
Boozman
Brown (SC)
Brown-Waite, Ginny
Buchanan
Calvert
Camp
Cantor
Cao
Capito
Cassidy
Castle
Crenshaw
Davis (KY)
Diaz-Balart, L.
Diaz-Balart, M.
Duncan
Ehlers
Emerson
Fleming
Forbes
Fortenberry
Frelinghuysen
Gallegly
Gerlach
Goodlatte
Guthrie
Heller
Herger
Hoekstra
Johnson (IL)
Jones
Kirk
Lance
Latham
Lee (NY)
Lewis (CA)
LoBiondo
Manzullo
McCaul
McClintock
McHugh
McMorris Rodgers
Mica
Miller (MI)
Moran (KS)
Petri
Platts
Putnam
Rehberg
Reichert
Roe (TN)
Rogers (AL)
Rogers (KY)
Rogers (MI)
Rohrabacher
Rooney
Ros-Lehtinen
Roskam
Royce
Ryan (WI)
Schmidt
Schock
Shimkus
Smith (NJ)
Smith (TX)
Stearns
Tiberi
Turner
Upton
Walden
Wamp
Whitfield
Wittman
Wolf
Young (AK)
Young (FL)