PAULSON AND FRIENDS ....AGAIN

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joe2baba's picture
joe2baba
Status: Martenson Brigade Member (Offline)
Joined: Jun 17 2008
Posts: 807
PAULSON AND FRIENDS ....AGAIN

i am not surprised and i am sure anyone here for more than 30 seconds is not surprised either.

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Paulson's swindle

Paulson's Swindle Revealed
by William Greider

The swindle of American taxpayers is proceeding more or less in broad
daylight, as the unwitting voters are preoccupied with the national
election. Treasury Secretary Hank Paulson agreed to invest $125 billion
in the nine largest banks, including $10 billion for Goldman Sachs, his
old firm. But, if you look more closely at Paulson's transaction, the
taxpayers were taken for a ride--a very expensive ride. They paid $125
billion for bank stock that a private investor could purchase for $62.5
billion. That means half of the public's money was a straight-out gift
to Wall Street, for which taxpayers got nothing in return.

These are dynamite facts that demand immediate action to halt the
bailout deal and correct its giveaway terms. Stop payment on the
Treasury checks before the bankers can cash them. Open an immediate
Congressional investigation into how Paulson and his staff determined
such a sweetheart deal for leading players in the financial sector and
for their own former employer. Paulson's bailout staff is heavily
populated with Goldman Sachs veterans and individuals from other Wall
Street firms. Yet we do not know whether these financiers have fully
divested their own Wall Street holdings. Were they perhaps enriching
themselves as they engineered this generous distribution of public
wealth to embattled private banks and their shareholders?

Leo W. Gerard, president of the United Steelworkers, raised these explosive
questions in a
stinging letter sent to Paulson this week. The union did
what any private investor would do. Its finance experts vetted the terms
of the bailout investment and calculated the real value of what Treasury
bought with the public's money. In the case of Goldman Sachs, the
analysis could conveniently rely on a comparable sale twenty days earlier.
Billionaire Warren Buffett invested $5 billion in Goldman Sachs and
bought the same types of securities--preferred stock and warrants to
purchase common stock in the future. Only Buffett's preferred shares pay
a 10 percent dividend, while the public gets only 5 percent. Dollar for dollar,
Buffett "received at least seven and perhaps up to 14 times more
warrants than Treasury did and his warrants have more favorable terms,"
Gerard pointed out.

"I am sure that someone at Treasury saw the terms of Buffett's
investment," the union president wrote. "In fact, my suspicion is that
you studied it pretty closely and knew exactly what you were doing. The
50-50 deal--50 percent invested and 50 percent as a gift--is quite
consistent with the Republican version of spread-the-wealth-around
philosophy."

The Steelworkers' close analysis was done by Ron W. Bloom, director of
the union's corporate research and a Wall Street veteran himself who
worked at Larzard Freres, the investment house. Bloom applied standard
valuation techniques to establish the market price Buffett paid per
share compared to Treasury's price. "The analysis is based on the
assumption that Warren Buffett is an intelligent third party investor
who paid no more for his investment than he had to," Bloom's report
explained. "It also assumes that Gold Sachs' job is to protect its
existing shareholders so that it extracted from Mr. Buffett the most
that it could.... Further, it is assumed that Henry Paulson is likewise an
intelligent man and that if he paid any more than Mr. Buffett--if he
paid
$1 for something for which Mr. Buffett would have paid 50 cents--that
the difference is a gift from the taxpayers of the United States to
the shareholders of Goldman Sachs."

The implications are staggering. Leo Gerard told Paulson: "If the result
of our analysis is applied to the deals that you made at the other eight
institutions--which on average most would view as being less well
positioned than Goldman and therefore requiring an even greater rate of
return--you paid a$125 billion for securities for which a disinterested
party would have paid $62.5 billion. That means you gifted the other
$62.5 billion to the shareholders of these nine institutions."

If the same rule of thumb is applied to Paulson's grand $700 billion
bailout fund, Gerard said this will constitute a gift of $350 billion
from the American taxpayers "to reward the institutions that have driven
our nation and it now appears the whole world into its most serious
economic crisis in 75 years."

Is anyone angry? Will anyone look into these very serious accusations?
Congress is off campaigning. The financiers at Treasury probably assume
any public outrage will be lost in the election returns. I hope they are
mistaken.

This article can be found on the web at:

http://www.thenation.com/doc/20081110/greider2

well i am mad as hell and i well i ..........................................guess i will vote for change. manana. "wasted away again in margaritville"

krogoth's picture
krogoth
Status: Platinum Member (Offline)
Joined: Aug 18 2008
Posts: 576
Re: PAULSON AND FRIENDS ....AGAIN
And the hits just keep coming! Good post Joe.
rlee's picture
rlee
Status: Silver Member (Offline)
Joined: Sep 18 2008
Posts: 148
Re: PAULSON AND FRIENDS ....AGAIN

Excellent post Joe!  This goes to the heart of the matter - sleazy insider deals and an out-and-out looting of the American sheeple.  

And yet, this thing will continue to go on regardless of who occupies the Whitehouse, as I suspect that whoever that may be will be well schooled early on regarding just who is really in charge of this country. 

Bob 

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