The NYT Finally Addresses The Obama Administration - GM Fraud

I posted here on the fraud being jointly perpetrated by GM and the White House as regards GM early repayment of its government loan. Touted by both GM and the White House as proof of GM's profitability and responsibility, they failed to note that the repayment was accomplished using TARP funds. The Bush administration would have been roasted to a smoking husk over this in the MSM had his administration engaged in such a blatant fraud. Nonetheless, as with most things involving the left, it has been virtually ignored by the left. Today, weeks after the story broke, the NYT has posted an article addressing the fraud:

. . . Truth seekers the nation over . . . are indebted to Senator Charles E. Grassley, Republican of Iowa, who in recent days uncovered what he called a government-enabled “TARP money shuffle.” It relates to General Motors, which on April 21 paid the balance of its $6.7 billion loan under the Troubled Asset Relief Program.

G.M. trumpeted its escape from the program as evidence that it had turned the corner in its operations. “G.M. is able to repay the taxpayers in full, with interest, ahead of schedule, because more customers are buying vehicles like the Chevrolet Malibu and Buick LaCrosse,” boasted Edward E. Whitacre Jr., its chief executive.

G.M. also crowed about its loan repayment in a national television ad and the United States Treasury also marked the moment with a press release: “We are encouraged that G.M. has repaid its debt well ahead of schedule and confident that the company is on a strong path to viability,” said Timothy F. Geithner, the Treasury secretary.

Taxpayers are naturally eager for news about bailout repayments. But what neither G.M. nor the Treasury disclosed was that the company simply used other funds held by the Treasury to pay off its original loan.

Neil M. Barofsky, the inspector general overseeing the troubled asset program, revealed this detail when he spoke before the Senate Finance Committee on April 20.

“So it’s good news in that they’re reducing their debt,” Mr. Barofsky said of G.M. But he went on to note that G.M. was using other taxpayer money to make the loan repayment, according to the transcript of his testimony.

Armed with this information, Mr. Grassley fired off a letter to Mr. Geithner on April 22, asking for details of the transaction. “I am concerned ... that this announcement is not what it seems,” he wrote. “In fact, it appears to be nothing more than an elaborate TARP money shuffle.”

Mr. Grassley heard back from the Treasury last Tuesday. Herbert M. Allison Jr., assistant secretary for financial stability, confirmed that the money G.M. used to repay its bailout loan had come from a taxpayer-financed escrow account held for the automaker at the Treasury.

Emphasizing that the cash in the account was “the property of G.M.,” Mr. Allison said that the department had approved the company’s use of the money to retire the original debt because it was “consistent with Treasury’s goal of recovering funds for the taxpayer and exiting TARP investments as soon as practicable.”

It’s certainly understandable that G.M. would want to spin its repayment as proof of improving operations. But Mr. Grassley said he was troubled that the Treasury went along with the public relations campaign and didn’t spell out how the loan was retired.

“The public would know nothing about the TARP escrow money being the source of the supposed repayment from simply watching G.M.’s TV commercials or reading Treasury’s press release,” Mr. Grassley said in a speech on the Senate floor last Wednesday, saying that “many billions” of federal dollars remained invested in G.M.

“Much of it will never be repaid,” Mr. Grassley added. “The Congressional Budget Office estimates that taxpayers will lose around $30 billion on G.M.”

(Taxpayers still own $2.1 billion in preferred stock of G.M. and almost 61 percent of its common equity.) . . .

Of course, there is much joy in Mudville when a recipient of government aid repays its obligations. And it is also natural that the administration is keenly interested in reassuring taxpayers that losses on their bailout billions will be smaller than expected. Still, employing spin and selective disclosure is no way to raise taxpayers’ trust in our nation’s leadership. . . .

I pointed out in my initial post that this fraud and collusion likely fell afoul of securities regulations. And today, Hot Air and Powerline conclude similarly. This is more than a bad act - it is a potentialy criminal scandal. It is certainly a scandal deserving of far more than a buried article in the business section of the NYT, though that is at least a small start.

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Utterly Shameless - & Fraudulent

You might have caught this bit of seemingly good news today if you saw this commercial . . .



Or you might have heard the news from an ecstatic White House. This from CBS News:

No one was cheering louder than the White House about General Motors' repayment of $6.7 billion in loans from the federal government.

First thing this morning, Press Secretary Robert Gibbs alerted his 56,000 followers on Twitter of "BIG NEWS."

"GM pays back US $6.7 billion used to save jobs," Gibbs exulted. But he had more.

"BIGGER NEWS," he trumpeted. "Payment was 5 years ahead of schedule."

. . . Later at his daily press briefing, Gibbs didn't wait for a reporter to ask him about the GM payback. He portrayed it as a vindication of President Obama's decision to provide a federal bailout to GM and Chrysler . . .

The amount repaid by GM is less than 13 percent of the $52 billion in federal bailout funds provided to the automaker. The remainder of the bailout was converted into stock, which GM still intends to pay off. Gibbs concedes, "obviously, we're not out of the woods by any stretch of the imagination." But he thinks the payback demonstrates that GM is on a path to renewal. . . .

Vice President Biden added his voice to the White House chorus, hailing the GM payback as a "huge accomplishment."

"The President of the United States took a lot of heat for that effort," said Biden of the GM bailout, saying it kept the company alive while it was transitioning.

"And I would just like to point out that I am proud to be associated with the guy who saw the necessity to do this," boasted the VP about his constitutional boss.

Biden said the rapid GM payback "exceeded our expectations."

White House economic advisor Lawrence Summers came closest to telling the critics of the bailout "we told you so," without actually using those words.

"This turnaround wasn't an accident of history," said Summers in a blog on the White House website. "It was the result of considered and politically difficult decisions made by President Obama to provide GM and Chrysler - and indeed the auto industry - a lifeline, if they could demonstrate the will to reshape their businesses and chart a path toward long-term viability without ongoing government assistance."

But the payback also gives the White House ammunition in defense of future government bailouts, should they be needed. Gibbs said it's the White House hope they won't be.

Great news for Obama and GM indeed - until you get the rest of the story. This, courtesy of Jamie Dupree via Q&O:

The issue came up yesterday at a hearing with the special watchdog on the Wall Street Bailout, Neil Barofsky, who was asked several times about the GM repayment by Sen. Tom Carper (D-DE), who was looking for answers on how much money the feds might make from the controversial Wall Street Bailout.

“It’s good news in that they’re reducing their debt,” Barofsky said of the accelerated GM payments, “but they’re doing it by taking other available TARP money.”

In other words, GM is taking money from the Wall Street Bailout – the TARP money – and using that to pay off their loans ahead of schedule.

“It sounds like it’s kind of like taking money out of one pocket and putting in the other,” said Carper, who got a nod of agreement from Barofsky.

“The way that payment is going to be made is by drawing down on an equity facility of other TARP money.”

Translated – they are using bailout funds from the feds to pay off their loans.

This is absolutely unreal. This is nothing more than a shell game with taxpayer money, yet it is being presented as if GM is actually becoming a profitable organization again. Its been a long time since I looked at securities law, but I would be willing to bet this incredibly bit of misleading news from GM and its primary stockholder, the Obama administration, easily crosses those regulatory lines that define fraud under SEC regs. This is GM and the Obama Administration colluding to perpetrate a massive fraud on the American people.

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Barney Frank Vies For Washinton's Most Toxic Asset

Few people have played such a disastrous role in our nation as Barney Frank. He has been a key architect of the mortgage mess that is at the heart of our economic meltdown. Since the mortgage market crashed, that hasn't slowed this utterly shameless and dangerous man. He has strong-armed the bond rating companies not to downgrade municipal bonds and floated a plan to have the federal government insure all state and local bond issues. A few days ago, he asked Fannie Mae to start accepting loans on condos that they currently deny as too risky. His latest is now to take repayment of TARP funds - money that is by law supposed to go into the general funds and be used to pay down our crippling debt - and use it to fund one of his latest brilliant plans. This from Byron York:

When President Obama announced on June 9 that some financial institutions would be allowed to repay Troubled Asset Relief Program dollars, he said the massively expensive TARP bailout had made money for the federal government. "It is worth noting that in the first round of repayments from these [TARP recipients], the government has actually turned a profit," the president said. Indeed, TARP supporters have long held out the hope that the program might be profitable.

But now Rep. Barney Frank, the chairman of the House Financial Services Committee, has come up with a proposal to spend any TARP profits before they can be returned to the taxpayers. Last Friday, Frank introduced the "TARP for Main Street Act of 2009," a bill that would take profits from the program and immediately redirect them toward housing proposals favored by Frank and some fellow Democrats.

. . . Last month, the General Accountability Office (GAO) reported that, through June 12, 2009, the government had received $6.2 billion in dividend payments. The original TARP legislation required that money made from the program "shall be paid into the general fund of the Treasury for reduction of the public debt."

Frank, however, wants to spend the money before it can be used to pay down anything. First, the "TARP for Main Street" proposal would take $1 billion "from dividends paid by financial institutions that have received financial assistance provided under…the Emergency Economic Stabilization Act" and apply it to a trust fund that Frank has long wanted to create for low-income rental housing. (The measure, unfunded, was part of last year's bailout of Fannie Mae and Freddie Mac.) Next, Frank would take $1.5 billion from TARP dividends for a so-called "neighborhood stabilization" fund. Republican critics have charged that both measures might allow federal dollars to be distributed to activist groups like the Association of Community Organizers for Reform Now, or ACORN.

The "TARP for Main Street" bill would also spend $2 billion, apparently from remaining TARP funds, to subsidize people who are delinquent on their mortgages, and another $2 billion to "stabilize multifamily properties that are in default or foreclosure." . . .

Read the entire article. I mean, its not like we need to be concerned about the size of our budget, right? Barney Frank is a clear and present danger to this country.

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A Descent Into Corruption & Abuse Of Power Is Not The Change For Which We Had Hoped

Unlimited power is apt to corrupt the minds of those who possess it; and this I know, my lords, that where laws end, tyranny begins."

William Pitt The Elder, Speech to the House of Lords, 1770

The Democrats have achieved what amounts to complete power in America. And the far left wing of the Democratic Party, led by Obama, are skirting if not violating the law in order to get their way. Numerous acts of intimidation and abuse of power are showing up everywhere you look. That includes at least two egregious acts that have come to light just this day - the intimidation of a witnesses and Obama's unilateral decision to fire the Inspector General (IG) for Americorps who had recently investigated and received a judgment against a major Obama supporter.

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In the Chrysler and GM bankruptcies, we have seen extortion and strong arming from Obama and his "car czar" to trample on statutory and constitutional rights of secured creditors. With the nations major banks, we have seen the Obama administration refuse to allow repayment of loans and then use their control to influence bank decisions as regards Chrysler and GM. Even now, though allowing repayment, the government is maintaining warrants that they could exercise at any time to take over the effective ownership of every major banking institution in America. We have seen the White House take direct control of the 2010 census and insert the deeply corrupt ACORN into the counting process. We have seen the Obama DOJ make the inexplicable decision not to prosecute voter intimidation by the New Black Panthers. And we have the Obama DOJ ignoring a recent Supreme Court case and making decisions that can only further promote voter fraud.

In the House, Nancy Pelosi and the Democrats repeatedly refused to allow ethics investigations of numerous Democratic lawmakers who are reeking with the stench of corruption. Indeed, even the NYT editorial board is starting to choke on that one. Tax fraud Charlie Rangel and "friend of Angelo" Chris Dodd still not only retain their seats in Congress, but their chairmanships. And we have the left protecting ACORN at every turn, cancelling hearings to investigate their corruption and insuring that all attempts to block robust funding of ACORN on the taxpayer's dime are rebuffed.

And today, there is more. First up are charges of witness intimidation. Democratic Rep. Ed Markey, co-author of the Waxman Cap and Trade bill, sent a letter to Federal Energy Regulatory Commission asking FERC to investigate MidAmerican Energy Holdings on the same day that company’s CEO was set to testify before the energy panel on the dangers of a carbon cap and trade system. In another instance, health care lobbyists were warned by two senior democratic staffers not to meet with the Republican leadership to discuss the proposed health care plan. As they reportedly said, doing so would be a "hostile act."

But by far the worst act is Obama's unilateral decision to fire Gerald Walpin, the Inspector General of AmeriCorps. An inspector generals job is to investigate for waste, fraud or abuse of federal funds. Walpin had recently investigated Kevin Johnson, an Obama supporter, and the nonprofit St. HOPE Academy that Johnson headed. Walpin found six instances of funds being diverted or wrongly used, none of which were disputed by Johnson. Walpin handed his findings over to the DOJ. The DOJ then found sufficient cause to order St. Hope to repay about half of nearly $847,000 in federal grants they had received from AmeriCorps. On the heels of that, not only did Obama act to fire Walpin, but Obama failed to comply with an act he voted for last year meant to protect Inspector Generals from political pressure. That law requires Obama to allow allow thirty days to pass after informing Congress of the intent to fire an IG, and to provide specific reasons for the firing. Obama did neither. Byron York has the definitive postings on this one. He also adds that this situation with Walpin may be the tip of the iceberg, stating that a "number of inspectors general around the government have been expressing concerns to Congress recently about threats to their independence."

On a final note, not included in the bill of particulars above are the highly questionable procedural games that the Democratic majority is playing in Congress. Major bills are not being written in committee. Instead, they are being written in secret by the far left wing of the Democratic party then pushed out with calls for an immediate vote. Nancy Pelosi virtually wrote the porkulus bill behind closed doors, and then referred to Republican complaints about the lack of bipartisanship in drafting the bill as mere "process arguments." And it is not just Republicans. The NYT reported last month "[f]orty-five House Democrats in the party’s moderate-to-conservative wing have protested the secretive process by which party leaders in their chamber are developing legislation to remake the health care system." Then there is Obama's proposal for ramming socialized medicine legislation through by grossly misusing the "budget reconciliation" procedure in the Senate.

Obama and the far left are drunk with power and vastly overreaching. Indeed, any number of Obama's acts to date would have, had they been done by Bush, resulted in substantive calls for impeachment. There is a reason Dafydd ab Hugh of Big Lizards tagged Obama as "Lucky Lefty." But with a press corps that more resembles a smitten school girl - indeed, so much so that one of the editors of the left wing SF Examiner is complaining - utterly none of these tyrannical acts designed to skirt law and democracy are being followed up by the MSM. This is not the hope and change Obama promised - but it is the reality his background clearly foreshadowed.

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"Lucky Lefty" Obama, TARP, Chrysler, California and Gangster Government

Obama is not running the government as President according to the Constitution - he is running it like a mafia don from the pages of a Mario Puzo novel. As Michael Barone describes it, we now have "Gangster Government." And as Dafydd ab Hugh has cynically but appropriately tagged him, our nation's leader is more aptly termed "Lucky Lefty" Obama.

First are the TARP "loans" to banks. They came with numerous strings attached. When some of the banks said they wanted to pay the loans back and crawl out from under the thumb of the Obama government, Obama's administration said "not so fast." Like the most lawless of loan sharks, to the contrary, the Obama administration floated a plan to forcibly convert the TARP loans into common stock, thereby making the government the dominant owner of the banks.

As it is, TARP funds are grossly distorting our economy in three ways. One, recipients of TARP loans are being leaned on by the government to act in ways that support Obama goals instead of those of the bank's shareholders and customers. Two, this government interference is going to give great pause to anyone so foolish as to be thinking of investing in any entity subject to Obama administration interference. And lastly, TARP funds are leading to corruption and fraud on a world record scale.

Then there is Obama's well blogged (though anything but well publicized in the MSM) extortion of Chrysler secured bond holders. It is a charge the Obama administration first categorically denied. Now, after others have verified the story, the White House simply refuses to answer questions on the topic . Obama strong-armed the secured creditors to give up their property rights - rights protected both in bankruptcy law and the Constitution - so that Obama could reward the UAW on a grand scale. It is government theft - stealing from innocent investors to give to his union supporters. The Obama administration threatened to destroy the bondholders in the press if they did not comply. Obama excoriated the bond holders as "speculators" at his 100 days press conference - an absolutely outrageous act. There were anonymous death threats made to the bond holders. And to put the icing on the cake, the bankruptcy court ordered exposure of the bond holders.

To add onto all of this, many of the secured bond holders were TARP recipients. These entities were not among the hold-outs seeking to uphold their legal rights. To the contrary, the TARP recipients rolled over long before this, giving up their legal rights so Obama could legally steal from them and give to the UAW. Do you think they were given an offer they couldn't refuse?

Then there is California, a state whose finances have been so mismanaged by the far left for over a decade that now, under fiscal stress, they are headed for bankruptcy by July. Seeing the writing on the wall, Gov. Schwarzenager pushed through legislation to lower compensation for union health care workers - a move that was expected to save over $72 million. The Service Workers International Union appealed directly to Obama. Now, in an absolutely outrageous act, Obama has unilaterally threatened to withhold all $6.8 billion in stimulus funds slated for California unless the California government reinstates the old wage rate for the unionized workers. Dafydd at Big Lizards has the entire story - and it is Obama's extrajudicial actions that led Dafydd to tag Obama as "Lucky Lefty" - an appropriate gangster nickname for our Don in Chief.

I have to laugh when I look back at this point and ponder the last eight year's worth of baseless left wing claims that the Bush Administration was shredding the Constitution. What we are being treated to now is the real deal. It really is "gangster government," and the Constitution doesn't seem worth the paper it is printed on to "Lucky Lefty."

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The Constitution - - The Last Refuge Against A Scoundrel

We have been witness over the past several weeks to White House strong arming of businesses the likes of which have previously been unknown in this country. And now if appears Obama has crossed a threshold that the Constitution forbids.

First there are the TARP loans. The government has refused banks the ability to repay them. Instead, the Obama administration floated a plan, still under consideration, of de facto nationalizing the banks by converting bank TARP loans to common stock. One would think it could not get worse than that, but one would be wrong.

Obama, in proposing to reorganize the auto manufacturers, wants to place his major constituency, big Labour, at the front of the line when it comes to an ownership stake in GM and Chrysler. The end result of such a move is that secured creditors of the two companies would suffer a relative loss far in excess of that which would be suffered by the unions. Not only has the Obama plan been set up to show blatant favortism in contravention of the commercial code, but Obama and his crew were publicly criticizing - and privately threatening - the secured creditors holding out against this plan. Powerline, refering to this as banana republic capitalism, has the whole story. And indeed, there is nothing to distinguish this act of Obama from similar extortions of property by Hugo Chavez in Venezuela or . . . well, pick your favorite dictator.

Fortunately, it seems that the creditors are fighting back. At least one attorney, Thomas Lauria, has gone public about the threat to the entities he represents made by the Obama administration - to use the White House Press Corps to destroy them in the eyes of the public. Today, Lauria has filed a brief challenging the proposed acts of Obama based on the Fifth Amendment. Specifically, he cites to a 1935 case, Louisville Joint Stock Land Bank v. Radford, that dealt with a provision of the New Deal that would have acted to strip a secured creditor of the value of his security by government fiat. The Supreme Court held that, regardless of the government's compelling interest in responding to the economic chaos of the depression, such an act violated the 5th Amendment prohibition against taking private property without just compensation. It is a case dead on point. Hot Air has the story.

I will assume, without looking it up, that this case is still good law. It's interesting to note that this case fell two years prior to FDR's "court packing" scheme. FDR was tired of being stymied by a Supreme Court that found much of his "New Deal" legislation unconstitutional. In 1937, FDR proposed to expand the number of Justices on the Supreme Court and pack the Court in his favor. FDR lost the battle and the legislation failed. That said, FDR won the war. The Supreme Court got the message and began regularly defering to FDR's wishes and taking congressional findings at face value.

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Obamanomics Pulling Hard Left

We are moving ever more quickly into socialism and, if the inevitable huge jump in inflation kicks in before our economy can recover, then we will have stagflation that will make us pine for the good old days of the Carter economy. The Obama administration is now seeking to take effective ownership of both our auto industry and our banking industry. This is on top of the cap and trade plan and Obamacare. And it is on top of massive public spending that threatens us with more debt than that created by all previous administrations combined. And that's only the first 100 days. There are many more to go. Indeed, when cap and trade and Obamacare hit, the numbers get too big for my five year old calculator.



Let's tick these off, one by one. The government refused banks the right to pay back TARP funds and floated a plan, still alive as far as I know, to coercively turn TARP loans into common stock, effectively nationalizing the banks and giving the Obama administration the right to set bank policy. Since it was setting bank policy through the Community Reinvestment Act that is at ground zero of our economic crisis, this ought to be doubly troubling.

As to the auto industry, we have already seen the incredible intervention of Obama forcing the CEO of GM to step down - apparently to get someone in the top spot who would be more amenable to the government's plans for the company. Now we have the government floating a plan that for GM and Chrysler that would have the government become the primary owner of both, with Big Labor as a junior partner. As to holders of common stock and bond holders who are legally entitled to far more - well, they are evil capitalists anyway who didn't likely vote for Obama, so they get shafted. See here, Powerline and Big Lizards.

Just to add here problem with government ownership of the means of production is that they will direct production and costs in ways that help them politically - or that are ideologically driven - rather than do what makes economic sense for the business and its customers. It is only the latter that helps all parties. It is why not a single socialist economy has ever prospered. Well, the ruling elites and their cronies all prosper, but the average Jack and Jill certainly do not.

Then there is the Troubled Assett Relief Program (TARP) that is growing in size and corruption by the day. As reported in the WSJ, Neil Barofsky, the Special Inspector General (SIG) for TARP, spoke before Congress in February, telling the legislators that far more transparency was needed to prevent vast fraud and abuse. At the time, Treasury concurred and said that they would institute changes to the program. Treasury since has dug in its heals and it really looks like TARP is out of control. The Special Inspector General (SIG) issued a report to Congress just the other day. I have not yet had time read the Quarterly Report of the Inspector General to Congress, but Powerline did - and their report is troubling indeed. Some snippets:

- - report documents the stunning and at least partly illegal expansion of TARP from the $700 billion originally allocated by Congress to what is now a $3 trillion complex of programs.

- - most troubling feature of the SIG's report is its documentation of reluctance on the part of Tim Geithner's Treasury Department to make even modest efforts to protect the interests of the taxpayers. To take just one glaring example, Treasury has refused to require banks to account for what they do with the billions of dollars they receive in TARP money.

- - The Treasury Department is now managing a vast portfolio of "troubled assets" on behalf of the American people. It has not, however, developed any plan for how to dispose of them, or how to manage them

- - The SIG discusses the "Public-Private Investment Program," one of the most controversial aspects of TARP. PPIP is intended to form public-private "partnerships" to buy distressed assets, mostly mortgage-backed securities. But the vast majority of the risk lies with the taxpayers, while the program is rife with opportunities for connected insiders to make a fortune.

There is much more and, if you do not have the time to read the SIG report, I would urge you to see the post at Powerline. As John Hinderaker sums it up in his post:

1) The government's $3 trillion and counting TARP program represents the greatest opportunity for sharp operators to profit at taxpayer expense in history.

2) The Obama administration is either in favor of giving Wall Street sharks this opportunity or, at a minimum, doesn't much mind doing so. (If this seems odd, remember where Obama got the biggest chunk of campaign contributions in 2008.)

3) It may be that the TARP complex of programs is the beginning of a national-socialist type takeover of the financial services industry by the federal government.

4) We can only hope that this turns out not to be the case, and TARP is only the biggest--and perhaps, by the end of the day, the crookedest--waste of taxpayer money in history.

5) so far the only person or organization who appears to be looking out for the taxpayers is the Special Inspector General. We will be reading his future reports with great interest.

Why is it that we did not see this splashed across the papers as a huge scandal in the making?

One last note relating to TARP, though hardly least in importance, is that the programs - and people - who gave us this economic meltdown are still in place. As I wrote months ago, our credit rating system - the one that regularly gave us triple-A ratings for mortgage backed securities based on subprime mortgages - was completely broken. It was a huge contributing cause to the mess we are in, and truth be known, it is wholly unclear why and how this happened. Regardless, as the SIG wrote in his report to Congress, and as quoted in the WSJ, "credit ratings on residential mortgage-backed securities (RMBS) 'have proven to be unreliable and largely irrelevant to the actual value and performance of the security. Arguably, the wholesale failure of the credit rating agencies to rate adequately such securities is at the heart of the securitization market collapse, if not the primary cause of the current credit crisis.'" So can we at least get a correction of the systemic problems in our credit rating industry? Fat chance with Barney Frank at the helm. Indeed, Barney Frank's sole contribution to adjusting the credit rating system since Obama and cronies took power was to call on credit agencies to give higher ratings to municipal bonds than their risk justifies so that states could raise more money.

As to Obama's plan to revitalize the economy, he rammed through his massive spending bill without any meaningful debate. While tax cuts gets the money into the economy near immediately and can have long term effect as businesses expand, government spending can take years to have any impact and the effects are largely transitory. As far as I can tell, we have yet to see in history a government successfully borrow and spend its way out of an economic crisis such as we are in. It did not work for FDR, and most recently, it did not work for Japan. Dale Franks at Q&O has done a very interesting post how closely our current economic plans mirror those that failed utterly in Japan in response to its own financial crisis.

Then there are Obamacare and cap and trade. The former is an intermediate step towards socialized medicine expected to add a trillion dollars to our tax bill. The latter is designed to force us off of oil and coal - at the modest initial annual cost of $4k per American family - and into a world of green energy that does not exist. Those pushing cap-and-trade the most are those people and industries who stand to make a true windfall - GE and Al Gore chief among them.

Further, Obama is now warring on domestic production of energy plants using coal - and I seriously doubt this administration will consider any sort of expanded domestic oil production. Oil costs are low now. That said, the pendulum will, as it always does, swing. The massive markets for oil in China and India will again take hold. When it does, we will be even less prepared for the huge jump in oil and gas costs then when we were a year ago, when merely $4 a gallon for gas was putting a world of hurt on American families. Obama, despite his promises to the contrary during the campaign, is doing nothing to prepare us for this inevitability.

We are in a mess and the left, having primed the nation with class envy and then convinced a majority that they could improve the economy, are now spending us into penury for generations to come. Obama - who in fact himself bears some personal responsiblity for our current financial crisis through his strong arming of Chicago banks on behalf of ACORN - is nothing if not an opportunist. He and his like minded cronies are using the economic crisis to work a fundamental change to our nation. We are on the road to European socialism. I wonder if we will even stop there between now and 2012? Or will we run past that line following the rainbow to Utopia?

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"A Backdoor To Nationalization"

The WSJ piles on today, also calling the latest moves by Treasury to convert TARP assets into equity in our largest banks a foray into socialism in America.

This today from the WSJ:

. . . The latest Beltway blunder -- and it would be a big one -- is the Obama Administration's weekend news leak that it may insist on converting its preferred shares in some of the nation's largest banks into common equity.

The stock market promptly tumbled by more than 3.5% yesterday, with J.P. Morgan falling 10% and financial stocks as a group off 9%, as measured by the NYSE Financials index. Note to White House: Sneaky nationalizations aren't any more popular with investors than the straightforward kind.

The occasion for this latest nationalization trial balloon is the looming result of the Treasury's bank strip-tease -- a.k.a. "stress tests." Treasury is worried, with cause, that some of the largest banks lack the capital to ride out future credit losses. Yet Secretary Timothy Geithner and the White House have concluded that they can't risk asking Congress for more bailout cash.

Voila, they propose a preferred-for-common swap, which can conjure up an extra $100 billion in bank tangible common equity, a core measure of bank capital. Not that this really adds any new capital; it merely shifts the deck chairs on bank balance sheets. Why Treasury thinks anyone would find this reassuring is a mystery. The opposite is the more likely result, since it signals that Treasury no longer believes it can tap more public capital to support the financial system if the losses keep building.

Worse, wholesale equity conversion would mean the government owns a larger share of more banks and is more entangled than ever in their operations. Giving Barney Frank more voting power is more likely to induce panic than restore confidence. Simply look at the reluctance of some banks -- notably J.P. Morgan Chase -- to participate in Mr. Geithner's private-public toxic asset sale plan. The plan is rigged so taxpayers assume nearly all the downside risk, but the banks still don't want to play lest Congress they become even more subject to political whim. . . .

Read the entire article. This really is a huge deal.

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Obama Moves Towards Nationalization Of The Banking Industry

With the announcement that the Obama administration is refusing to accept repayment of TARP funds and instead intends to convert those funds to an equity position, giving the government ownership stakes in the banks, socialism - and I am talking full blown socialism of the Hugo Chavez, Fidel Castro, name your favorite third world tin pot dictator variety - is now an actual risk in America.

The federal government, through market interference directed at social engineering, beginning with Clinton and protected at every turn by Democrats during the Bush Administration, gave us the subprime crisis. The fix we are in today never occurs without that, and that is irrespective of Wall St. What this crisis led to in October, 2008 was a massive credit crunch and liquidity problem. The government stepped in with TARP loans to provide government assistance, attaching a slew of strings to the money. At the time, the stated goal was to inject liquidity into the system with the onerous strings attached on such things as executive compensation in order to provide a motivation for banks to repay the funds as soon as possible.

The details of how the TARP money was used in each case is sketchy at best. Some was used as loans, some apparently to purchase preferred stock with no voting rights, etc. What was not done with the money, at least beyond AIG, was to buy a true ownership position in the banks that would have provided voting rights in the management of the company. The latter would be a major step towards nationalization of our financial industry. And indeed, that now seems to be what is on the cusp of happening.

Within the past week, we have seen some of the major banks publicly state that they wish to repay the TARP funds. The Obama government has said "no," we think you should keep the money - with all the strings attached - and perhaps we might take ownership of your company by forcing you to convert the loan to common stock. Read it here and here. In other words, not only would all of the onerous strings attached to TARP funds become permanent - to the detriment of our financial sector - but the U.S. government would effectively take ownership of our major banking institutuions.

That is really breathtaking - as is the fact that this is being reported off the front pages in our MSM. Under no circumsatances should the U.S. government be allowed a voting interest in our major banks nor should the TARP strings extend another day beyond an institutions stated desire and ability to repay those funds in full. Further, if the government wishes, they can easilly change how TARP funds are carried on the books of banks with a simple change to the regulations. The suggestion that only by converting loans to common stock can liquidity be increased is so transparent as to be laughable.

This gets worse and worse.

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