The alleged purpose of the 2008 TARP bailout was changed after only a week from saving mortgages to saving banks. No 'grilling' was going to take place about this change by a lame duck congress in business with Paulson and Bernanke. In a secret Sept. 2008 meeting, congress was given advance word by the two of the upcoming stock market crash enabling members to sell large amounts of stock and avoid losses later experienced by constituents. Banks weren't obligated to use TARP money for small business loans and the like but were free to spend it on things like bonuses for executives. Paulson also withheld $350 billion of the money and gave it to Obama. "$350 billion was saved for the new President when he took office in 2009. Obama never used the TARP funds to further bail out banks," focusing instead on his 'stimulus' program.
11/18/2008, "Lawmakers grill Paulson on bailout plan," AP
"Paulson said he is not planning to initiate another capital injection program beyond those already announced. Thus he's unlikely to tap the remaining $350 billion before the Bush administration leaves office on Jan. 20.
The idea behind the capital injection program is for banks to use the money to rebuild reserves and lend more freely to customers. However, banks do have the leeway to use the money for other things, such as buying other banks, paying dividends to investors or bonuses to executives.
That has touched a nerve with some lawmakers. "My constituents are telling me that many of them still cannot get access to credit," said Rep. Carolyn Maloney, D-N.Y.
Locked-up lending is a prime reason why the U.S. is suffering through the worst financial crisis since the 1930s. All the fallout from the housing, credit and financial crises have badly hurt the economy, which is almost certainly in recession, analysts say....
Faced with exasperated lawmakers upset by shifts in bailout strategy, Treasury Secretary Henry Paulson launched a spirited defense Tuesday of his handling of the $700 billion program and expressed fresh reservations about tapping the pool for mortgage guarantees to relieve skyrocketing home foreclosures.
Members of the House Financial Services Committee grilled Paulson for not doing enough to help distressed homeowners and for failing to force banks that get some of the bailout money to specifically use it to bolster lending to customers, one of the prime reasons behind the rescue package.
"It is essential" that some of the bailout money be used to ease foreclosures, said the panel's chairman, Rep. Barney Frank, D-Mass., a key player in shaping the package that Congress passed and President George W. Bush signed into law Oct. 3.
Amid fits and starts in the administration's rollout and direction of the program, "I have to say at this point that public confidence in what we have done so far is lower than anybody would want it to be, to the point where it could be an obstacle to further steps," Frank lamented.
In a break with the administration, Federal Deposit Insurance Corp. Chairman Sheila Bair, made a fresh pitch for using $24 billion of the bailout pool to help Americans at risk of losing their homes. House Speaker Nancy Pelosi is urging Paulson to support the FDIC plan.
"As foreclosures escalate, we are clearly falling behind the curve," Bair warned the panel. "Much more aggressive intervention is needed if we are to curb the damage to our neighborhoods and broader economic health."...
While Paulson was resistant to using some of the bailout money to provide mortgage guarantees, he said the administration will look for ways to provide foreclosure relief.
Some Democrats also prodded Paulson to divert $25 billion of the bailout money to help Detroit automakers. Paulson, however, didn't budge in his opposition.
"I don't see this as the purpose" of the bailout program, which is intended to stabilize jittery financial markets and get lending flowing more freely again, Paulson told the panel.
The Treasury chief found himself on the hot seat just one week after he officially abandoned the original rescue strategy of buying rotten mortgages and other bad assets from financial institutions.
That had been the main thrust of the plan Paulson and Bernanke originally pitched to lawmakers.
Focusing the bailout program on infusing billions into banks — and possibly other types of companies — to pump up their capital and bolster lending to customers was deemed a faster and more effective approach to stabilizing the financial system than the original centerpiece of the plan, Paulson said.
Buying financial institutions' toxic debts would have required a "massive commitment" of the bailout money, Paulson told the panel. As economic and financial conditions quickly worsened, it became clear that the first installment of the money — $350 billion — for that purpose "simply isn't enough firepower," he said.
It's crucial that the administration be nimble in assessing changing conditions and adapt the bailout strategy accordingly, Paulson said....
"There is no playbook for responding to turmoil we have never faced. We adjusted our strategy to reflect the facts of a severe market crisis."
But lawmakers worried the administration was sending confusing signals to taxpayers and Wall Street investors....
Treasury will focus on rolling out a capital injection program to pour $250 billion into banks in return for partial ownership stakes in them, Paulson said. And, the department will search for new ways to boost the availability of auto loans, student loans and credit cards, which have been become harder to get due to the credit crisis....
So far, the Treasury Department has pledged $250 billion for banks and has agreed to devote $40 billion to troubled insurer American International Group_ its first slice of funds going to a company other than a bank. That leaves just $60 billion available from Congress' first bailout installment of $350 billion."...
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4/3/12, "What Exactly Was the Bank Bailout Bill?" K. Amadeo, useconomy.about.com
"The bill established the Troubled Assets Recovery Program (TARP). It originally gave troubled banks the right to submit a bid price to sell their assets to TARP as part of a reverse auction. Each auction was to be for a certain asset class. TARP administrators would select the lowest price for each asset class, which was to help assure that the government didn't pay too much for distressed assets. However, it took too long to develop the auction program, so instead Treasury lent $115 billion to banks by purchasing preferred stock. (Source: WSJ, Historic Bailout Passes as Economy Slips Further, October 4, 2008)."....
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Sen Sheldon Whitehouse is one example of congress members who traded stock after a Sept. 2008 Bernanke/Paulson meeting:
Nov. 14, 2011, "FULL DETAILS: How Congress Insider Traders Abused The Public's Trust During The Financial Crisis," Business Insider, Miller, Dougherty
"The Play: Senator Sheldon Whitehouse of Rhode Island also made a flurry of trades in the days after the Paulson-Bernanke meeting with legislators.
At minimum, Whitehouse sold $250,000 in the stocks below between September 18-24, 2008. He may have sold as much as $600,000 in the stock below according to disclosures. Here are the losses he avoided in the next month:...
"On September 16, Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke
held a private meeting with legislators in which they reported that the
economy was in deep trouble and predicted near-term disaster in the
markets. Congressmen privy to this information reacted--not by dropping everything and drawing up a plan to save the economy, but by dumping stock and avoiding the losses everyone else would take in the coming month. Others bought stocks in financial firms that would later be saved by the federal government."
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Stocks sold on Whitehouse's account in Sept. 2008 include BofA, Cisco, Devon Energy, Microsoft, Intel, J&J, Wachovia.
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11/15/11, "Sen. Whitehouse mentioned in book on Congressional 'insider' trading," ProvidenceJournal.com, by John E. Mulligan, Washington bureau
"Quoting a new book on legal "insider" trading by members of Congress, a business news Web site says Sen. Sheldon Whitehouse, D-RI, avoided big losses by trading stocks after top federal officials warned congressional leaders of "the coming economic cataclysm" in September 2008.
Whitehouse "is not actively involved in the management" of the investment account mentioned in the book Throw Them All Out by Peter Schweizer, spokesman Seth Larson replied by email. Whitehouse "neither directed his financial advisor to undertake any transaction during that time, nor ever took advantage of any exclusive or secret information," he said.
Schweizer's book was featured in a report Sunday on CBS's "60 Minutes,'' that focused on such prominent legislators as former House Speaker Nancy Pelosi and current Speaker John Boehner."
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1/4/13, "Secrets and Lies of the Bailout," Rolling Stone, Matt Taibbi
"The federal rescue of Wall Street didn’t fix the economy – it created a permanent bailout state based on a Ponzi-like confidence scheme. And the worst may be yet to come."
"It was all a lie – one of the biggest and most elaborate falsehoods ever sold to the American people. We were told that the taxpayer was stepping in – only temporarily, mind you – to prop up the economy and save the world from financial catastrophe. What we actually ended up doing was the exact opposite: committing American taxpayers to permanent, blind support of an ungovernable, unregulatable, hyperconcentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it....
But the most appalling part is the lying. The public has been lied to so shamelessly and so often in the course of the past four years that the failure to tell the truth to the general populace has become a kind of baked-in, official feature of the financial rescue. Money wasn't the only thing the government gave Wall Street – it also conferred the right to hide the truth from the rest of us. And it was all done in the name of helping regular people and creating jobs. "It is," says former bailout Inspector General Neil Barofsky, "the ultimate bait-and-switch."
The bailout deceptions came early, late and in between. There were lies told in the first moments of their inception, and others still being told four years later. The lies, in fact, were the most important mechanisms of the bailout. The only reason investors haven't run screaming from an obviously corrupt financial marketplace is because the government has gone to such extraordinary lengths to sell the narrative that the problems of 2008 have been fixed. Investors may not actually believe the lie, but they are impressed by how totally committed the government has been, from the very beginning, to selling it."...
"How Wall Street Killed Financial Reform"
Comment: The Beltway is just one big criminal operation.
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