Mussolini-Style Corporatism in Action: Treasury Conference Call on Bailout Bill
A good example of just how business is conducted in the new Paulson financial dictatorship.
This post is from naked capitalism.
Various readers wrote us, and it was confirmed by a detailed report on the call at DealBreaker, that the Treasury Department held a conference call this evening for analysts on the bailout bill. A memo was evidently sent to SIFMA members; others may have been contacted by other means. But the report I got from one person who was on the call was the the questions came from financial services industry members. In other words, this was most assuredly not intended to be a call open to the public at large. If anyone from the media or other member of the great unwashed was listening in, it was by accident.
This is simply scandalous. To have a group of interested parties get a privileged briefing by government officials on a matter of keen public interest flies in the face of what a democracy is supposed to be about. The proper method would either be a published FAQ on the Treasury website or a briefing with the media included. But why should I be surprised? Favoritism has been a staple of the Bush Administration.
There is a live blogging recap at DealBreaker. Someone who was on the call is going over his notes and other recaps on the Web and sending me his version, which I hope will add some color. Check back for that update.
Update: Here are the notes promised. Calculated Risk had put up the conference call number. so some of this is the listener’s notes, some are hoisted from CR. They are admittedly skeletal at points, but track and enhance the live blogging report at DealBreaker. You can download a torrent for the call here, which I intend to do post haste and will amend the post accordingly. I’ve included the long form notes below, but some items jump out:
1. The tranching is a mere formality, and the Treasury boys as much as said so. They could take the $700 billion max as soon as the bill has passed,
2. However, they do not plan any action immediately, will wait a couple of weeks. They want to focus their efforts on stronger companies but also made noise about protecting the financial system. This, by the way, is the Japanese convoy system all over.
3. There seemed to be a lot of tap dancing about what price they will pay for assets and no straight answer about their policy on warrants. They did say that if the amount sold was greater than $100 million, they would take warrants. FYI, the current draft allows them to pay up to the price at which the assets were initially booked (yikes) . I wonder if this is obfuscation, if they have an idea of what the plan to do but will not admit it in any public forum.
4. As the person who listened to the call stressed, DealBreaker wasn’t clear on the bifurcated process. If you come to the Treasury and you are in trouble, you get reamed. Bear/AIG style treatment, execs probably fired. But if you participate on a voluntary basis, the intent is to make it very user friendly. That is consistent with Paulson’s position during the negotiations.
5. The exec comp provisions sound like a joke, They DO NOT affect existing contracts, they affect only contracts entered into during the two years of the authority of this program and then affect only golden parachutes. More detail on that point, but I don’t need more detail to get the drift of the gist.
September 30th, 2008 at 9:13 pm
1. untrue
2. unnecessary
3. when the financial system seizes up because there are no prices for key instruments, it should only surprise a complete idiot that no one knows what price to pay for the assets.
4. differentiating between those forced into taking government assistance and those who step up before they get in trouble makes sense to me.
5. if the problem was that some executives are paid what someone thinks is “too much,” we wouldn’t need a $700 billion bailout, would we?
September 30th, 2008 at 10:18 pm
David, I’m curious to hear your take on the bailout proposal.
Do you believe that the assets that aren’t currently selling on the market will appreciate significantly at some point after the govt purchases them? Do they have any value at all?
Do you think the bailout will add liquidity to the credit markets?
Do you think this bailout is primarily intended to make nice with foreign investors?
October 1st, 2008 at 7:22 am
“5. if the problem was that some executives are paid what someone thinks is “too much,” we wouldn’t need a $700 billion bailout, would we?”
Captain, do you believe that tens of millions of dollars in salary plus millions in bonuses for top executives who made the decisions that put these companies in the need for a bailout are okay, even though these very same companies are now asking for taxpayer assistance as well as risk?
I believe they should pay back every penny before one dollar is promised from our treasury to buy toxic overpriced “assets”.
I do not believe in any bailout. It is being done with borrowed dollars (from my grandchildren), not real cash. The federal government is paying for borrowed money with borrowed money. If the stock market goes down, so be it. Since when is “investing” a guarantee? I thought there was supposed to be an assumption of risk with the market. And how are taxpayers supposed to pay back these loans when we do not have well paying jobs anymore?
October 1st, 2008 at 10:31 am
GA Patriot, you won’t find anyone more disgusted with the recent turn of events than me.
However, I think that what is really going on is that we owe a lot of foreigners in a big way. I don’t think this is about paying off U.S. bankers. I think this is primarily about paying off foreign bankers. This is the only way it makes sense to me.
I think we’ve screwed over the rest of the world so badly with our markets that we face a serious global revolt against the dollar if we don’t pony up now.
I think that this is the stuff that world wars are made of.
Anyway, this is just a conclusion I’ve come to recently. I’ve listened to a lot of foreign leaders lately and not a single one of them has disguised their disappointment and irritation with how the U.S. has handled itself in recent years. Big surprise. We have very few friends at a time when we desperately need friends.
October 1st, 2008 at 10:48 am
Some people think that compliance with basel II banking reforms are what is driving this. Paulson needs the 700 billion to straighten out some books. Incidentely Goldman Sachs is the only Basel II compliant bank in the US now. Foreign banks will not loan money to our banks anymore. Goldman stands to reap a bundle from this inside deal. That is why Buffet invested 5 billion. Insider trading? I think so. Anyone care to guess who is the majority stock holder in Goldman? Hank Paulson. And McCain calls him a man of integrity?
October 1st, 2008 at 8:39 pm
captain_menace,
Do you believe that the assets that aren’t currently selling on the market will appreciate significantly at some point after the govt purchases them?
—-I cannot imagine a scenario where an asset with a stream of revenue behind it (mortgage payments) does not rise in value above zero. So, the answer is “yes.”
.
Do they have any value at all?
—These assets currently have no value, which is to say there is no price. If they did, someone would be pay that price and we would have a solid, market-created floor. Since we don’t, we need help.
.
Do you think the bailout will add liquidity to the credit markets?
—Enormously. $700 billion or whatever fraction is actually spent goes straight to liquidity. Please note that this is unrelated to easing the credit crunch, which is based not on a lack of capital but on a healthy surplus fear.
.
Do you think this bailout is primarily intended to make nice with foreign investors?
—-No. Foreign investors are important, but they are not the majority. Never have been, and that is true in almost every financial crisis in modern history.
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And, even though it wasn’t directed to me, this one: “do you believe that tens of millions of dollars in salary plus millions in bonuses for top executives who made the decisions that put these companies in the need for a bailout are okay?”
—-Irrelevant. Maybe someday, years from now when we have time to deal with petty issues, this might be an interesting op-ed topic. Today, it is mostly a distraction.
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Fence builder,
“Foreign banks will not loan money to our banks anymore.”
—Serious drivel. Really, that comment is very, very dumb.
“Anyone care to guess who is the majority stock holder in Goldman? Hank Paulson”
—OK, you out did yourself with that one.
Do you dream this stuff up, or are you listening to Rush Limbaugh again?
October 1st, 2008 at 8:40 pm
a healthy surplus of fear.
October 1st, 2008 at 11:15 pm
David, why shouldn’t the government set up a sponsored entity with the sole purpose of providing credits to companies in need of credit?
Why use the middle men?
Further, can Paulson be trusted? He’s been wrong more than he has been right, and as CEO of Goldman Sachs he was participating in the orgy along with everyone else. He doesn’t inspire confidence in me at all. In fact there isn’t a person I hear on the radio or television that inspires me to take on $700 billion in additional debt.
Please feel free to reassure me that these jackasses are capable of mitigating this crisis.
October 2nd, 2008 at 8:34 pm
captain_menace,
Why not nationalize the entire economy?
Because Karl Marx, Vladimir Lenin and Mao Zedong proved it doesn’t work.
Those “middle men” are the market makers. Those time arbitrators take short-term money in and let out long-term money (which, by the way, is the best definition of a bank: time arbitrators of risk).
Can Paulson be trusted? As much as anyone commenting on these blogs, yes. He’s an American, and has no interest in harming our country.
Has he really been wrong more than right? Measuring personal bank accounts suggest he has been very, very right a lot of the time.
.
I’m not going to try to assuage your fears. This is a time to be afraid. Very afraid.