Dean Baker says Paulson screwed taxpayers, despite all the promises from the White House and Congress. Both Barack Obama and John McCain are campaigning on a promise to protect taxpayers. So will the Democratic Congress engage in some oversight now? Or do we need to launch an Impeach Paulson campaign?
there is a big issue about the terms under which they were given capital. Secretary Paulson decided that a 5 percent rate of return on preferred share was good enough for the taxpayers. Warren Buffet got a 10 percent return for his investment.
No one would confuse Henry Paulson for Warren Buffet, but come on -- he could get a 4.0 percent return buying treasury bonds. I can't believe that he had such bad business sense when he was CEO of Goldman Sachs.
The markets gave Paulson's investment strategy a big thumbs down from the taxpayer perspective. Goldman Sachs shares jump 10.7 percent after the details were made public. Shares of Bank of America rose 16.4 percent and Citigroup's stock rose 18.2 percent. Obviously the market thinks that Paulson gave the banks a really good deal.
It also seems unlikely that the executive compensation restrictions will have much effect. I doubt that we will hear about any top executives getting big pay cuts because of the bailout, but I will be very happy to be proven wrong.
In short, it seems that we have a whole new group of welfare dependents. Forget Reagan's mythical "welfare queen" who drove a Cadillac. These folks have private jets and homes on the Hamptons. And, they wreck banks and economies for a living.
Update 1: Yves Smith says the banks got the money with virtually no strings attached.
the [Wall Street] Journal authors nailed it when they used the word "token." The banks will probably put a few measures in place so as not to embarrass their new sugar daddy. But with no formal conditions set at the time of the capital injection, the terms generous compared to recent private sector financings, and only (at most) promises made to a Treasury secretary with a bit more than three months left in office, the government assistance of early this week was as close as you get in adult life to free money.
