Bailout

In his statement celebrating the passage of the Dodd-Frank financial reform bill last week, President Obama said: "There will be no more taxpayer-funded bailouts -- period."

Really? Let's assume Obama is right. Even under the best-case scenario, in which Dodd-Frank performs exactly as its technocratic architects intended, the legislation would -- with all necessary caveats attached -- prevent bailouts just in the financial sector.

Former President George W. Bush recently gave a speech before a business group meeting in Houston, Texas. In the speech, he explained how he came to endorse bailouts for financial companies, auto companies, etc., toward the end of his term. He said that his personal inclination was to avoid bailouts – that if people or companies do imprudent things they need to suffer the consequences – including bankruptcy. He felt our system depended on that.

Financial regulatory “reform” has been wending its desultory way through Congress for quite a while, and one can lose track of where things stand and what’s important.

Treasury secretary Timothy Geithner was president of the New York Federal Reserve when the government nationalized insurance giant AIG and paid counter-parties to the company's credit default swaps 100 cents on the dollar. That was in 2008. In January 2010, taxpayers have poured $180 billion into AIG (so far!) and Congress has uncovered evidence that the Fed did not disclose the full details of its interactions with AIG counter-parties such as Goldman Sachs. Here's GOP congressman Darrell Issa of California in the Washington Examiner:

Many financial experts expected AIG to negotiate with the counterparties for a discounted rate, thus achieving the best possible deal for U.S. taxpayers.  Instead, the New York Fed arranged to pay full price in what amounted to a backdoor bailout of large financial companies.  Aware that the bailout details would anger taxpayers, the Fed applied pressure on AIG to keep the details quiet and out of all SEC filings

Evidence obtained by the House Oversight and Government Reform Committee now demonstrates that officials at the New York Fed ordered AIG officials not to disclose details about the decision to pay the counterparties the full price.

To facilitate the cover up, the Fed instructed the Special Investigator General for the Troubled Asset Relief Program (SIGTARP), Neil Barofsky, not to release documents to the Committee that would aid an ongoing investigation.

Geithner went to the Hill this morning to answer questions about AIG. Needless to say, the meeting wasn't amicable. Geithner is a lot more comfortable around rich bankers than he is around the people's representatives.

You know he's bad off when MSNBC calls the Democrat "embattled."

Given Dodd's bad poll standing, other Democrats have gone out of their way to give him the spotlight in hopes he could recover before November.