The Next Bailout: $165B for Unions?

This will probably go through with no problems. After all Obama can’t afford to offend his voter base.

From Fox News:

A Democratic senator is introducing legislation for a bailout of troubled union pension funds.  If passed, the bill could put another $165 billion in liabilities on the shoulders of American taxpayers.

The bill, which would put the Pension Benefit Guarantee Corporation behind struggling pensions for union workers, is being introduced by Senator Bob Casey, (D-Pa.), who says it will save jobs and help people.

As FOX Business Network’s Gerri Willis reported Monday, these pensions are in bad shape; as of 2006, well before the market dropped and recession began, only 6% of these funds were doing well.

Although right now taxpayers could possibly be on the hook for $165 billion, the liability could essentially be unlimited because these pensions have to be paid out until the workers die.

It’s hard to say at the moment what the chances are that the bill will pass. A hearing is scheduled Thursday, which will give the public a sense of where political leaders sit on the topic, said Willis.

Just last week President Obama said there would be no more bailouts. (That was then, this is a whole new week, with all new rules- pinroot)

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$830,000 in job funds to Oakland questioned

Of course, this is just an isolated incident, and in general the stimulus package has done a great job of righting the economy. Oh, sorry, that was sarcasm, for those who didn’t notice.

From SFGate.com:

Federal stimulus dollars intended for job creation in Oakland were spent instead on trips to the Santa Cruz Beach Boardwalk and a Concord water park, rent, church repairs, bus passes, salaries and car allowances, according to a state review released Tuesday.

Oakland, which has struggled with a 17.7 percent unemployment rate, received $3 million last year for summer youth, adult and dislocated worker programs. But more than $830,000 of the money received under the American Recovery and Reinvestment Act from February to December 2009 was not properly accounted for or was misspent, according to the state Office of the Inspector General.

In addition, state auditors found the city inflated the number of jobs created, claiming 35 when only about six jobs were created with the stimulus dollars.

Continue reading

Taxpayers to help with the rent at Goldman’s new office tower

We bailed them out, the least we can do is help with the rent till they can get on their own two feet again.

From Raw Story:

As if billions in cash and government guarantees wasn’t enough, it turns out investment bank Goldman Sachs will also be sucking on the taxpayers’ teat when employees move into their slick new digs at the corner of West and Vesey in Manhattan next year.

The New Goldman Sachs World Headquarters — a 43-story office tower next to the World Trade Center site — is being built with the help of millions of dollars from taxpayers, Bloomberg news service reports.

The company that has been the focus of populist anger since the TARP bailout last year took advantage of programs the government set up to revitalize lower Manhattan after the 9/11 attacks. Setting up shop next to the WTC qualified Goldman Sachs for $49 in “job-grant funds, tax exemptions and energy discounts,” Bloomberg’s Christine Harper reported.

Continue reading

GMAC Seeks Its Third Bailout

If at first you don’t succeed, just come back and get more money from the government (aka, the taxpayers). Hopefully, the third time will be the charm.

From DSNews:

Even as the Treasury is going public with its expectation that banks’ will be quick to repay their bailout money, GMAC Financial Services is asking the government for more cash.

Treasury officials confirm that they are in talks with the Detroit-based lender over a third injection of taxpayer dollars.

GMAC has already received $12.5 billion from the Troubled Asset Relief Program (TARP) fund – $5 billion last December and $7.5 billion in May. Citing unnamed people familiar with the matter, the Wall Street Journal reported that the U.S. government could hand over another $2.8 billion to $5.6 billion to GMAC.

Earlier this year, following the ill-famed bank “stress tests,” federal regulators ordered GMAC to raise an additional $11.5 billion by November or take another government hand-out. While other banks deemed to have capital deficits have filled their holes with private investment capital, GMAC is not listed as a public company, making it difficult for the institution to attract money from investors.

“GMAC is the only one of the banks that went through the stress test to need additional government capital,” a Treasury spokesperson told the Journal. “All other institutions were able to raise any necessary capital from investors and several paid back the taxpayer.”

GMAC is the parent of Residential Capital LLC (ResCap) and GMAC Mortgage. Its capital troubles, though, stem primarily from the sinking auto industry. The government already owns 35 percent of GMAC as a result of its first two bailouts and the bankruptcy restructuring of General Motors, for whom GMAC provides financing.

In a separate move, GMAC said Wednesday that the FDIC has agreed to guarantee a $2.9 billion debt offering. The FDIC’s backing makes the debt sale more appealing to investors.

According to multiple media reports, the FDIC’s intent is to help prevent the company from having to reduce its lending volume and ensure GMAC can continue to fund its daily operations. The nod from the agency came just four days before its bank debt-guarantee program, the Temporary Liquidity Guarantee Program, is set to expire. The FDIC backed $4.5 billion in GMAC-issued debt in June.

GMAC posted a second-quarter loss of $3.9 billion. The company is scheduled to release its third-quarter results next week.

Bailout May Cost $23.7 Trillion: Barofsky

From The Huffington Post:

WASHINGTON – The federal government has devoted $4.7 trillion to help the financial sector through its crisis, a level of assistance equal to about one-third of the overall U.S. economy, a watchdog report said Monday.

Under the worst of circumstances, the report said, the government’s maximum exposure could total nearly $24 trillion, or $80,000 for every American.

The figures are part of a tough new quarterly report to Congress from special inspector general Neil Barofsky, who accuses the Treasury Department of repeatedly failing to adopt recommendations aimed at making one component of the government financial rescue effort more accountable and transparent.

The $4.7 trillion commitment to the industry takes into account about 50 initiatives and programs set up since 2007 by the Bush and Obama administrations as well as by the Federal Reserve. Barofsky oversees one of the initiatives — the $700 billion Troubled Asset Relief Program.

Much of the government assistance is backed by collateral and Barofsky’s $23.7 trillion estimate represents the gross, not net, exposure that the government could face. Continue reading

Goldman Sachs 2009 bonuses to double 2008’s; $23 billion could send 460,000 to Harvard, buy insurance for 1.7 million families

This problem brought to you by Big Government. GS was one of those “too big to fail” companies that needed bail-out money. Now we see why. Billion dollar bonuses are easier to hand out when they’re financed by taxpayer dollars.

From Raw Story:

Yesterday, we brought you the insurance company that wouldn’t insure a 17-pound infant because he was too heavy. Today, we bring you the investment bank that manages to double its bonuses during the worst recession since the Great Depression.

On Thursday, Goldman Sachs will announce the firm’s bonus payments for 2009. Analysts expect the bonus pool to mushroom to $23 billion — double the bonus pool paid to employees in 2008. Earlier this year, Goldman Sachs said that it had put aside $11.4 billion for bonuses during the first half of the year.

“The absolute size of compensation payouts will rise significantly,” Keith Horowitz, an analyst at Citigroup, wrote in a note to clients two weeks ago, highlighted by Andrew Sorkin in The New York Times’ dealbook column Tuesday.

How much is $23,000,000,000?

For one thing, it’s enough to send 460,000 full paying students to Harvard University for one year, or 115,000 for four years.

It’s enough to pay the health insurance premium for the average American family ($13,375) 1.7 million times.

It’s enough to upgrade 191 million computers to Windows 7 operating system (priced at $119.99), or to buy 115 million iPhones at $199.99 (provided the recipient was willing to sign a two-year contract).

Or, apparently, it’s enough to reward the employees of Goldman Sachs for a bonanza trading year, at a firm where average employee compensation was recently $622,000 — and likely to be greater this year.

The $23 billion figure could leave some American taxpayers woozy — the US government bailed out Goldman Sachs with a multi-billion payment last year, which the firm has since repaid.

But while Goldman is likely to pay its biggest bonuses ever to employees, the firm pays very little in taxes worldwide. In 2008, the company was said to have paid just $14 million in taxes worldwide, and paid $6 billion in 2007.

The firm’s corporate tax rate? About 1 percent. According a prominent tax lawyer, “They have taken steps to ensure that a lot of their income is earned in lower-tax jurisdictions.”

Sorkin says Goldman’s CEO is trying to hold off criticism by making a big charitable donation.

“Now there’s talk inside Goldman that it is considering making a huge charitable donation — perhaps more than $1 billion — as a way to help deflect the criticism,” Sorkin says. “Such a donation would be a welcome gesture that would no doubt benefit many needy organizations. But it would most likely be seen for what it is: a one-time move to draw attention away from where most of the money is really going. A large charitable donation also raises questions about the company’s fiduciary duty to its shareholders; it could be seen as giving away profits that ostensibly belong to them.”

Report Claims Bailed Out Banks Were Healthy

From CNSNews:

Washington (AP) – The credibility of the government’s $700 billion financial rescue program was damaged by claims a year ago that all of the initial banks receiving support were healthy, a new report contends.

Special Inspector General Neil Barofsky generally found that the government had acted properly in October 2008 as it scrambled to implement the Troubled Asset Relief Program to avert the collapse of the U.S. financial system.

But the report said that then-Treasury Secretary Henry Paulson and other officials were wrong to contend at an Oct. 14 press conference that all nine institutions receiving the first round of support – $125 billion – were sound.

“These are healthy institutions, and they have taken this step for the good of the economy,” Paulson had declared at the time.

Barofsky said that the fact that Citigroup Inc. and Bank of America Corp. soon required billions in additional assistance highlighted the inaccuracy of that claim and raised questions about the whole effort. In addition, Merrill Lynch, which was also in the original nine, was in the process of being acquired by Bank of America because of its weakening financial position.

“Statements that are less than careful or forthright – like those made in this case – may ultimately undermine the public’s understanding and support,” the report said. “This loss of public support could damage the government’s credibility and have long-term unintended consequences that actually hamper the government’s ability to respond to crises.”

In announcing the $125 billion in support to the nine institutions, Paulson had said that by building up the capital reserves of these healthy institutions, it would allow them to resume normal lending to businesses and consumers and help stabilize the financial system.

The nine institutions, including JPMorgan Chase & Co. and Wells Fargo & Co., held about 75 percent of the assets of the U.S. banking system at the time.

A joint statement from Treasury, the Federal Reserve and the Federal Deposit Insurance Corp. also referred to the nine institutions as healthy.

In commenting on Barofsky’s report, the Federal Reserve generally supported the findings, saying “transparency and effective communications are important to restoring and maintaining public confidence, especially during a financial crisis.”

But Assistant Treasury Secretary Herbert Allison Jr., who now heads the bailout program for the government, said that any critique of the announcements made a year ago should take into consideration the unprecedented circumstances facing financial regulators at the time.

“We believe the most important lesson from this history is that quick, forceful action prevented a catastrophic meltdown of the system,” Allison wrote in his response to Barofsky’s findings.

Barofsky serves as the auditor for the Troubled Asset Relief Program, a position that was created by Congress when it passed the $700 billion bailout fund on Oct. 3, 2008.

In his new report, Barofsky reviewed Paulson’s decision to switch the focus of the program from buying up toxic assets from banks to spur new lending to direct injections of capital. The report cited developments that supported Paulson’s contention that financial conditions were deteriorating so quickly that the government did not have the time needed to get the toxic asset program up and running.

The government just announced last week that two large investment funds have raised the minimum amounts needed to begin purchasing toxic assets from banks, a full year after Congress authorized the program.

The new report also provided information on interviews conducted with embattled Bank of America CEO Kenneth Lewis and Paulson and Federal Reserve Chairman Ben Bernanke over their conversations regarding Bank of America’s acquisition of Merrill Lynch.

A congressional committee has investigated whether the government pressured Lewis, who announced this past week that he would leave Bank of America at year’s end, to continue with the merger despite sharply rising losses at Merrill Lynch and to delay revealing those losses.

The report said that it had “found nothing to indicate Treasury and Federal Reserve officials instructed Bank of America executives to withhold the public disclosure of losses,” the report said.