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The Bailout Deception

Final Call, News Report, Charlene Muhammad Posted: Dec 11, 2008

(FinalCall.com) - In September when President George W. Bush, U.S. Treasury Secretary Henry Paulson, Jr. and U.S. Federal Reserve Chairman Ben Bernanke asked for $700 billion in taxpayer money to help rescue the failing economy, they promised to use the money to buy bad mortgages from lending institutions. That was supposed to help ease the burden of rapid foreclosures, get banks lending again, and jumpstart consumer confidence.

Barely two months later, Sec. Paulson announced that the bailout money acquired under the guidelines of the Emergency Economic Stabilization Act of 2008s Troubled Relief Asset Program would not be used to buy bad bank assets. Instead it was used to buy shares in the banks, which in turn is supposed to mitigate mortgage loans and resume lending.

The banks not lending the money goes beyond criminal conduct. Its literally stealing from the national coffers, the taxpayers and after theyve basically robbed the taxpayers to rescue these entities, the entities have been rewarded by a bailout. That was the bait, said Professor James Taylor of the University of San Francisco and incoming president of the National Conference of Black Political Scientists.

Prof. Taylor added, The switch was they got the money and were not seeing, at least in the short term, evidence of them liberalizing lending practices or making the money available to the market.

Critics insist it is insane that the entire crisis started with mortgage backed financing yet housing has not received any attention under the $700 billion bailout. They also argue that taxpayers would never have knowingly agreed to a bailout that left them out and will cost much more than initially forecast.

Sec. Paulson pointed out that the taxpayers and homeowners are being rescued through the HOPE NOW Alliance, a coalition of mortgage servicers, investors and counselors, which was set up to help prevent foreclosures. In late October, HOPE NOW reported that 2.5 million foreclosures were averted because of its efforts since July 2007. In September alone, 212,000 people retained their homes, it said.

But according to RealtyTrac, Inc., an online foreclosure database, some 280,000 U.S. households received foreclosure filings in October and other reports indicate that 85,000 homes were foreclosed on that same month.

Meanwhile, economists say, U.S. taxpayers are being forced to stand by and watch as their billions rescue investment banks and high-priced executives. According to reports, $250 billion of the bailout money is to be distributed partly toward shares in Bank of America, Merrill Lynch, J.P. Morgan, Citigroup, Goldman Sachs Group, Inc., Bank of New York Mellon, Wells Fargo & Co., Morgan Stanley and State Street. The Treasury drew harsh criticism from taxpayers, economists, analysts and news media because it concealed the names of the banks that received funding.

Roderick Harrison, of the Joint Center for Economic and Political Studies, said the secrecy was to avoid weakening investor and consumer confidence in the receiving institutions.

Mr. Harrison said he doesnt believe that the bailout was a deception but that Sec. Paulson realized the plan was not workable. It would have taken too much time to find ways to identify bad bank assets and develop ways to buy them, he said.

Theyre sitting on the money figuring that they dont know whats going to happen in the next six months and its better to have assets in banks. Some are using the money in mergers to buy up smaller banks to better themselves down the line. But weve got to get those credit lines flowing again, because if not, soon people will be into deeper debt and credit woes, Mr. Harrison said.

According to Sec. Paulson, the revised plan will focus on auto loans, credit card and student loan companies and the government will continue to explore ways to reduce the risk of foreclosure. Recently, top automakers, led by General Motors, announced that they faced certain bankruptcy unless the government stepped in to bail them out, too.

Meanwhile, U.S. taxpayers footing the bill are facing a new wave of foreclosures next April when the Adjustable Rate Mortgages, in which payments either go up or down, will reset again on hundreds of thousands of home loans. Unemployment continues to increase. The Labor Department reported that in the first week of November, workers filed 516,000 unemployment insurance claims32,000 more than the week before.

This was deception in my opinion because the Congress and the American people were told one thing by the Treasury Secretary and it turns out he had something else in mind. The U.S. should just concede that it has lost control over its responsibilities regarding the economic crisis and abdicated it to one man, said Andre Eggelletion, an economist and host of The Andre Eggelletion Show, heard on www.ustalknetwork.com.

Obviously, Mr. Eggelletion added, if Sec. Paulson told taxpayers that the bailout was necessary to salvage mortgage assets on bank books and help families struggling against foreclosures, people expected that he had already analyzed the situation and determined it was the correct course of action.

There have been numerous statewide summits on foreclosures and housing solutions. Some housing experts have sought to use public and private resources to acquire foreclosed properties to help stabilize neighborhoods. The Federal Reserve created the Homeownership and Mortgage Initiative to help prevent foreclosures and rebuild neighborhoods, and one community-based organization has created a national lease program to help families get into affordable homes. But none of these efforts have solved the national problem.

Some economists have labeled the bailout a stab in the dark to solve an unprecedented crisis that will yet have greater repercussions than the Great Depression of 1929. Prof. Taylor said that its ironic that World War II helped to rebuild the economy and ended the Great Depression, whereas the unchecked, Iraq and Afghanistan Wars helped to bring on the collapse of the U.S. economy.

Until Congress decides to obey the mandates of the Constitution and restore the power over monetary and credit policy to the people to whom it rightfully belongs, the citizens of the U.S. through their elected representatives, we will forever be on the high road to debt slavery and economic tyranny, Mr. Eggelletion said.

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