Saturday, April 16, 2011

The Republican Media: No. 29

It graced the Facebook page of Carol Costello and it also was on CNN, purportedly part of that "liberal media," on Friday:

Carol Costello: If you listen to our politicians this week, you might think America is at war. Not in Iraq, Afghanistan or Libya, but right here at home in a kind of class warfare. [Excerpts of speeches by Obama, Orrin Hatch.]

From Republican Paul Ryan, Mr Obama's speech was the same old partisan politics:

Ryan: [video] "When the Commander in Chief sort of brings himself down to the level of the partisan mosh pit, it makes it more difficult to bring that kind of leadership."

Costello: groan It's deja vu all over again. Helloooo! 2008 anyone??? Will we see Joe the Plumber and President Obama calling Wall Street executives "fat cats" again?

At his inauguration Mr Obama urged both parties to rise above partisan politics. Now, says independent political analyst Jon Avlon, Mr Obama's speech opened him up to accusations of class warfare on the campaign trail going into 2012!

Wall Street vs main Street. As long as politicians keep reinforcing it, we will never get out of that partisan mosh pit.

So, talkback question today: Is class warfare the right political fight?

Apparently, it is the right political fight- and it is the political fight of the right. And it has worked, because it apparently has Costello buffaloed. The charts below, both from the Center for Budget and Policy Priorities from Congressional Budget Office data indicate: a)from 1979 to 2007 the after-tax incomes of the top 1% increased 281% and of the top fifth, 95%; for the middle fifth, 25%; b)as a result, the share of the nation's after-tax income increased of the top 5th increased from 42.1% to 52.5%.

The disparity in wealth is greater even than in income and is highly likely to have grown since 2005. This is how class warfare really works, as illustrated by the Rolling Stone's Matt Taibbi. He describes a program of the Federal Reserve and the opportunity it afforded two women: Christy Mack, the chairman of Morgan Stanley; and Susan Karches, the widow of Peter Karches, a close friend of the Macks who served as president of Morgan Stanley's investment-banking division. Consider this Term Asset-Backed Securities Loan Facility (TALF):

Created just after Barack Obama's election in November 2008, the program's ostensible justification was to spur more consumer lending, which had dried up in the midst of the financial crisis. But instead of lending directly to car buyers and credit-card holders and students — that would have been socialism! — the Fed handed out a trillion dollars to banks and hedge funds, almost interest-free. In other words, the government lent taxpayer money to the same assholes who caused the crisis, so that they could then lend that money back out on the market virtually risk-free, at an enormous profit.

Cue your Billy Mays voice, because wait, there's more! A key aspect of TALF is that the Fed doles out the money through what are known as non-recourse loans. Essentially, this means that if you don't pay the Fed back, it's no big deal. The mechanism works like this: Hedge Fund Goon borrows, say, $100 million from the Fed to buy crappy loans, which are then transferred to the Fed as collateral. If Hedge Fund Goon decides not to repay that $100 million, the Fed simply keeps its pile of crappy securities and calls everything even.

This is the deal of a lifetime. Think about it: You borrow millions, buy a bunch of crap securities and stash them on the Fed's books. If the securities lose money, you leave them on the Fed's lap and the public eats the loss. But if they make money, you take them back, cash them in and repay the funds you borrowed from the Fed. "Remember that crazy guy in the commercials who ran around covered in dollar bills shouting, 'The government is giving out free money!' " says Black. "As crazy as he was, this is making it real."

This whole setup — in which millionaires and billionaires gambled on mountains of dangerous securities, with taxpayers providing the stake and assuming almost all of the risk — is the reason that it's insanely premature for Wall Street to claim that the bailouts have actually made money for the government. We simply can't make that determination until the final bill comes in on all the dicey securities we financed during the bailout feeding frenzy.

In the case of Waterfall TALF Opportunity, here's what we know: The company was founded in June 2009 with $14.87 million of investment capital, money that likely came from Christy Mack and Susan Karches. The two Wall Street wives then used the $220 million they got from the Fed to buy up a bunch of securities, including a large pool of commercial mortgages managed by Credit Suisse, a company John Mack once headed. Those securities were valued at $253.6 million, though the Fed refuses to explain how it arrived at that estimate. And here's the kicker: Of the $220 million the two wives got from the Fed, roughly $150 million had not been paid back as of last fall — meaning that you and I are still on the hook for most of whatever the Wall Street spouses bought on their government-funded shopping spree.

The public has no way of knowing how much Christy Mack and Susan Karches earned on these transactions, because the Fed has repeatedly declined to provide any information about how it priced the individual securities bought as part of programs like TALF.

Carol Costello doesn't want to dwell on this "partisan mosh pit." She and others might find out about the class warfare that has been going on for decades as the American taxpayer subsidizes wealthy investors, including offshore companies such as Waterfall TALF opportunity. Better to admonish Barack Obama for insulting Joe the sort-of Plumber and Wall Street- and to canonize Paul Ryan, whose formula for deficit reduction is elimination of Medicare.

As Digby notes,

This is the storyline for 2012. Get it straight. We're in "sacrifice" mode. And any of you who thought that Americans had already sacrificed quite enough of their futures already what with the ongoing high unemployment, health care crisis and foreclosures, think again. You don't know the meaning of the word. "Sacrifice" means paying more and getting less for the rest of your lives so that our productive overlords can make ever more money and employ more servants. If you object to that you are committing class warfare. Worse than that, you are boring the wealthy media celebrities, and that's simply unforgivable.

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