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Financial Firms Lobby to Cut Cost of TARP Exit

Damian Paletta and Deborah Solomon, Wall Street Journal, April 22, 2009

"The banking industry is aggressively lobbying the Treasury Department to make it less costly for financial institutions to get out of the Troubled Asset Relief Program. The move could prove controversial for the banking industry, which is busy deflecting criticism about higher fees it is charging consumers for credit cards and other products and services.

"At issue are 'warrants' the government received when it bought preferred stock in roughly 500 banks over the past six months as part of TARP. The warrants allow the government to buy common stock in the banks at a later date so taxpayers can receive more of a return on their investment when the banking industry recovers.

"Many banks want to return their TARP money and, as part of that effort, want to expunge the warrants. To do that, banks must either buy them back from the government or allow the Treasury to sell them to private investors. Today, most of the warrants are essentially worthless, because their exercise price is higher than where most banks' stocks are trading. But the government believes the warrants still have value, since they give the Treasury the right to buy common stock at a set price for 10 years."

See Also:
Letter from the American Bankers Association urging the Treasury Department to break provisions in existing contracts with the banks.


Lending by Bailed Out Banks Keeps Dropping

, Wall Street Journal, April 20, 2009

Lending at the biggest U.S. banks has fallen more sharply than realized, despite government efforts to pump billions of dollars into the financial sector.

According to a Wall Street Journal analysis of Treasury Department data, the biggest recipients of taxpayer aid made or refinanced 23% less in new loans in February, the latest available data, than in October, the month the Treasury kicked off the Troubled Asset Relief Program. The total dollar amount of new loans declined in three of the four months the government has reported this data.


100 Former Govt Employees Now Working as Bank Lobbyists on Bailout

Daniel Schulman and Jonathan Stein, Mother Jones, April 9, 2009

"In late March, as public outrage over bonuses paid to executives of bailed-out financial firms exploded, Citigroup CEO Vikram Pandit met with Senate majority leader Harry Reid. Accompanying the under-fire CEO to the meeting was Jimmy Ryan, one of the banking conglomerate's top in-house lobbyists. Ryan was a familiar face to Reid and his staff. Up until 2003, he was the Nevada senator's chief counsel, and since then he has remained close to Reid. The senator, according to Reid spokesman Jim Manley, merely discussed with Pandit the financial state of Citigroup and the economy in general. If Pandit and Ryan had hoped that Reid would take action to benefit their company, Manley maintained, this effort was unsuccessful.

"Whether or not Ryan was able to win any sympathy (or anything else) from his old boss, the episode highlights one aspect of Washington bailout politics: Financial firms seeking big bucks and favorable terms from Congress and the White House are deploying Capitol Hill aides turned lobbyists to win favorable treatment from the congressional lawmakers who are managing various aspects of the financial recovery—overseeing or appropriating nearly $3 trillion in spending and lending. And some lawmakers—including Sen. Chris Dodd (D-Conn.), the chairman of the Senate banking committee—have declined to disclose whether they have had contact with former aides now lobbying for the financial sector.

"Corporations hiring departed congressional staffers as lobbyists is a ho-hum practice on K Street. But the stakes are particularly high when these Capitol Hill vets are sicced on programs and legislation that are crucial to the country's financial recovery and that involve massive amounts of government spending. In the past year, top bailout recipients, from Goldman Sachs to Bank of America to JPMorgan Chase, have dispatched more than 100 past congressional staffers and ex-government officials to shape the bailouts to their liking. This crew of well-connected lobbyists includes ex-employees of the congressional committees on banking, finance, and commerce; one-time aides to Democratic and Republican leaders; former Treasury officials; and a past aide to Rahm Emanuel, now the White House chief of staff."


Ex-Blackwater Workers May Return to Iraq Jobs

Rod Nordland, New York Times, April 4, 2009

“Late last month Blackwater Worldwide lost its billion-dollar contract to protect American diplomats here, but by next month many if not most of its private security guards will be back on the job in Iraq.

“The same individuals will just be wearing new uniforms, working for Triple Canopy, the firm that won the State Department's contract after Iraqi officials refused to renew Blackwater's operating license, according to American diplomats, private security industry officials and Iraqi officials. Blackwater - viewed in Iraq as a symbol of American violence and impunity - lost the contract after being accused of excessive force in several instances, particularly an apparently unprovoked shooting in downtown Baghdad in 2007 in which 17 civilians were killed….

“Critics of Blackwater said they worried that the same people might perpetuate what they believed was a corporate culture that disregarded Iraqis' lives. ‘They're really all still there, and it's back to business as usual,’ said Susan Burke, an American lawyer who has filed three civil rights lawsuits against Blackwater on behalf of Iraqi civilians alleged to be victims of it.”


Bankers Bet on Number of Arrests, Deaths and Injuries at G20

David Teather, The Guardian, April 2, 2009

"At Coq d'Argent, the restaurant atop the salmon-coloured building at Number One Poultry, next to Bank station, two traders were angry that the police didn't seem to be making any arrests. 'The demonstrators are goading the police and hitting them, but they aren't arresting anyone,' said one.

"'I'll make money if they arrest more than 140,' he said. Traders, he explained, were putting spread bets on the number of arrests - with the quoted spread on Bloomberg at 130-140. They were also paying out on deaths and if more than 20 protesters were injured in horse charges. The riots, they said, were only a minor inconvenience: 'We've been in this morning, made a lot of money and now are chilling out.'"


Obama Administration Awards $20 Million Contract to Boeing for Border Surveillance Towers

Eileen Sullivan, Associated Press, April 1, 2009

"The U.S. Border Patrol is erecting 16 more video surveillance towers in Michigan and New York to help secure parts of the U.S.-Canadian border, awarding the contract to a company criticized for faulty technology with its so-called 'virtual fence' along the U.S.-Mexico boundary. The government awarded the $20 million project to Boeing Co., for the towers designed to assist agents stationed along the 4,000-mile northern stretch....

"Boeing is the firm responsible for a 28-mile stretch of technology erected along the U.S.-Mexico border near Tucson, Ariz., as part of the government's Secure Border Initiative. The company was widely criticized for delivering an inferior product. Last year the government withheld some of the payment to Boeing because technology used in the test project near Tucson did not work properly. Boeing also was late in delivering the final product....

"Tim Sparapani, senior legislative counsel at the American Civil Liberties Union, said the Secure Border Initiative has been a disaster since its inception. 'The technologies don't work, they're not weather-resistant and they're certainly privacy invasive,' Sparapani said. 'Putting them in America's backyards only invades the privacy of Americans, it doesn't add to our security.'"


After Lobbying for Years, Banks Likely to Achieve Accounting Rules Change

Ian Katz and Jesse Westbrook, Bloomberg News, March 30, 2009

"Four days after U.S. lawmakers berated Financial Accounting Standards Board Chairman Robert Herz and threatened to take rulemaking out of his hands, FASB proposed an overhaul of fair-value accounting that may improve profits at banks such as Citigroup Inc. by more than 20 percent. The changes proposed on March 16 to fair-value, also known as mark-to-market accounting, would allow companies to use 'significant judgment' in valuing assets and reduce the amount of writedowns they must take on so-called impaired investments, including mortgage-backed securities. A final vote on the resolutions, which would apply to first-quarter financial statements, is scheduled for April 2....

“What disturbs me most about the FASB action is they appear to be bowing to outrageous threats from members of Congress who are beholden to corporate supporters,” said [former SEC Chairman Arthur] Levitt, now a senior adviser at buyout firm Carlyle Group....

"Conrad Hewitt, a former chief accountant at the SEC who stepped down in January, said representatives from the ABA, American International Group Inc., Fannie Mae and Freddie Mac all lobbied him over the past two years to suspend the fair- value rule. Executives 'would come to me in the afternoon with the argument, "You've got to suspend it,"' Hewitt said in a March 25 interview. The SEC, which oversees FASB, would reject their demands, and “the next morning their lobbyists would go to Congress,” he said.

Update on April 2: Government Gives in to Pressure and Eases Mark to Market Rules, Bloomberg News


Bailed Out Banks Make Campaign Contributions to Politicians Overseeing TARP

Michael Isikoff and Dina Fine Maron, Newsweek, March 21, 2009

"A NEWSWEEK review of recent filings with the Federal Election Commission found that the political action committees of five big TARP recipients doled out $85,300 to members in the first two months of this year—with most of the cash going to those who serves on committees who oversee the TARP program. Among them: Bank of America (which got $15 billion in bailout money) sent out $24,500 in the first two months of 2009, including $1,500 to House Majority Leader Steny Hoyer and another $15,000 to members of the House and Senate banking panels. Citigroup ($25 billion) dished out $29,620, including $2,500 to House GOPWhip Eric Cantor, who also got $10,000 from UBS which, while not a TARP recipient, got $5 billion in bailout funds as an AIG 'counterparty.' 'This certainly appears to be a case of TARP funds being recycled into campaign contributions,' says Brett Kappel, a D.C. lawyer who tracks donations. (A spokesman for Cantor did not respond to requests for comment. A spokeswoman for Hoyer said it's his 'policy to accept legal contributions.')"


Citigroup May Spend $10 Million for Executive Suite

Erik Schatzker, Bloomberg News, March 19, 2009

"Citigroup Inc. plans to spend about $10 million on new offices for Chief Executive Officer Vikram Pandit and his lieutenants, after the U.S. government injected $45 billion of cash into the bank.

"Affidavits filed with New York’s Department of Buildings show Citigroup expects to pay at least $3.2 million for basic construction such as wall removal, plumbing and fire safety. By the time architect’s fees and expenses such as furniture are added, the tally for the offices at the bank’s Park Avenue headquarters will be at least three times as high, according to a person familiar with the project who declined to be identified because he’s not authorized to comment. Citigroup said the project will help it save money over time....

"Plans and instructions for the bank’s contractors, on file with the city, specify the installation of at least one Sub-Zero Inc. refrigerator and icemaker in the renovated space, along with “premium grade” millwork and Madico Inc. “Safety Shield 800” blast-proof window film."


Banks Receiving TARP Funds Owe More Than $220M in Back Taxes

Matt Jaffe, ABC News, March 19, 2009

"At least 13 companies who have received some of the $300 billion in TARP funds owe hundreds of millions of dollars in back taxes, it was revealed today.

"Two of the companies owe more than $100 million in taxes, said Rep. John Lewis, D-Ga., chairman of the House Ways and Means Subcommittee on Oversight. Altogether, the 13 companies owed the government more than $220 million in unpaid taxes, he said.... He didn't identify the companies or indicate how much TARP money they have received. But some of the corporations that have received the largest chunks of TARP cash include AIG, Bank of America, Citigroup, General Motors and Chrysler."

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