US Treasury Secretary Hank Paulson Three Page Memo to Congress – Drafting Original TARP Plan

By popular demand, we wish to provide our readership the fond memory of former Treasury Secretary Hank Paulson, who have led us down the road of mass taxpayer money infused into failed American businesses.

But testifying before Congress is not new to Hank Paulson prior to September 2008 when the US financial meltdown had occurred.  Back in 2000, Hank Paulson was the CEO of Goldman Sachs and often influenced the regulatory decisions that Congress were to make.  Goldman Sachs ultimately received nearly $14 billion of taxpayer funds that was pumped into AIG for the purpose of keeping the US financial system intact.  Conflict of interest anybody?  In addition, since Goldman Sachs received TARP funding, couldn’t Congress have negotiated how much Goldman Sachs received at something less than face value of the Credit Default Swaps?  Because, if AIG was put into bankruptcy, Goldman Sachs would have received very little of the $14 billion from AIG.

Now to be fair to Congress and its oversight accountability, there were many questions asked and the desire for better understanding of what they were getting US taxpayers into.  But we all know how bureaucracy works in this country.

From the New York Times:

September 21, 2008

Text of Draft Proposal for Bailout Plan



Section 1. Short Title.

This Act may be cited as ____________________.

Sec. 2. Purchases of Mortgage-Related Assets.

(a) Authority to Purchase.–The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.

(b) Necessary Actions.–The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:

(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;

(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;

(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;

(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and

(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.

Sec. 3. Considerations.

In exercising the authorities granted in this Act, the Secretary shall take into consideration means for–

(1) providing stability or preventing disruption to the financial markets or banking system; and

(2) protecting the taxpayer.

Sec. 4. Reports to Congress.

Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.

Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.

(a) Exercise of Rights.–The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act.

(b) Management of Mortgage-Related Assets.–The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.

(c) Sale of Mortgage-Related Assets.–The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.

(d) Application of Sunset to Mortgage-Related Assets.–The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.

Sec. 6. Maximum Amount of Authorized Purchases.

The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time

Sec. 7. Funding.

For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Sec. 9. Termination of Authority.

The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.

Sec. 10. Increase in Statutory Limit on the Public Debt.

Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.

Sec. 11. Credit Reform.

The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.

Sec. 12. Definitions.

For purposes of this section, the following definitions shall apply:

(1) Mortgage-Related Assets.–The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.

(2) Secretary.–The term “Secretary” means the Secretary of the Treasury.

(3) United States.–The term “United States” means the States, territories, and possessions of the United States and the District of Columbia.

Here’s are videos of the testimony and the afterward public opinion.

US Treasury Secretary Urging Bailout of US Financial Institution

BBC Surveys Public Opinion


Bailout Costs = $42,105 for every man, woman and child in the U.S.

When will the US government stop the senseless bailout of failed financial institutions and their greedy insiders?

When will the US government demonstrate they value the taxpayers and the voters more than the “too big to fail” financial corporations?

When will the US government put the same amount of money towards people who pay the taxes and those that have lost the jobs, homes and their dignity of no fault of their own?

Jobless rates are rising higher and so are home foreclosures. President Obama argued that Bush’s “trickle down approach” has failed. So how is giving trillions to financial corporations to help the economy not a trickle down approach?

ADP Job Report for March 2009

Europeans are protesting their anger towards failings of  government and corporate leaders.

Financial Rescue Nears GDP as Pledges Top $12.8 Trillion (Update1)

By Mark Pittman and Bob Ivry

March 31 (Bloomberg) — The U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the longest recession since the 1930s.

New pledges from the Fed, the Treasury Department and the Federal Deposit Insurance Corp. include $1 trillion for the Public-Private Investment Program, designed to help investors buy distressed loans and other assets from U.S. banks. The money works out to $42,105 for every man, woman and child in the U.S. and 14 times the $899.8 billion of currency in circulation. The nation’s gross domestic product was $14.2 trillion in 2008.

President Barack Obama and Treasury Secretary Timothy Geithner met with the chief executives of the nation’s 12 biggest banks on March 27 at the White House to enlist their support to thaw a 20-month freeze in bank lending.

“The president and Treasury Secretary Geithner have said they will do what it takes,” Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said after the meeting. “If it is enough, that will be great. If it is not enough, they will have to do more.”

Commitments include a $500 billion line of credit to the FDIC from the government’s coffers that will enable the agency to guarantee as much as $2 trillion worth of debt for participants in the Term Asset-Backed Lending Facility and the Public-Private Investment Program. FDIC Chairman Sheila Bair warned that the insurance fund to protect customer deposits at U.S. banks could dry up because of bank failures.

‘Within an Eyelash’

The combined commitment has increased by 73 percent since November, when Bloomberg first estimated the funding, loans and guarantees at $7.4 trillion.

“The comparison to GDP serves the useful purpose of underscoring how extraordinary the efforts have been to stabilize the credit markets,” said Dana Johnson, chief economist for Comerica Bank in Dallas.

“Everything the Fed, the FDIC and the Treasury do doesn’t always work out right but back in October we came within an eyelash of having a truly horrible collapse of our financial system, said Johnson, a former Fed senior economist. “They used their creativity to help the worst-case scenario from unfolding and I’m awfully glad they did it.”

Federal Reserve officials project the economy will keep shrinking until at least mid-year, which would mark the longest U.S. recession since the Great Depression.

The following table details how the Fed and the government have committed the money on behalf of American taxpayers over the past 20 months, according to data compiled by Bloomberg.

                                  --- Amounts (Billions)---
                                   Limit          Current
Total                            $12,798.14     $4,169.71
 Federal Reserve Total            $7,765.64     $1,678.71
  Primary Credit Discount           $110.74        $61.31
  Secondary Credit                    $0.19         $1.00
  Primary dealer and others         $147.00        $20.18
  ABCP Liquidity                    $152.11         $6.85
  AIG Credit                         $60.00        $43.19
  Net Portfolio CP Funding        $1,800.00       $241.31
  Maiden Lane (Bear Stearns)         $29.50        $28.82
  Maiden Lane II  (AIG)              $22.50        $18.54
  Maiden Lane III (AIG)              $30.00        $24.04
  Term Securities Lending           $250.00        $88.55
  Term Auction Facility             $900.00       $468.59
  Securities lending overnight       $10.00         $4.41
  Term Asset-Backed Loan Facility   $900.00         $4.71
  Currency Swaps/Other Assets       $606.00       $377.87
  MMIFF                             $540.00         $0.00
  GSE Debt Purchases                $600.00        $50.39
  GSE Mortgage-Backed Securities  $1,000.00       $236.16
  Citigroup Bailout Fed Portion     $220.40         $0.00
  Bank of America Bailout            $87.20         $0.00
  Commitment to Buy Treasuries      $300.00         $7.50
  FDIC Total                      $2,038.50       $357.50
   Public-Private Investment*       $500.00          0.00
   FDIC Liquidity Guarantees      $1,400.00       $316.50
   GE                               $126.00        $41.00
   Citigroup Bailout FDIC            $10.00         $0.00
   Bank of America Bailout FDIC       $2.50         $0.00
 Treasury Total                   $2,694.00     $1,833.50
  TARP                              $700.00       $599.50
  Tax Break for Banks                $29.00        $29.00
  Stimulus Package (Bush)           $168.00       $168.00
  Stimulus II (Obama)               $787.00       $787.00
  Treasury Exchange Stabilization    $50.00        $50.00
  Student Loan Purchases             $60.00         $0.00
  Support for Fannie/Freddie        $400.00       $200.00
  Line of Credit for FDIC*          $500.00         $0.00
HUD Total                           $300.00       $300.00
  Hope for Homeowners FHA           $300.00       $300.00
he FDIC’s commitment to guarantee lending under the
Legacy Loan Program and the Legacy Asset Program includes a $500
billion line of credit from the U.S. Treasury.

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AIG Millions in Bonus-What about the hundreds of TARP and TALF Billions Going Out the Door?

Basic defintion before explanation of accusation:

Yield Curve – difference between interest rate of borrowed money versus the interest rate earned on the same money lend out.

Essentially, AIG was allowed to hide a hedge fund in a solid insurance business.

  1. AIG was a hybrid company hiding from different government agencies and was allowed to create exotic financial products went unregulated and therefore selected by economic terrorist to be used as a weapon of mass destruction.
  2. Enormous risks were allowed to built up hidden from the American public within its four walls which once triggered will allow vast wealth to be transferred from the American people to these yet to be identified terrorists.

Supporting sources of information:

  1. In 1987 Joseph Cassano after failing at the collapse of junk bond firm, Drexel Burnham Lampert in the US joins AIG London Office.
  2. According to the Ray De Lorenzi, American Association for Justice at  “…The Starr Foundation is one of the largest foundations in the United States. It is chaired by Hank Greenberg, CEO of AIG until 2005. AIG gave $23 million to U.S. Chamber through the Starr Foundation to push anti-regulatory efforts. The majority of this money, $15 million, was pledged in 2003 immediately after the passage of Sarbanes-Oxley to initiate a “capital campaign for educational and research programs.” Effectively, this money was to begin setting the groundwork to roll back post-Enron reforms…”
    The money was given from Starr to U.S. Chamber’s own foundation, which freely moves money to the corporate arm. Of U.S. Chamber’s 17 foundation grants, seven came from a variety of corporations totaling $2.2 million. The remaining 10 grants to U.S. Chamber, equaling $24.25 million, all came from Greenberg and the Starr Foundation.15
  3. Bernanke executing Federal Reserve Bank powers attempting to manipulate the yield curve keeping interest rate low to keep AIG from further hemmorage between 2006 and present.
  4. Democratic House Representative Alan Grayson of 8th District Florida notice that AIG may need $500 billion more if yield curve moves by 1%.  See video # 1 below.
  5. AIG 2008 10K filing with SEC reveals this in plain sight but Bernanke and Geithner makes no mention of it to the American Taxpayer who owns AIG despite receiving the recent stress test results.
  6. Ben Bernanke in Sep ’08 gives AIG $85 billion and takes effective ownership of AIG.
  7. AIG borrows another $37.8 billion.
  8. Bernanke and Paulson go before Congress and asks Congress for $700 billion and creates TARP which AIG takes $40 billion.
  9. Geithner arranging additional lending facilities to AIG of $30 billion.

AIG has $1.6 trillion to “unwind” according to AIG CEO Liddy.  But these are really paper losses.  It’s not like AIG sold oranges and the oranges are rotten have to be thrown away.  So where are all these hundreds of billions going?  Watch video #2 of Democratic House Representative Carolyn Malony from New York’s 14th District.  She says it’s going to foreign countries.  Now how are foreign governments “systemic risks” to the United States?  Sounds fishy?  You betcha’!!!  So why was the US Congress and the American Taxpayer rushed into this bailout strategy using “fear and scare” propaganda since Sep 2008?  Hmmm…

Video #1

Video #2


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