When the House of Representatives bowed to popular anger and defeated the Bush administration’s $700 billion bailout bill on Sept. 29, 2008, Wall Street was dealt a stunning defeat. The next day, the Senate took the same bill and loaded it up with $100 billion dollars of tax breaks (including one for makers of wooden arrows). The Senate passed the bill the next day, which went on to pass in the House on Oct. 3.
The bailout bill created a $700 billion ‘Troubled Asset Relief Program’ or TARP to buy bad loans from banks. This was supposed to free up banks to lend more to homeowners and small businesses in need of credit. Backers of the bailout said that only half would be spent and the other half would have to be approved by Congress, saying that this would guarantee accountability. To pass the bill, the Bush administration and leading Democrats in House promised that there would be Congressional oversight of the bailout.
What a bunch of crap.
After the passage of bailout bill, the Bush administration did not buy any bad loans but instead began to put the money directly into banks. This was done with no requirements for what the banks were to do with the money. At the same time, the bailout out bill allowed the Federal Reserve to start paying interest on deposits that banks have at the Fed. What happened is that ‘excess reserves,’ or cash that banks have parked at the Fed, soared from less than $2 billion in August to more than $800 billion by the end of December. So instead of making more loans available, the bank bailout actually made it more profitable for banks not to lend.
The Congressional Oversight Panel issued a report on the TARP Jan. 9, reporting that the bank bailout had done nothing to reduce foreclosures. In 2008 more than 2 million homes went into foreclosure, almost twice as many as the year before. The Bush administration’s Hope Now program to help homeowners facing foreclosure, which was not a part of the bank bailout, only received 347 applications and has not processed a single one.
On Jan. 12, President Bush asked for the other $350 billion of TARP funds at the request of the incoming Obama administration. On Wednesday, Jan. 21, the House of Representatives voted 270-155 against giving $350 billion more to banks. But unlike last September, when the House voted down the first bank bailout bill, there were no headlines, no drop in the stock market - in fact almost no news coverage at all. Why? Because Wall Street knew that they were going get the money despite opposition in the House.
What Congress and the corporate-controlled media did not tell the people was that in order to block the second half of the money, the House, the Senate and the president would have to oppose the bill. Once it was clear that President Obama supported the bill and it was passed by a 52-42 vote in the Senate, then the opposition of the House had no effect.
Why are both the Republicans and the Democrats pushing for more bailout money now? For one, Bank of America is in trouble. Bank of America is one of the largest banks in the world, whose empire includes mortgage lender Countrywide and investment bank Merrill Lynch. Countrywide was a leader in issuing subprime mortgages, while Merrill Lynch was turning these mortgages into bonds; they were at the core of the financial crisis that exploded last year. Bank of America has consistently opposed giving homebuyers facing foreclosure relief through bankruptcy courts and has paid out billions of dollars in dividends to its shareholders and billions more in bonuses. Bank of America already received $25 billion from the U.S. government last year, and right after the Senate vote, received another $20 billion from the government. In addition, the government guaranteed $118 billion dollars of loans that Bank of America made.
Last November the American people voted for change. But when we see the same old policies of bailing out the big banks that helped create the economic crisis, we have a right to be mad at the Democrats and the Republicans who are putting Wall Street first. The chairman of the Federal Reserve has said that giving more money to the banks is “unavoidable.” We say it is unacceptable. We demand a clear accounting of what happened to the billions doled out banks! We demand a moratorium on foreclosures and for homeowners to be able to work out their mortgages in bankruptcy courts! No more bailouts of the banks that created this financial crisis!