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Wednesday, Nov. 5, 2008 05:08 am

Hank Paulson’s bailout scandal


"You don't tell deliberate lies," explained Britain's right-wing political icon Margaret Thatcher, "but sometimes you have to be evasive."

If only such honest dishonesty were practiced on this side of the pond. Unfortunately, in the Bush regime, the art of evasiveness has given way to the pervasive use of blunt falsifications — i.e., deliberate lies. Take the ones we've been getting from Hank Paulson, George W.'s Wall Street bailout czar. This guy is now rivaling Donnie Rumsfeld for the Least Trustworthy Bushite in a Leading Role.

The Goldman Sachs CEO-turned-treasury-secretary has gone from confidently assuring us that he had "contained" the financial problem to frantically demanding that Congress federalize America's credit system. However, even before Congress had passed his bill to buy up the bad investments created by Wall Street's "innovative" bankers, Paulson was secretly changing course. By executive fiat, and with no notice to Congress, he shifted into a bank nationalization plan. He is presently spending $250 billion of our tax dollars to purchase stock in the nation's biggest banks, including giving $10 billion to the one he had headed.

Using our billions to save high-rolling, high-finance billionaires was not enormously popular in this presidential election year, so Paulson came up with this cover story: It's not about Wall Street, he and his minions rushed to assure us, it's about your street. We must put government funds into these banks in order to unclog their credit flow, as though we were buying $250 billion worth of Liquid-Plumr. With this federal investment, the Paulsonistas promised, banks would again begin to make loans to America's businesses and consumers — and bluebirds of economic happiness would once again twitter across our land.

They lied. The billions are now being distributed to bankers with no strings attached — no requirement whatsoever that the banks actually start making loans to help "your street." The unclogging rationale was a scam.

Sure enough, the big financial houses say they have no intention of increasing their lending, with some privately admitting that they'll make even fewer loans than before receiving Paulson's generous gift. Noting that they've taken huge losses in the recent collapse, they say they'll apply much of the taxpayers' money to their own bottom lines, trying to shore up their corporate profits.

If that's not enough to disgust you, it now turns out that Paulson & Co. have quietly been pursuing an even more pernicious purpose with our bailout funds: oligopoly. That's the term for a non-competitive market that has hordes of consumers left to the mercies of only a handful of giant providers. Behind the scenes, Treasury is actively encouraging big banks to use their taxpayer windfall to buy out our regional and local banks, eliminating these competitors from the marketplace. "One purpose of this plan is to drive consolidation," says an agency official, off the record.

New York Times columnist Joe Nocera quotes a top executive of JPMorgan Chase exulting to his colleagues about the oligopolistic potential that his bank has gained with the infusion of $25 billion from us: "(We'll) be a little bit more active on the acquisition side or opportunistic side for (taking over) some banks who are still struggling. ... I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way."

Thanks, Hank.

By forcing this wrenching round of mergers, Paulson will reduce banking choices and services for you and me, and almost certainly drive up the fees we pay. At the same time, he'll drastically increase the size of the very giants that made the mess we're in — outfits that he tells us are already "too big to fail."

He has moved this bailout from scam to scandal. Where is Congress? Not only must Paulson be stopped, he should be impeached.

Jim Hightower is a national radio commentator, columnist and author.

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