Banking Bailout News Stories

Excerpts of Key Banking Bailout News Stories in Major Media

Below are key excerpts of revealing news articles on the 2008 banking bailout from reliable news media sources. If any link fails to function, a paywall blocks full access, or the article is no longer available, try these digital tools.

Note: This comprehensive list of news stories is usually updated once a week. Explore our full index to revealing excerpts of key major media news stories on several dozen engaging topics. And don't miss amazing excerpts from 20 of the most revealing news articles ever published.

Some of the largest shareholders in Goldman Sachs Group Inc. have urged the Wall Street firm to reduce the size of its bonus pool, arguing that it should pass along more of its blockbuster earnings to investors, according to people familiar with the situation. Their complaints in private conversations with the company and at analyst meetings show how anger over its big-money culture is spilling into the ranks of investors who typically shy away from debates over Wall Street pay. Despite record net income and compensation at Goldman as markets rebound and the firm outmuscles weakened rivals for business, analysts expect its 2009 earnings per share to be 22% lower than in 2007 and roughly equal to its 2006 earnings, according to Thomson Financial. The decline is caused by issuing more than 100 million shares in the past year to bolster Goldman's financial position and capital. Some major Goldman shareholders also are concerned about a little-noticed change in the company's financial statements that increased the firm's total head count by adding temporary employees and consultants. The change reduced per-employee compensation, making it look like Goldman employees earn less than they actually do. The figure is a lightning rod for criticism of Goldman because its staff is on pace to earn about $717,000 apiece for 2009. Excluding temporary employees and consultants would increase compensation per employee to about $775,000.

Note: For many revealing reports from reliable sources on the realities behind the Wall Street bailout, click here.

Things turned Orwellian in the House Financial Services Committee this week when members — with the backing of the White House — passed an investor protection bill that would make it all too easy for thousands of publicly traded companies to cook their books. While the bill offers investors important protections ... an amendment was added to permanently exempt smaller public companies (worth less than $75 million) from a post-Enron auditing requirement. It passed with votes from 28 of the committee’s 29 Republicans (one was absent) and 9 Democrats. All clearly were more interested in pleasing corporate constituents than protecting investors who, last time we checked, are also constituents. While President Obama and Democratic leaders say they are committed to more transparency and regulation over derivatives — the complex instruments that were at the heart of the financial crisis — they are supporting a dangerous exemption for big businesses in the derivative reform bill pending in the House. Another House bill to protect consumers of financial products has concessions for big and small banks alike. It appears that the administration will support those concessions, too. Mr. Obama and his aides have said repeatedly that they are committed to closing the regulatory gaps that allowed the financial system to spin so dangerously out of control. They need to do a lot more.

Note: For many revealing reports from reliable sources on the realities behind the Wall Street bailout, click here.

In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting. Goldman's sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled one of the nation's premier investment banks to pass most of its potential losses to others before a flood of mortgage loan defaults staggered the U.S. and global economies. Only later did investors discover that what Goldman promoted as triple-A investments were closer to junk. Now, pension funds, insurance companies, labor unions and foreign financial institutions that bought those dicey mortgage securities are facing large losses, and a five-month McClatchy Newspapers investigation has found that Goldman's failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws. "The Securities and Exchange Commission should be very interested in any financial company that secretly decides a financial product is a loser and then goes out and actively markets that product or very similar products to unsuspecting customers without disclosing its true opinion," said Laurence Kotlikoff, a Boston University economics professor who's proposed a massive overhaul of the nation's big banks. "This is fraud and should be prosecuted."

Note: For an eye-opening, powerful PBS video which reveals how the economic crisis was conscously allowed to happen, click here. It reveals that Fed chairman Alan Greenspan was against investigating any fraud. For many reports from reliable sources on corruption at the core of the Wall Street collapse and bailout, click here.

The deadly trade in cluster bombs is funded by the world's biggest banks who have loaned or arranged finance worth $20bn (Ł12.5bn) to firms producing the controversial weapons, despite growing international efforts to ban them. HSBC, led by ordained Anglican priest Stephen Green, has profited more than any other institution from companies that manufacture cluster bombs. The British bank ... has earned a total of Ł657.3m in fees arranging bonds and share offerings for Textron, which makes cluster munitions described by the US company as "leaving a clean battlefield". HSBC will face protests outside its London headquarters today. Goldman Sachs, Bank of America, JP Morgan and UK-based Barclays Bank are also named among the worst banks in a detailed 126-page report by Dutch and Belgian campaign groups IKV Pax Christi and Netwerk Vlaanderen. Goldman Sachs, the US bank which made Ł3.19bn proft in just three months, earned $588.82m for bank services and lent $250m to Alliant Techsystems and Textron. Last December 90 countries, including the UK, committed themselves to banning cluster bombs by next year. But the US was not one of them. So far 23 countries have ratified the convention. The UK has yet to do so.

Note: For many verifiable revelations of war profiteering by large corporations, click here.

Despite concerted government-led and lender-supported efforts to prevent foreclosures, the number of filings hit a record high in the third quarter. 937,840 homes received a foreclosure letter -- whether a default notice, auction notice or bank repossession. That means one in every 136 U.S. homes were in foreclosure, which is a 5% increase from the second quarter and a 23% jump over the third quarter of 2008. Most disturbing is that all foreclosures -- not just repossessions -- are rampant despite efforts to corral them. There are no firm statistics for it, but many industry watchers claim the percentage of REOs [properties possessed by the mortgage company after an unsuccessful foreclosure auction] caused by borrowers voluntarily walking away from their homes is skyrocketing. The foreclosure crisis may not diminish anytime soon.

Note: For lots more from major media sources on the impacts of the financial crash, click here.

On Tuesday, March 11th, 2008, somebody — nobody knows who — made one of the craziest bets Wall Street has ever seen. The mystery figure spent $1.7 million on a series of options, gambling that shares in the venerable investment bank Bear Stearns would lose more than half their value in nine days or less. It was madness — "like buying 1.7 million lottery tickets," according to one financial analyst. In order for the bet to pay, Bear would have to fall harder and faster than any Wall Street brokerage in history. The very next day, March 12th, Bear went into free fall. By the end of the week, the firm had lost virtually all of its cash and was clinging to promises of state aid; by the weekend, it was being knocked to its knees by the Fed and the Treasury, and forced at the barrel of a shotgun to sell itself to JPMorgan Chase (which had been given $29 billion in public money...) at the humiliating price of … $2 a share. Whoever bought those options on March 11th woke up on the morning of March 17th having made 159 times his money, or roughly $270 million. Six months after Bear was eaten by predators, virtually the same scenario repeated itself in the case of Lehman Brothers — another top-five investment bank that in September 2008 was vaporized in an obvious case of market manipulation. From there, the financial crisis was on. When Bear and Lehman made their final leap off the cliff of history, both undeniably got a push ... in the form of a flat-out counterfeiting scheme called naked short-selling.

Note: Why isn't this being reported in the major media and aggressively investigated? For many reports from reliable sources on the corruption at the core of the Wall Street collapse and bailout, click here.

The Federal Reserve Board has rejected a request by U.S. Treasury Secretary Timothy Geithner for a public review of the central bank’s structure and governance, three people familiar with the matter said. U.S. lawmakers have also called for a review of the Fed’s power and structure, saying Fed Chairman Ben S. Bernanke overstepped his authority as he bailed out creditors of Bear Stearns Cos. and American International Group Inc. while battling a crisis that led to $1.62 trillion in writedowns and losses at financial firms. While the report requested by the Treasury hasn’t been formally scrapped, no work has been done on the project, which was due Oct. 1. Treasury spokesman Andrew Williams declined to comment, as did Fed spokeswoman Michelle Smith. Congressional leaders have balked at the notion of giving the Fed more power and are leaning toward vesting authority over capital, liquidity and risk-management practices of big banks in a council of regulators.

Note: To understand how business corrupts politicians watch the heated MSNBC News clip at this link.

The U.S. Federal Reserve asked a federal judge not to enforce her order that it reveal the names of the banks that have participated in its emergency lending programs and the sums they received, saying such disclosure would threaten the companies and the economy. The central bank filed its request ... two days after Chief Judge Loretta Preska of the U.S. District Court in Manhattan ruled in favor of Bloomberg News, which had sought information under the federal Freedom of Information Act. Preska said the Fed failed to show that revealing the names would stigmatize the banks and result in "imminent competitive harm." Underlying this case and a similar one involving News Corp's Fox News Network is a question of how much the public has a right to know about how the government is bailing out a financial system in a crisis. The case arose when two Bloomberg reporters submitted FOIA requests about actions the Fed took to shore up the financial system in 2007 and early 2008, including an expansion of lending programs and the sale of Bear Stearns Cos to JPMorgan.

Note: Don't tax payers have a right to know to which bankds the trillions of tax dollars are going in the bank bailout? For lots more on government secrecy, click here.

If you believed all the talk from Chrysler about how our tax dollars would help finance its fast-track electric-vehicle future, you're in for a big disappointment. Chrysler has disbanded the engineering team that was trying to bring three electric models to market as a rush job. Chrysler [had] cited its devotion to electric vehicles as one of the key reasons why the Obama administration and Congress needed to give it $12.5 billion in bailout money. The change of heart on electric vehicles has come under Fiat. At a marathon presentation of Chrysler's five-year strategy, CEO Sergio Marchionne talked about just about everything on Chrysler's plate ... except its earlier electric-car plans. With the group's disbanding, Chrysler's electric plans will be melded into Fiat's. Marchionne is apparently no fan of electric power. He says electrics will only make up 1% or 2% of Fiat sales by 2014 and that he doesn't put a lot of faith in the technology until battery developments are pushed forward. As a result, Chrysler won't have an electric car on sale as soon as next year, such as the Dodge Circuit sports car concept it had unveiled. The change has come so fast that Chrysler's website has been still featuring pictures of the electric vehicles. As late as August, Chrysler took $70 million in grants from the U.S. Department of Energy to develop a test fleet of 220 hybrid pickup trucks and minivans, vehicles now scrapped in the sweeping turnaround plan for Chrysler.

Note: For reports from reliable sources on promising new developments in electric automobile technologies, click here.

It took just five weeks after the WorldCom accounting scandal erupted in 2002 for Congress to pass ... the Sarbanes-Oxley Act. That law required public companies to make sure their internal controls against fraud were not full of holes. Sarbanes-Oxley was passed, almost unanimously, by a Republican-controlled House and a Democratic-controlled Senate. Now a Democratic Congress is gutting it with the apparent approval of the Obama administration. The House Financial Services Committee this week approved an amendment to the Investor Protection Act of 2009 — a name George Orwell would appreciate — to allow most companies to never comply with the law, and mandating a study to see whether it would be a good idea to exempt additional ones as well. Some veterans of past reform efforts were left sputtering with rage. “That the Democratic Party is the vehicle for overturning the most pro-investor legislation in the past 25 years is deeply disturbing,” said Arthur Levitt, a Democrat who was chairman of the Securities and Exchange Commission under President Bill Clinton. There are other threats to Sarbanes-Oxley as well. The law set up a long-overdue system of regulating the accounting industry, which had proved time and again that it was incapable of effective self-regulation. The Public Company Accounting Oversight Board has done a credible job, but a month from now the Supreme Court will hear a case that could drive it out of existence.

Note: For a treasure trove of revealing reports from reliable sources on the realities behind the Wall Street collapse and bailout, click here.

It was 9/29/08 - a moment when a rare blast of populist democracy briefly singed the economic terrorists who hold the Capitol hostage. It had been a dark and stormy month of financial collapse, culminating in an attempted power grab. Pushed by his fellow Wall Street Ponzi schemers, Treasury Secretary Henry Paulson - a former Goldman Sachs CEO - was threatening Armageddon unless Congress ratified his ... decree for a no-strings-attached bank bailout. Today, the episode seems merely to have set minimum standards for chicanery. As evidenced by two little-noticed sections of the Obama administration's Wall Street "reform" bill, presidents and their bank benefactors are back to thinking they can pilfer whatever they want by burying their demands in the esoterica of lengthier bills. Finding this latest giveaway means digging all the way down to sections 1109 and 1604 of the White House's mammoth proposal. At a recent hearing, Rep. Brad Sherman, D-Sherman Oaks (Los Angeles County), called the language "TARP on steroids," noting the provisions would deliberately let the executive branch enact even bigger, more unregulated bailouts than ever - and by unilateral fiat. TARP on Steroids includes no specific oversight or executive pay constraints. TARP on Steroids allows taxpayer cash to go only to the behemoths (which, not coincidentally, tend to make the biggest campaign contributions). TARP on Steroids would let [the Treasury Secretary] spend as much as he wants.

Note: For many revealing reports from reliable sources on the continuing Wall Street bailout, click here.

The Federal Reserve Bank of New York said ... that it had no choice but to instruct American International Group last November to reimburse the full amount of what it owed to big banks on derivatives contracts, a move that ended months of effort by the insurance giant to negotiate lower payments. The New York Fed, led at the time by then-President Timothy F. Geithner, directed AIG to make the payments after it received a massive government bailout. The officials said AIG lost its leverage in demanding a better deal once the company had been saved from bankruptcy. Lawmakers and financial analysts critical of the payouts say it amounted to a back-door bailout for big banks. AIG, the recipient of a $180 billion federal rescue package, ended up paying $14 billion to Goldman Sachs over months and $8.5 billion to Deutsche Bank, among others. Before the New York Fed intervened, AIG had been trying to persuade the firms to take discounts. [A Bloomberg] report concluded that the government needlessly overpaid $13 billion. The Federal Reserve has declined to detail the terms of the deals and specifics about negotiations with creditors. The Bloomberg report quoted an unnamed AIG executive who said he was pressured by New York Fed officials to refrain from filing any documents with the Securities and Exchange Commission that would divulge the deals' details.

Note: For many revealing reports from reliable sources on the realities of the Wall Street bailout, click here.

Hoping, perhaps, to persuade a dubious public that curbing reckless business practices is indeed a Washington priority, the Obama administration and Congress produced a hat trick of financial reforms last week. For all the apparent action in Washington, some acute observers say that it was much ado about little. Last week’s moves, they say, were tinkering around the edges and did nothing to prevent another disaster like the one that unfolded a year ago. The white-hot focus on pay, for example, looks like a way for the government to reassure an angry public that they are making genuine changes. But compensation is a trifling matter compared to, say, true reform of derivatives trading. “The American public understands the immorality of paying people huge bonuses for failures that damaged the economy,” said Michael Greenberger, a law professor at the University of Maryland and a former commodities regulator. “What they don’t understand is that those payments are only a small fraction of the irregularities that took place and that, in essence, the compensation problems, as bad as they are, are a sideshow to the casino-like nature of the economy as it existed, pre-Lehman Brothers, and as it exists today.” Regulating derivatives is far more important to those interested in eliminating the possibility of future billion-dollar bailouts. But the derivatives bill generated by the House Agriculture Committee contains a sizable loophole. Many derivatives would not trade in the light of day.

Note: For many revealing reports from reliable sources on the realities of the continuing bank bailout, click here.

Even as the economy continues to struggle, much of Wall Street is minting money — and looking forward again to hefty bonuses. Many Americans wonder how this can possibly be. How can some banks be prospering so soon after a financial collapse, even as legions of people worry about losing their jobs and their homes? It may come as a surprise that one of the most powerful forces driving the resurgence on Wall Street is not the banks but Washington. Many of the steps that policy makers took last year to stabilize the financial system — reducing interest rates to near zero, bolstering big banks with taxpayer money, guaranteeing billions of dollars of financial institutions’ debts — helped set the stage for this new era of Wall Street wealth. Titans like Goldman Sachs and JPMorgan Chase are making fortunes in hot areas like trading stocks and bonds, rather than in the ho-hum business of lending people money. They also are profiting by taking risks that weaker rivals are unable or unwilling to shoulder — a benefit of less competition after the failure of some investment firms last year. So even as big banks fight efforts in Congress to subject their industry to greater regulation — and to impose some restrictions on executive pay — Wall Street has Washington to thank in part for its latest bonanza. “All of this is facilitated by the Federal Reserve and the government,” said Gary Richardson, a research fellow at the National Bureau of Economic Research. “But we have just shown them that they can have the most frightening things happen to them, and we will throw trillions of dollars to protect them. I have big concerns about that.”

Note: For lots more on the realities of the Wall Street bailout, click here.

Congress began the work of reforming our troubled financial system last week, and a bill aimed at regulating derivatives passed the House Financial Services Committee on Thursday. Derivatives — contracts that theoretically protect buyers from unforeseen financial calamities but more often are used to fuel raw speculation — were ... at the heart of the banking crisis. Credit default swaps ... propelled the American International Group off the cliff. Those swaps also linked millions of trading partners, creating a web in which one default threatened to produce a chain of corporate and economic failures worldwide. And derivatives aren’t going away. So reforming the $42 trillion market for credit swaps is crucial if taxpayers are to be protected from future rescues of institutions deemed not only too big but also too interconnected to fail. The best aspect of the House bill is that it requires many swaps to be traded on exchanges just like stocks, subjecting them for the first time to the light of day. But elsewhere in the bill, ... exceptions to this exchange-trading rule undermine its regulatory power. Big banks dealing in swaps don’t want exchange trading, where pricing and the identities of participants would be more publicly transparent. Michael Greenberger, a University of Maryland law professor and an expert in derivatives, criticized the House bill. “The plain language of the legislation can only be read as a Christmas tree of decorative gifts to the banking industry,” he said. “And this is being done when people acknowledge the unregulated O.T.C. derivatives market was a principal reason for the meltdown.”

Note: For lots more on the realities of the Wall Street bailout, click here.

Major U.S. banks and securities firms are on pace to pay their employees about $140 billion this year -- a record high that shows compensation is rebounding despite regulatory scrutiny of Wall Street's pay culture. [Executives] at 23 top investment banks, hedge funds, asset managers and stock and commodities exchanges can expect to earn even more than they did the peak year of 2007, according to an analysis of securities filings for the first half of 2009 and revenue estimates through year-end by The Wall Street Journal. Total compensation and benefits at the publicly traded firms analyzed by the Journal are on track to increase 20% from last year's $117 billion -- and to top 2007's $130 billion payout. This year, employees at the companies will earn an estimated $143,400 on average, up almost $2,000 from 2007 levels. The growth in compensation reflects Wall Street firms' rapid return to precrisis revenue levels. Even as the economy is sluggish and unemployment approaches 10%, these firms have been boosted by a stronger stock market, thawing credit market, a resurgence in deal making and the continuing effects of various government aid programs. So far, regulators and lawmakers have focused on making sure pay practices discourage excessive risk-taking, leaving to companies the question of how much is too much.

Note: For lots more on the realities of the Wall Street bailout, click here.

LOIS ROMANO: Welcome, Elizabeth Warren, Chairman of the Congressional Oversight Committee that is tasked with scrutinizing how the Treasury Department has spent $700 billion to shore up our failing financial institutions. There's a wonderful moment [in the movie "Capitalism: a Love Story"] when [Michael Moore] asks you where the $700 billion is, and you look at him and you say, "I don't know." So the question is: why don't you know? WARREN: Well, we don't know where the $700 billion is because the system was initially designed to make sure that we didn't know. When Secretary Paulson first put this money out into the banks, he didn't ask "what are you going to do with it?" He didn't put any restrictions on it. He didn't put any tabs on where it was going to go; in other words, he didn't ask. And if you don't ask, no one tells. And so we have a system that originally put more than $200 billion into the financial institutions basically saying just take it. ROMANO: And that money is gone. You have not been able to track where that money is? WARREN: Well, we don't know where the money went from the financial institutions. The big conversation at the time was that the credit markets are frozen; if we put money into the financial institutions, they will start lending it because that's what they do when they receive money. It was called the "Healthy Banks Program." Secretary Paulson kept saying, over and over, these are investments in healthy financial institutions, no one needs any subsidy, that [the] money was going to be used in lending to small businesses and consumers and kind of get our whole credit market going again. That didn't happen.

Note: To watch a powerfully revealing, five-minute video showing the Inspector General of the Federal Reserve testifying that she doesn't know where trillions of dollars are, click here. For a comprehensive overview of the realities underlying the government's bailout of the biggest financial institutions, click here.

The Treasury Department and the Federal Reserve lied to the American public last fall when they said that the first nine banks to receive government bailout funds were healthy, a government watchdog states in a new report released today. Neil Barofsky, the special inspector general for the Troubled Asset Relief Program (SIGTARP), says that despite multiple statements on Oct. 14 of last year that these nine banks were healthy and only receiving government funds for the good of the country's economy, federal officials knew otherwise. "Contemporaneous reports and officials' statements to SIGTARP during this audit indicate that there were concerns about the health of several of the nine institutions at that time and, as detailed in this report, that their overall selection was far more a result of the officials' belief in their importance to a system that was viewed as being vulnerable to collapse than concerns about their individual health and viability," Barofsky says. In announcing the initial $125 billion provided to these banks, former Treasury Secretary Hank Paulson on Oct. 14 said, "These are healthy institutions. As these healthy institutions increase their capital base, they will be able to increase their funding to U.S. consumers and businesses." That same day, the Treasury Department, the Federal Reserve and the FDIC also released a joint statement reiterating that "these healthy institutions are taking these steps to ... enhance the overall performance of the US economy." Barofsky finds, however, senior officials at the Treasury and the Fed had serious concerns about the health of some of these banks.

Note: For a comprehensive overview of the realities underlying the government's bailout of the biggest financial institutions, click here.

The head of the U.S. Federal Deposit Insurance Corp. said on Sunday that she wanted to end the "too big to fail" doctrine and shrink the shadow banking system that operates outside the reach of regulators. FDIC Chairman Sheila Bair ... said a U.S. proposal to create the authority to shut down failing systemically important financial firms may need to be extended to insurers and hedge funds. "We need to end 'too big to fail' and this needs to be an overarching policy that applies to everyone," Bair said. Bair said she believed that bank holding companies with subsidiaries that are shut down by regulators also should be made to pay the price of failure by being subject to the same wind-down process. "I believe that the new regime should apply to all bank holding companies that are more than just shells and their affiliates regardless or not whether they are considered to be systemic risks," she said, adding that including only systemically important firms in the shut-down regime could reinforce the 'too big to fail' doctrine. Financial firms subject to systemic risk shutdown authority should likely also be required to publish "living wills" -- details on how an orderly wind-down would play out -- on their websites to provide more clarity to shareholders and customers. And by applying the resolution authority more broadly outside of normal regulated bank holding companies, it would help shrink the shadow banking system by discouraging regulatory arbitrage under which financial firms shop for the most lenient supervisors. "If you tighten regulation of the banks even more without dealing with the shadow sector you could make the problem even worse," she said.

Note: For a comprehensive overview of the realities underlying the government's bailout of the biggest financial institutions, click here.

The Securities and Exchange Commission’s independent watchdog called for a sweeping overhaul of the agency’s investigation and enforcement practices on Tuesday, after a blistering report on the S.E.C.’s failure to detect Bernard L. Madoff’s extensive Ponzi scheme. Two reports, released by the S.E.C.’s inspector general, H. David Kotz, recommended dozens of changes in the way the agency evaluates tips, trains investigators and documents examinations of securities firms. The first report, which covers the S.E.C.’s inspections and examinations office, outlines 37 improvements that would revamp nearly every aspect of the division’s operations, including how investigators follow up on tips and creating step-by-step procedures in identifying potential violations of securities laws. Mr. Kotz also issued 21 recommendations to the S.E.C.’s division of enforcement, including the start of a formal process for handling complaints and improving working relationships within the division. One measure would mandate that tips and complaints be reviewed by at least two individuals experienced in the subject before taking further action. The proposed changes come after Mr. Kotz’s office completed an exhaustive investigation this month of the S.E.C.’s failure to detect the Madoff fraud despite many warnings and a flood of complaints from credible sources. At nearly every turn, the investigation found, the agency had failed to properly examine Mr. Madoff’s firm and had not adequately followed up on tips from as far back as 1992 that could have unearthed the estimated $65 billion scheme.

Note: For a treasure trove of key revelations on the realities behind the Wall Street crash and bailout, click here. Contact your political representatives urging them to support these recommendations.

Important Note: Explore our full index to revealing excerpts of key major media news stories on several dozen engaging topics. And don't miss amazing excerpts from 20 of the most revealing news articles ever published.