The Man Who May Cost Cleveland 4000 Jobs

This is John Dugan, Comptroller of the United States. He is also the man who apparently pulled the plug on National City Bank and steered National City into a merger with PNC, the Pittsburgh-based bank that is using Federal bail-out money to buy National City.

Dugan pulled the plug on National City by refusing to allow it to receive Federal funds. According to Ohio political leaders, NCB was the only bank in the top 25 to be refused Federal bail-out money. Although Cleveland Congressmen Kucinich and LaTourette have been trying to find out the particulars of the NCB-PNC deal, they have been frustrated by a lack of transparency in the Treasury Department.

What makes this deal stink is that before becoming Comptroller of the Currency, Mr. Dugan was a lawyer in private practice in Washington, D.C. One of his clients was, wait for it, PNC. Although he points out that NCB was also one of his clients, his relationship with PNC has caught the attention of LaTourette, among others.

Dugan is shocked and angered that anyone would think that he used his influence to help a former client of his, but LaTourette points out that Treasury gave more money to PNC than that bank was supposed to get. This is from the PD article linked to in this entry's title:

LaTourette said the Treasury Department money that went to PNC marked the first time the federal government took an equity stake in a regional bank.

According to LaTourette, about a week before National City was forced to sell itself to PNC, Dugan told National City Chief Executive Peter Raskind that his institution shouldn't expect federal bailout money.

LaTourette also observed that Paulson and Dugan gave PNC more bailout money than it was eligible to receive under the terms of the federal program. He said the bailout law stipulated that the Treasury Department could only give a bank money equivalent to 3 percent of its risk-weighted assets, while PNC got an amount closer to 6 percent.

Representative LaTourette has a great line about NCB:

It survived two wars and the Great Depression, but couldn't survive eight weeks of the bail-out.

If you agree with LaTourette and Kucinich that the NCB-PNC deal is suspicious, then check out this website and see how you can get involved in saving National City jobs.

Billions for Wall Street, Nothing for Auto-Makers? The Double Standard of Hank Paulson

So, what's with this? The Bush Administration and the Federal Reserve Board are willing to spend trillions on bailing out financial institutions, but won't bail out the auto-makers. Senators and Representatives are demanding a detailed plan from the auto industry on how it would spend any Federal money, yet, as far as we can tell, neither the Treasury Department or the Federal Reserve are demanding the same thing from companies like AIG, which reportedly got 150 billion or Citigroup, which apparently is getting 20 billion.

Representatives and Senators from Michigan are calling this policy of billions for banks, but nothing for manufactuers a "double standard" and it is hard to argue with them. Further, while businesses rant and rail against the United Auto Workers and assert that worker greed is responsible for the automakers' problems, not a word is said about the fact that these financial institutions are all going under and none of them are unionized.

Robert Reich, former Secretary of Labor under Clinton, in an article posted on Talking Points Memo, said that the reason why banks are getting bailed out is that the people who run Treasury and the Federal Reserve Board come from the financial services sector of our economy. This is how Reich puts it in his article:

Nonetheless, Citi is about to be bailed out while GM is allowed to languish. That's because Wall Street's self-serving view of the unique role of financial institutions is mirrored in the two agencies that run the American economy -- the Treasury and the Fed. Their job, as they see it, is to keep the financial economy "sound," by which they mean keeping Wall Street's own investors and creditors reasonably happy.

As Reich points out, however, manufactuers support local communities all across this nation. This is a quote from Reich's article:

So why save Citi and not GM? It's not at all clear. In fact, there may be more reason to do the reverse. GM has a far greater impact on jobs and communities. Add parts suppliers and their employees, and the number of middle-class and blue-collar jobs dependent on GM is many multiples that of Citi. And the potential social costs of GM's demise, or even major shrinkage, is much larger than Citi's -- including everything from unemployment insurance to lost tax revenues to families suddenly without health insurance to entire communities whose infrastructure and housing may become nearly worthless.

We question whether Paulson understands the importance of manufactuers to the rest of the economy. Senator Levin from Michigan said on Monday that he plans to ask Paulson to outline the effect on the country if GM goes under. If Levin gets a response from Paulson, it will be interesting to see what he says.

Does Paulson Have Conflict of Interest in Bailout Bill?

The New York Times has a fascinating article up on its website, which apparently also ran in the edition for September 28, 2008. The article is headlined "Behind Insurer’s Crisis, Blind Eye to a Web of Risk" and it is about how the insurance giant AGI got itself in financial trouble.

The article points out that not only did it get itself into financial trouble, it also got those with whom it did business into financial trouble. According to the article, one company it did business with was Goldman-Sachs, the private investment bank. Treasuary Secretary Henry Paulson used to run Goldman-Sachs. The following is a quote from the article:

Although it was not widely known, Goldman, a Wall Street stalwart that had seemed immune to its rivals’ woes, was A.I.G.’s largest trading partner, according to six people close to the insurer who requested anonymity because of confidentiality agreements. A collapse of the insurer threatened to leave a hole of as much as $20 billion in Goldman’s side, several of these people said.

Days later, federal officials, who had let Lehman die and initially balked at tossing a lifeline to A.I.G., ended up bailing out the insurer for $85 billion.

Their message was simple: Lehman was expendable. But if A.I.G. unspooled, so could some of the mightiest enterprises in the world.

So AIG gets access to United States taxpayer money and Paulson's old firm doesn't have to worry about possibly losing 20 billion dollars. Frankly, is the Times article is true, the bailout of AGI begins to smell like a dead fish.