Wall Street and the Rise of Obama
AIM Report | By Cliff Kincaid | November 20, 2008
Based on what has been publicly said by the President and the SEC, the culprits could possibly include operators of the controversial, mysterious and secretive financial vehicles known as hedge funds.
Joe Biden made headlines by talking about a “generated crisis” for President Obama. But is the current financial meltdown another “generated crisis?” Why did this crisis suddenly occur only six weeks before the election? Is it just a coincidence that it occurred at a time when John McCain was leading in the national public opinion polls and appeared to be on his way to a November 4 election victory?
“If it were not for the financial crisis,” commented Byron York of National Review, “McCain might have won” the election. It was the financial mess—not Obama’s massive advantage in campaign spending and a sympathetic media— that really hurt McCain.
If you examine the polling trend, McCain was moving ahead of Obama by mid-September. One poll, the Rasmussen poll, had McCain over Obama every day from September 12-17. McCain evened up the race again on September 23, after Obama had taken a lead, but it was Obama all the way after that.
The crisis, which is continuing and could get far worse, was man-made. It was not a natural disaster like an earthquake or a hurricane. And it is a fact that President Bush’s Treasury Secretary Henry Paulson, who worked for a Democratic firm, Goldman Sachs, and has very close ties to Communist China, is the one who convinced Bush on September 18 to publicly demand hundreds of billions of bailout dollars from Congress.
This is when McCain began falling in the polls. That’s apparently because McCain, like Bush, is a Republican, and he was blamed by Obama and the Democrats for the Republican policies that were said by the media to have produced this crisis.
Part of the problem was of McCain’s own making. He voted for the $700-billion plan after flirting with the House conservatives opposing it. He missed a critical opportunity to take on the incumbent President of his own party, Obama, the Democrats, and Wall Street interests.
The growing suspicion that the financial meltdown is a “generated crisis” has been fed by statements from President Bush himself. On September 18, Bush announced that the Securities and Exchange Commission (SEC) was stepping up its enforcement actions “against illegal market manipulation.”
The next day, September 19, Bush appeared in the Rose Garden with Paulson, SEC chairman Christopher Cox, and Federal Reserve chairman Ben Bernanke. Bush declared that the SEC “has launched rigorous enforcement actions to detect fraud and manipulation in the market. Anyone engaging in illegal financial transactions will be caught and persecuted [sic].”
For its part, on the same day, the SEC announced “a sweeping expansion of its ongoing investigation into possible market manipulation in the securities of certain financial institutions.” The SEC declared, “Hedge fund managers, broker-dealers, and institutional investors with significant trading activity in financial issuers or positions in credit default swaps will be required, under oath, to disclose those positions to the Commission and provide certain other information.” But no details were provided.
Almost as secretive were Treasury Secretary Paulson’s maneuvers. He produced a quick three-page proposal to make himself a virtual financial dictator without judicial oversight or review. Then just as quickly it was secretly altered so that he would have the authority to bail out banks in China and other foreign countries.
The China Connection
The October issue of Bloomberg Markets notes that Paulson was sworn in as secretary in July 2006 and that by September he was announcing “creation of the first U.S.-China Strategic Economic Dialogue.” Paulson, the magazine reports, has a relationship with Chinese leaders and has traveled to China at least 70 times in his career. It reports that he personally had $25 million worth of holdings in a Goldman Sachs fund whose sole asset was a stake in the Industrial & Commercial Bank of China.
Goldman Sachs, a “full-service global investment banking and securities firm,” is “the leading underwriter of Chinese equity securities and M&A [merger and acquisition] advisor in China,” its website declares.
“Managing the U.S. relationship with China is an increasingly important part of the Treasury secretary’s job,” Bloomberg Markets says. “During the Fannie and Freddie crisis, Paulson used his credibility with Chinese leaders to reassure them that the U.S. mortgage companies weren’t in jeopardy.” Paulson is quoted as saying that “I clearly talked with the Chinese through this. They’ve worked with me enough that they knew I wouldn’t say it unless I believed it.”
Why was this necessary? Back on July 21, 2008, in an article headlined, “Trouble at Fannie Mae and Freddie Mac Stirs Concern Abroad,” The New York Times noted that China held $376 billion in securities issued by the quasi-governmental agencies, known as Government Sponsored Enterprises. In total, foreign investors held some $1.5 trillion in the housing giants, about one-fifth of their securities. China was the leading foreign investor.
On September 7, the U.S. Government, under Paulson’s direction, took control of Fannie Mae and Freddie Mac, putting the U.S. taxpayers on the hook for $5 trillion of their mortgages. This constituted, in effect, a bailout of the foreign investors.
About a week and a half later the demands came for more taxpayer money for Wall Street, and the national economic crisis was well underway.
Bush’s November 15 “international summit,” including the United Nations Secretary-General, was to “begin developing principles of reform for regulatory bodies and institutions related to our financial sectors.” This is bureaucratic doublespeak for what has been called “global governance.” Some may fear with good reason that world government and global taxes are on the way in and U.S. sovereignty is on the way out.
The U.N., under its new General Assembly President, Miguel D’Escoto, is working to take advantage of the continuing crisis. D’Escoto is the renegade Catholic Priest and former foreign minister of Communist Sandinista Nicaragua who advocates Marxist-oriented liberation theology and won the Lenin Peace Prize from the old Soviet Union.
While Bush insists that the nations at this summit must “recommit to the fundamentals of long-term economic growth-free markets, free enterprise, and free trade,” he has already authorized several socialist-style schemes, including the $700-billion bailout, nationalization of mortgage companies, massive subsidies to American International Group (AIG), and the federal government taking ownership stakes in big banks. The estimated cost is already $1.8 trillion—more than $17,000 per American household.
It is important to note that none of this has stabilized the financial system, although that is what we were told by the media would happen.
Calling the global financial crisis an “historic opportunity,” a coalition of “progressive” individuals, social movements and non-governmental organizations met in Beijing on October 15 and issued a statement urging the “radical economic transformation” of the global economy. They advocate a “global taxation system,” including what are known as “Tobin taxes, on the movements of speculative capital,” and “stringent progressive carbon taxes on those [nations] with the biggest carbon footprints.”
Their plan also includes phasing out the U.S. dollar as the international reserve currency and establishing “a people’s inquiry into the mechanisms necessary for a just international monetary system.” Clearly, they intend to bring the U.S. into a system of international socialism, with new and more powerful global agencies deciding our economic and financial fate.
At the same time, the Left wants to make sure that “aid transfers do not fall as a result of the crisis.” Foreign aid must not only continue, they say, it must be expanded. The primary vehicle for this is the Millennium Development Goals project of the United Nations, whereby nations such as the U.S. are supposed to provide .7 percent of their Gross National Product (GNP) in foreign aid.
Setting The Stage For Obama
Their point man is Joseph Stiglitz, who won the Nobel Prize for Economics in 2001 and is now a Columbia University professor. Stiglitz has been appointed by D’Escoto to chair a high-level U.N. task force to review the global financial system.
His first book, Globalization and its Discontents, suggested that while a global tax on currency transactions, the so-called Tobin Tax, was being seriously studied in Europe, it might involve serious “implementation problems.” But with his subsequent book, Making Globalization Work, those problems have vanished, as he argues for a variety of global tax schemes that would cost American taxpayers billions of dollars.
Stiglitz, a financial contributor to Obama’s presidential campaign and major backer of the national Democratic Party, is in a perfect position to guide the transition into a global socialist economy.
On October 23, at a U.N. meeting, U.N. Secretary-General Ban Ki-moon met with Stiglitz to discuss the financial crisis and the November 15 global summit. One of the other economists in attendance was Jeffrey Sachs, also of Columbia University, and the head of the U.N. office that supervises foreign aid commitments and contributions to the U.N.’s Millennium Development Goals (MDGs).
Sachs has estimated that the U.S. is short by $65 billion a year in foreign aid, which adds up to $845 billion over the 13-year period during which nations are supposed to attain the MDGs. Through references to various U.N. resolutions and conferences, as well as the MDGs, Obama’s Global Poverty Act is designed to make the U.S. comply with the requirement of .7 percent of GNP being provided for “official development assistance.” Sachs has stated openly that a global tax will be necessary to force the U.S. to come up with the money.
At the Clinton Global Initiative meeting in September, Obama reaffirmed his own “embracing” of the MDGs and noted, “This will take more resources from the United States, and as President I will increase our foreign assistance to provide them.” On top of that, Obama supports the Jubilee Act, which would cancel as much as $75 billion of third world debt. That adds up to $920 billion more in taxpayer money on top of the estimated $1.8 trillion in national and domestic spending to deal with the current crisis.
We may be facing the bankruptcy of the United States, even without all of this new spending. Indeed, the Global Europe Anticipation Bulletin, which predicted the current crisis, reports the likelihood that the U.S. will default on some of its debts next year.
It declares that “…our researchers anticipate that, before next summer 2009, the US government will default and be prevented to pay back its creditors (holders of US Treasury Bonds, of Fannie Mae and Freddie Mac shares, etc.). Of course such a bankruptcy will provoke some very negative outcome for all USD- [dollar] denominated asset holders. According to our team, the period that will then begin should be conducive to the setting up of a ‘new Dollar’ to remedy the problem of default and of induced massive capital drain from the US.”
This is what the international Left is hoping for.
Financial analyst Peter Schiff, who also predicted the current crisis, warns that “the fundamentals loom simple and irrefutable: American borrowers of all stripes cannot afford to repay the trillions of dollars we owe. Over the past decade, the vast majority of lending has come from abroad, and as Americans don’t pay, the losses show up on foreign balance sheets. Since we blew most of the money we borrowed on consumption, we simply lack the industrial capacity to repay our debts without resorting to a printing press.”
He adds, “In bankruptcy, both the debtor and creditors are affected. However, while creditors take a financial hit, ramifications for debtors are typically more severe. Creditors are generally better prepared to absorb their losses. However, for bankrupt debtors usually much more substantial changes ensue.
“Since America is the world’s biggest debtor, with our IOU’s broadly held by every creditor nation, the effects of our bankruptcy are being felt worldwide. However, while our creditors are suffering now, their pain will be temporary and relatively mild compared to what awaits Americans.
“So while it may appear to some that things are worse abroad, that is only because the full extent of our problems has yet to be reckoned with. The main lesson our creditors will learn from this crisis is not to lend American consumers any more money. Once the lending stops, our ‘cart before the horse’ borrow to spend economy will crumble. While the rest of the world absorbs their losses and moves on, we will be digging our way out of the rubble for years to come.”
Goldman Sachs Connection
This ominous future is why the role of Henry Paulson in sparking the panic should be probed.
Paulson “does not act or sound much like a conservative Republican to the GOP remnant at the Treasury,” noted Robert Novak in an October 2007 column. Novak reported that Paulson had “marched to his own drummer” by naming Eric Mindich, chairman of Eton Park Capital Management, to head the Asset Managers’ Committee of the President’s Working Group on Financial Markets. “A former Goldman Sachs colleague of Paulson’s, Mindich is a top-level Democratic fundraiser,” Novak noted. “He was in Sen. John Kerry’s inner circle for the 2004 presidential campaign and backs Sen. Barack Obama for 2008.”
Significantly, on September 23, Paulson’s former firm, Goldman-Sachs, received $5 billion from Warren Buffett, a major Obama financial backer and booster.
Then, during the current crisis, Paulson appointed another former Goldman Sachs banker, Neel Kashkari, to run the new “Office of Financial Stability” and buy bad loans and distressed securities.
Under Paulson and Kashkari, $10 billion of taxpayer money was soon extended to Goldman Sachs.
Information from the Center for Responsive Politics identifies Goldman Sachs as a “strongly Democratic” firm, having contributed 73 percent of their almost $5 million in 2008 election cycle contributions to Democrats.
Some liberals understand the connection between Goldman Sachs and Obama. “Obama’s number one bundler is Goldman Sachs,” notes John R. MacArthur, publisher of Harper’s Magazine, in a release from the “progressive” group calling itself the Institute for Public Accuracy. He was referring to how money from the firm is packaged for the Obama campaign. “In his book, ‘The Audacity of Hope,’ Obama talks about how much he likes investment bankers, how bright and liberal they are,” says MacArthur.
Obama was clearly the firm’s favorite in the presidential race.
Lynn Sweet of the Chicago Tribune recently discovered that, on May 3, 2007, Obama had attended an event at the Museum of Modern Art in Manhattan “that was not on his public schedule and is only now surfacing—a private dinner for Goldman Sachs traders with a discussion on issues moderated for the Wall Street firm by NBC’s Tom Brokaw”—the moderator of the second presidential debate.
Her column noted other Obama campaign connections, including a report that Obama addressed Goldman Sachs’s annual partners meeting 2006 in Chicago.
The Hedge Funds
Based on what has been publicly said by the President and the SEC, the culprits could possibly include operators of the controversial, mysterious and secretive financial vehicles known as hedge funds.
A hedge fund operator such as George Soros, who was convicted of insider trading in France, is known to make money from the collapse of national economies and currencies. He was labeled “The Man who broke the Bank of England” because of his financial activities against the British currency. Did he break the U.S. economy?
Considering that Soros pours millions of dollars into the Democratic Party, its front groups and candidates, it is doubtful that the Democrats controlling Congress will want to investigate or even aggressively question the multi-billionaire.
The Wall Street Journal in January had reported that hedge fund operator John Paulson received a visit from Soros, a public supporter of and contributor to the Obama campaign, after Paulson had made about $4 billion betting on a housing market collapse. Obviously, Soros wanted to know how he had done it. But Soros wouldn’t talk to the Journal about his meeting with Paulson.
Soros gets away with a “no-comment” because he pours money into journalism organizations, including the Center for Investigative Reporting, the Fund for Investigative Journalism, and Investigative Reporters & Editors, thereby guaranteeing that they won’t investigate how and where he gets his money. Isn’t this convenient?
A recent example of this conflict of interest came in Bill Moyers’ October 10 interview on the Public Broadcasting Service. Moyers lavished Soros with praise, saying that he is “one of the world’s best known and successful investors,” and mentioned Soros’s new book, The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means.
Not once did Moyers question Soros about his reported discussions with John Paulson. Not once did he question whether Soros’s financial activities had facilitated or precipitated the current financial crisis that he writes about in his book.
Soros insists that one contributing factor to the crisis was the lack of financial regulation. But he takes advantage of the lack of those regulations. Back in 2005, one Soros company was a member of the Managed Funds Association, which describes itself as “the global voice for the hedge fund industry” and was actively fighting an SEC proposal to impose more regulation on hedge-fund managers.
Is there anybody in the media willing to question Soros about how he made that money? And whether it came at the expense of the American people?
DEAR FELLOW MEDIA WATCHDOG November-B 2008
A LOT WILL BE SAID AND WRITTEN ABOUT THE PRESIDENTIAL ELECTION. The liberal media bias was terrible. But one central fact remains: John McCain was ahead in the polls until the financial crisis emerged and President Bush was pushed by Treasury Secretary Paulson into seeking a Wall Street bailout on September 18. The crisis benefited Obama, even though he voted for the bailout, because he was not a Republican, like McCain or Bush. Republicans were blamed because a Republican was in the White House. The exit polls on November 4 still found the public opposed to the bailout by a 56-39 percent margin. We are now facing, according to one financial bulletin cited in this AIM Report, the bankruptcy of the United States. It is the biggest story of our lives, indeed of U.S. history, and yet our media have no interest in getting to the bottom of what happened and why. That is why we are taking another hard look at the crisis in this AIM Report.
EVEN BEFORE THE ELECTION RESULTS WERE IN, KIMBERLEY A. STRASSEL OF THE WALL Street Journal was urging Republicans “to start elevating the new generation of reformers—folks like Virginia Rep. Eric Cantor or Wisconsin’s Paul Ryan” in the House. She called them intellectuals, never mentioning the fact that they backed the Wall Street bailout that her colleague, Stephen Moore of the Journal’s editorial page, now admits was a big mistake. “I want to apologize,” Moore said. “I drank the Kool-aid.” Cantor and Ryan, a member of the House Budget Committee, were good conservatives until they drank the Kool-aid and backed the bailout. Of course, there were a lot of Kool-aid drinkers in Congress, including House Minority Leader John Boehner, Minority Whip Roy Blunt, Cantor, and House Republican Conference Chairman Adam Putnam of Florida. However, most House Republicans opposed the bailout, objecting to its socialist nature and questioning whether it would even work. Please drop the enclosed postcard to Rep. Jeb Hensarling, who was chairman of the Republican Study Committee, asking him to investigate the forces behind the bailout.
HAVING RECOMMENDED TWO PHONY “FISCAL CONSERVATIVES” FOR IMPORTANT POSI-tions in the House, Strassel also used her column to urge Republicans to quit “harping on immigrants and gay marriage.” The term “harping on immigrants” means that she believes that Big Business should be able to continue to exploit cheap labor from abroad and conservatives ought to quit advocating secure borders. As far as gay marriage is concerned, amendments to prohibit gay marriage passed in liberal California, Arizona and Florida on November 4. This is one of the bright spots for conservatives. But Strassel wants to throw this advantage away. Please send her the enclosed postcard.
IT GOES WITHOUT SAYING THAT THE LIBERAL MEDIA BIAS WAS ATROCIOUS. AS ROGER Aronoff of AIM noted in an article on our website, the Project for Excellence in Journalism and the Center for Media and Public Affairs (CMPA) documented the bias. The former found that, based on coverage from 48 news outlets between the end of the two party’s conventions and the end of the debates, 57% of the stories on McCain were negative, while only 14% were considered positive, while for Obama, those figures were 29% negative and 36% positive. The CMPA found that from August 23 to October 24, evaluations of Barack Obama and Joe Biden on the evening newscasts of the three major broadcast networks and the first half hour of Fox News Channel’s “Special Report” were “twice as favorable” as evaluations of John McCain and Sarah Palin. Needless to say, potentially damaging stories about Obama, such as his relationship with Communist Frank Marshall Davis, were ignored. We tried our best to get out this information, but even some in the conservative media shied away from it. And the financial crisis then took center stage.
SURVEYS SHOWED THAT, BY A MARGIN OF SEVEN TO ONE, THE PUBLIC THOUGHT THAT most journalists wanted Obama to win. Even Democrats, by a six-to-one margin, believed the same. But one thing I realized is that the bias was also evident in the conservative media. Strassel’s column is only one example. I find that the media are populated by many “conservatives” who are not really so conservative. This category includes the Fox News cheerleaders for the Wall Street bailout, such as Bill Kristol, Fred Barnes, Charles Krauthammer and Bill O’Reilly, and columnists David Brooks (New York Times), Peggy Noonan (Wall Street Journal) and Kathleen Parker (Washington Post Writers Group), who ridiculed Sarah Palin because she doesn’t read the New York Times. As we strive to correct the liberal media bias, we have to keep the conservative media honest as well. We need new conservative media voices.
FRANKLY, I AM ALSO GETTING TIRED OF LISTENING TO FORMER BUSH ADVISER KARL ROVE, who makes regular appearances on Fox News and writes for the Wall Street Journal and Newsweek, being constantly described as “the architect.” It’s true that he helped elect Bush two times, but considering what happened on November 4, isn’t it about time for somebody in the media to ask him some pointed questions about what he built and why it didn’t last. He actually stated during one appearance that one of Bush’s legacies will be spending billions of dollars on AIDS programs in Africa. Writer Steven Sailer points out that Rove was also a proponent of “comprehensive immigration reform” or amnesty for illegals, thinking it would attract votes, and that the Bush Administration was promoting home ownership for minorities who couldn’t really afford homes. Sailer points to a 2002 “White House Conference on Minority Home Ownership” and a Bush speech in which he said the problem was “high down payments” for home purchases and advocated more financial help for people with “bad credit histories.” We shouldn’t blind ourselves to the Bush Administration’s role in this debacle.
IN DESPERATION, CONSERVATIVE RADIO TALK-SHOW HOST LAURA INGRAHAM TOUTS former House Speaker Newt Gingrich as a source of new ideas. But he is hardly a profile in courage. As we noted in our last AIM Report, Gingrich was against the bailout plan until he was in favor of it. Then he came out against it again, saying that “If Senator McCain is not prepared to separate himself from the Bush-Paulson economic program, he has no opportunity to win.” Before it became fashionable to advocate more oil drilling, Gingrich was appearing with House Speaker Nancy Pelosi in an Al Gore-financed global warming ad, had been an advocate of “green conservatism,” and was proposing a Gore-like “Contract with the Earth.” In addition to his flip-flops, Gingrich has a well-known history of personal “indiscretions” that prohibits him from a public role in a movement that purports to advocate traditional moral values.
ONE EMERGING LEADER IS REP. THADDEUS MCCOTTER OF MICHIGAN, AN OPPONENT OF the bailout, who praises America’s “Greatest Generation” while saying that “Today, America’s Global Generation must also transcend a quartet of transformational challenges born of our interconnected world: economic, social and political upheavals; a global war against an evil enemy; Communist China’s rise as a strategic threat and rival model of governance; and moral relativism’s erosion of our nation’s foundational, self-evident truths.” These are powerful words. Please send him the enclosed postcard, thanking him for speaking out and urging him to probe into this financial crisis more deeply. Here at AIM, you know that we will not shrink from the responsibilities ahead.
