"What questions should officials ask (and answer) before giving away our tax money with subsidies, bailouts or TIFs to for-profit private ventures?" "TIF Impact Statements; The Questions We Should Insist Officials Ask First," November 29, 2011. That op ed column (embedded in the linked blog entry) focused on TIFs. But the problems and concerns with giveaways of taxpayers' money go far beyond TIFs. Examining some of the more outrageous offenses helps to put TIFs in context, to recognize that they come from the same bloodline as their more wealthy relatives.
As the Marlins’ new stadium nears completion in Miami, the wreckage from the deal to finance it continues to mount.Ken Belson, "S.E.C. Subpoenas Details on Marlins’ Stadium Financing," Bats/New York Times, December 3, 2011.
The Securities and Exchange Commission subpoenaed the City of Miami and Miami-Dade County seeking details about what investigation and analysis they did before agreeing to issue nearly $500 million in bonds to pay for the stadium and adjoining parking lots in the Little Havana neighborhood.
In a 20-page letter to the county dated Dec. 1, the commission also asked for any documents concerning the team’s ability to help pay for the stadium.
It is also seeking records of any campaign contributions that the Marlins may have given to officials working for the city, the county and the state, . . ..
City and county officials approved the deal to pay for more than three-quarters of the estimated $645 million cost of the stadium and parking lots in 2009. They did so during a deep recession, when services were being slashed, and despite calls to hold a referendum on the financing of the stadium and lots, which are being paid for with hotel bed taxes and parking fees.
City and county officials were accused of spending too much money on the Marlins — a for-profit organization — when other buildings, like the convention center, needed repairs. The Marlins also refused to show government officials their financial books.
This became an embarrassment last year when leaked financial documents showed that the Marlins were profitable in 2008 and 2009.
It may be difficult for the commission to accuse the Marlins of misrepresenting their finances if they did not represent them in the first place. Rather, the blame would fall to county and city officials if a lack of due diligence were found before the bonds were issued.
An even bigger robbery, perhaps the biggest in centuries of human history, is the secret gift of $7.7 trillion to our largest banks, banks which in my judgment were "too big to bail."
A fresh account emerged last week about the magnitude of financial aid that the Federal Reserve bestowed on big banks during the 2008-09 credit crisis. The report came from Bloomberg News, which had to mount a lengthy legal fight to wrest documents from the Fed that detailed its rescue efforts.Gretchen Morgenson, "Secrets of the Bailout, Now Told," New York Times, December 4, 2011, p. BU1.
It is dispiriting, of course, that we are still learning about the billions provided to various financial firms during the crisis. Another sad element to this mess is that getting the truth requires the legal firepower of an organization as rich as Bloomberg.
But that’s the way our world works. Billions are secretly showered on troubled financial institutions to stave off disaster. Individuals get little or no help.
Here are some of the new figures:
Among all the rescue programs set up by the Fed, $7.77 trillion in commitments were outstanding as of March 2009, Bloomberg said. The nation’s six largest banks — JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley — borrowed almost half a trillion dollars from the Fed at peak periods, Bloomberg calculated, using the central bank’s data.
Those six institutions accounted for 63 percent of the average daily borrowings from the Fed by all publicly traded United States banks, money management and investment firms, Bloomberg said.
Numbers for individual companies were equally astonishing. For example, the Fed provided Bear Stearns with $30 billion to see it through its 2008 shotgun marriage with JPMorgan. This was in addition to the $29.5 billion in assets purchased by the Fed from Bear to assist in the buyout by JPMorgan. Citigroup, meanwhile, tapped the Fed for almost $100 billion in January 2009 — its peak during the crisis — and Morgan Stanley received $107 billion in Fed loans in September 2008. . . .
[I]nvestors didn’t know how dire the situation was at these institutions. At the same time that these banks were privately thronging the teller windows at the Fed, some of their executives were publicly espousing their firms’ financial solidity. . . .
Citi’s earnings release didn’t detail its large Fed borrowings; neither did its filing for the first quarter of 2009 with the Securities and Exchange Commission. Other banks kept silent on these activities or mentioned them in passing with few specifics.
TIFs may involve fewer dollars, but the questions that need to be asked, and answered, before entering into them, the categories of adverse impact on our economy and society from these transfers of taxpayers' money to for-profit corporations, are comparable.