Obama offers nothing to states,
cities devastated by GM plant closures
By Tom Eley
3 June 2009
3 June 2009
Plant
closings resulting from Monday’s forced bankruptcy of General Motors will cause
spiraling unemployment and deep cuts in social services in many cities and
states across the country. The Obama administration, whose Auto Task Force
dictated the terms of the bankruptcy, has offered no serious aid to the
affected workers and their communities.
GM
is carrying out at least 21,000 job cuts and the closure of 14 plants and
warehouses in eight states. In addition, the company has announced its
intention to dump franchise agreements with 2,300 dealerships by the end of
next year. Many of these will be forced to close, eliminating as many as
100,000 jobs in all 50 states.
The
gutting of GM, once the most powerful corporation in the world and a symbol of
US industrial might, will send shock waves through the economy, cascading into
more layoffs at parts suppliers and financial ruin for thousands of small
businesses.
The
bankruptcy will immediately result in state and local cuts in social services,
health care and education, with city and state workers targeted for layoffs,
wages cuts and other concessions. It will accelerate the foreclosure crisis and
further drive down home prices, as tens of thousands of workers are no longer
able to meet their mortgage payments.
The
Obama administration is using the concessions and layoffs, agreed to by the
United Auto Workers, to attack the wages and benefits of the entire working
class. Corporations will take the concessions imposed on auto workers as a
signal for similar measures against their own workers.
The
state of Michigan, which already has the highest unemployment rate in the
nation at 12.9 percent, will bear the brunt of the closures, with 42 percent of
all national GM layoffs taking place there. Nearly 9,000 jobs will be lost in
Michigan from Monday’s announced plant closures. The shutdowns are concentrated
in southeast Michigan. They will be carried out in Flint, Livonia, Orion
Township, Pontiac and Ypsilanti Township. On Friday, 700 workers were laid off
when GM shuttered a stamping plant in Grand Rapids, in southwest Michigan.
It
is estimated that since 2000, Michigan has lost 17 percent of its jobs—about
three quarters of a million in all—as a direct result of the crisis in the auto
industry. Now the state anticipates 520,000 job losses this year and next.
The
consequences for the state’s limited social welfare system will be disastrous.
According to one estimate, Michigan could lose an additional $18.3 billion in
income. It already faces a $3 billion two-year budget shortfall, and officials
recently revised downward their revenue estimate for the 2010 fiscal year by
$1.7 billion, calling for an across-the-board spending cut of 8 percent.
“It’s
clearly going to impact the safety net,” Governor Jennifer Granholm warned. “People,
who are hurting, need services more, and we have fewer dollars.” Michigan has
already carried out $300 million in budget cuts for the current fiscal year.
Oakland
County in suburban Detroit will lose three factories and 6,600 jobs, the most
of any county. Oakland County was already in difficult financial straits due to
declining property tax revenue, a result of layoffs and the foreclosure crisis.
The loss of GM-related tax revenue will result in layoffs for county workers
and sharp cuts in social programs, said Bob Daddow, Oakland County’s deputy
executive. “I will be going to war,” Daddow told the Detroit News. “We
will need to make cuts in all departments. We have been doing these cuts all
along...but the worst is yet to come on governmental revenues.”
The
closure of the GM Truck and Bus plant will deepen the social crisis in
impoverished Pontiac, Michigan. About 1,100 workers will lose their jobs, and
the city will lose 20 percent of its current tax base, or $10 million, said
Fred Leeb, the city’s emergency financial manager. Leeb made clear that
Pontiac’s working class would pay the price for the shutdown. “We fear that we
are going to have to cut even more deeply,” he told the Detroit News.
“And there will be concessions to ask from the (city) unions.”
Flint,
Michigan has lost about 50,000 GM jobs in 30 years. One thousand more were
added to the grim tally when GM said Monday it would close its Powertrain Flint
North plant. Monday night, the Flint City Council met to enact a series of
measures to bridge a $13 million budget deficit, including the layoff of about
90 firefighters and police and the shuttering of a fire station.
The
city of Livonia, an inner-ring suburb of Detroit, will lose its GM engine
plant, and with it $474,000 in annual tax revenue, about 1 percent of its
total. City workers have already been asked to accept pay cuts. The
Detroit-Livonia-Warren area had an unemployment rate of 14 percent as of May.
Ypsilanti’s
Willow Run transmission plant laid off 600 workers on Monday, and 500 more jobs
will be shed by December 2010. The township will lose 4.4 percent of its tax
revenue, and Washtenaw County will see a loss of $3.8 million in tax receipts.
The Ypsilanti Public Schools confront a $1.4 million deficit, which will be met
primarily through teacher layoffs. The city faces a budget deficit of almost a
half million dollars.
In
Livingston County, Michigan, the GM bankruptcy may lead to a number of parts
suppliers shutting down. Already hundreds of auto parts workers have lost their
jobs in recent months, according to the county’s Economic Development Council
director, Fred Dillingham. Metaldyne, which employs 100 workers in the county,
last week filed for bankruptcy protection. “We have a number of companies with
as much as 90 percent of their business from GM. We have an awful lot of
trickle-down effect from GM,” Dillingham told Livingston Community News.
The
closure of GM Mansfield in Ontario, Ohio is likely to result in the elimination
of city jobs and pay cuts for municipal employees. With revenues already down a
quarter million dollars, the city is bracing for disaster.
Spring
Hill, Tennessee, which has seen its Saturn plant idled, most likely to be
closed permanently, was a single-industry town. When GM opened the plant in
1990, fewer than 1,500 people lived there. Now it has 24,000 inhabitants.
The
collapse of the Big Three has brought with it a sharp decline in funding for
the arts and culture. The General Motors Foundation, which contributed $31.4
million to the arts in 2007, has told many art and cultural organizations,
“mostly in Detroit,” not to count on any contributions this year, the Financial
Times reported last week. Toledo, Ohio, recently announced that its
three-day jazz festival, the Art Tatum Jazz Heritage Festival, would be
cancelled this year after Chrysler said it would no longer provide $100,000 in
annual funding.
In
the face of this mounting social crisis, President Barack Obama has offered
little more than rhetorical palliatives, telling workers that their
“sacrifices” will ensure the future for coming generations. But for the auto
workers’ children, the future foretells poverty amidst a crumbling social
safety net.
On
Tuesday, Obama sent Edward Montgomery, his director of recovery for auto
communities and workers, along with Labor Secretary Hilda Solis, to tour a
Romulus, Michigan GM plant that thus far has not been slated for closure. This
was followed by Solis’ appearance at a “worker round table” at Eastern Michigan
University in Ypsilanti, the ostensible purpose of which was to discuss the
retraining of workers for new jobs in the “green economy.”
The
meeting was little more than a media stunt organized by the Democratic Party
and UAW executives to present the Obama administration as a defender of jobs
and divert working class anger along nationalist lines.
In
her remarks, Solis outlined a series of “job training” programs that will
supposedly equip workers for new high-tech and environmentally-friendly
industries. But as Solis and Obama well know, these token programs cannot
possibly provide decent employment for the vast majority of the workers who are
losing their jobs as a result of the administration’s auto industry policy.
In
what is shaping up as the worst job market since the Great Depression, even
college graduates—many with degrees in engineering, computer science, robotics
and management—face the highest rate of unemployment for those with a four-year
degree in decades.
Among
the Obama administration initiatives Solis outlined was $49 million in
assistance to Michigan workers who have lost jobs due to “international trade,”
federal assistance for the weatherization of homes, and summer youth programs.
These are already existing programs. She could not announce any new programs to
deal with the social crisis created by the bankruptcy of GM because the Obama
administration has no plans for such programs.
After
Solis spoke, the panel discussion was turned over to a number of local
Democratic Party politicians and union officials. Don Skidmore, the Willow Run
UAW local president, set the “America first” tone, declaring, “We’ve got to
stop the bleeding of American jobs south of the border!” Another speaker
demanded to know why Toledo, Ohio was able to keep its GM engine plant open.
UAW
official Donnie Enersen denounced immigrant workers. “They’re coming into
America, not paying taxes, not paying into Social Security,” he said.
The
union officials are seeking to divide workers along national and even regional
lines, in order to deflect attention from their real enemies—the Obama
administration and the Wall Street financiers who are behind the carve-up of GM.
The
World Socialist Web Site spoke with a small number of workers, most of
whom were recently retired, who came to the meeting to demonstrate against the
closure of the Willow Run plant. Corky, a GM worker with 12 years, said, “We
thought we were going to stay open until 2010. On Friday when we walked out of
work we thought we would be coming back in mid-July. I got a call from a fellow
worker that night saying we were no longer going to work there.
“It’s
unfair. We’ve made enough sacrifices. I’m tired of it. This was my seventh GM
plant. For two-and-a-half years I was driving down to Toledo, Ohio to work,
even when gas was $4 a gallon. I’ve made sacrifices. My dad is a retired GM
worker and his benefits are being cut. I put my blood and sweat into every transmission
that comes off the line.
“Yesterday
when they announced the bankruptcy and plant closing I was all tears and
emotions. Now I’m angry.”
*
Obama prepares sweeping cuts in
social programs
8 January 2009
Barack
Obama took the occasion of his first press appearance in Washington as
president-elect to declare his determination to impose policies of budgetary
austerity, including the elimination of entire federal programs and
cost-cutting in the entitlement programs such as Social Security, Medicare and
Medicaid that are of vital importance to tens of millions of elderly and poor
people.
Obama
announced his appointment of Nancy Killefer, a director at the management
consulting firm McKinsey & Co., to a new White House post of chief
performance officer. Killefer, a Treasury official in the Clinton
administration, will be in charge of setting performance standards for federal
agencies and enforcing them on agency officials. Those programs that fail to
meet these standards will be targeted for reorganization or elimination.
The
president-elect made the statement on the eve of a speech Thursday in which he
will make the case for a proposed stimulus package. It was a clear effort to
appease both congressional Republicans and the sizeable faction of fiscal conservatives
among the congressional Democrats, reassuring them that while unlimited funds
are to be provided to bail out big business, there will be a tight rein on
spending for programs that support the needs of working people.
Obama's
remarks on Wednesday shed light on the basic character of his stimulus plan,
which is tailored to the demands of the financial and corporate elite and will
provide hundreds of billions in additional public funds to prop up corporate
profits, while doing little to provide relief for tens of millions of working
people facing the deepest slump since the Great Depression.
Obama
noted the Congressional Budget Office (CBO) estimate released Wednesday that
the federal deficit for the current fiscal year will top $1.2 trillion, without
counting any additional spending for the economic stimulus plan that the Obama
administration and Congress will enact after his inauguration. "Trillion
dollar deficits will be a reality for years to come," he warned, declaring
that containing the deficit and putting the lid on federal spending must become
"fundamental principles of government."
When
a reporter from the Wall Street Journal asked about Medicare and Social
Security, noting that these were among the largest federal expenditures, Obama
replied, "We are beginning consultations with members of Congress around
how we expect to approach the deficit. We expect that discussion around
entitlements will be a part, a central part, of those plans." He added
that once the stimulus package was adopted, by mid-February, "we will have
more to say about how we're going to approach entitlement spending."
These
remarks and comments by Democratic congressional leaders are a warning of what
is to come: a frontal assault on the most important components of what remains
of a social safety net in the United States—the programs that provide at least
minimal retirement benefits and medical coverage for tens of millions of
elderly people, as well as medical coverage for millions of low-income
families.
While
both Social Security and Medicare are solvent, currently taking in more tax
revenues than they pay out, the Social Security Trust Fund, which represents
the accumulated contributions of three generations of working people, has been
effectively plundered to pay for the Bush administration's tax cuts for the
wealthy, two wars and the immense US military establishment.
Out
of $10.7 trillion in total federal debt, about 40 percent, or $4.3 trillion, is
borrowed from Social Security. The Trust Fund is the largest holder of federal
debt, followed by US private investors, who hold $3.4 trillion, and foreign
investors, many of them governments, who hold $3 trillion.
The
CBO figure of $1.2 trillion likely underestimates the current year's deficit by
a significant amount. It includes nothing for the stimulus package which has
yet to be spelled out in detail by the incoming administration, and assumes no
emergency spending to finance Obama's promised buildup of US military forces in
Afghanistan. Reuters reported Wednesday that Obama's secretary of defense,
Robert Gates, a holdover from the Bush administration, is requesting an
additional $70 billion for the ongoing wars in Iraq and Afghanistan, not
counting the additional cost of a doubling of US forces to some 60,000 in
Afghanistan.
The
CBO estimates that the US unemployment rate, at 6.7 percent in November, will
rise to 9 percent by the end of this year, although many economists project a
rate of 10 percent or more. Double-digit unemployment would drive up spending
on jobless benefits, food stamps and Medicaid, among other programs, swelling
the deficit even further.
The
CBO also placed the cost of the Treasury bailout of Wall Street at $180 billion
in 2009, although Congress is expected to authorize an additional $350 billion
on top of the $350 billion already expended since October. The bailout of
Fannie Mae and Freddie Mac, the two government-sponsored mortgage finance
companies brought down by the subprime mortgage crisis, will add another $240
billion to the deficit.
Senate
Budget Committee Chairman Kent Conrad, Democrat from North Dakota, echoed
Obama's warning of trillion-dollar deficits for several years, as well as his
pledge to tackle long-term problems in the financing of Social Security and
Medicare. He told the press, "It would send a very healthy message to the
markets and the American people if President-elect Obama were to simultaneously
announce an economic recovery package and the beginning of a bipartisan process
to deal with our long-term imbalances."
House
Majority Leader Steny Hoyer, who has close ties to the right-wing faction of
House Democrats, the so-called Blue Dogs, added his voice to the chorus calling
for long-term deficit-reduction measures, going so far as to suggest that the
Obama administration might have to follow the example of the Republican
administrations of the 1980s, when White House budget officials engaged in
across-the-board budget cuts by executive order, a process called
"sequestering."
Congressional
Democrats opposed sequestering 20 years ago, pointing out that there was no
constitutional authority for such executive action without congressional
authorization. It is a measure of how far to the right the Democratic Party has
moved that one of its top leaders now embraces such a policy.
Robert
Bixby, director of the Concord Coalition, a bipartisan group that advocates
fiscal austerity, provided an indication of what is being contemplated, saying,
"I would analogize it to what the government is doing with the auto
companies. Congress said, we'll give you the money but you have to show us a
plan for sustainability." In return for emergency loans to the US auto
companies, Congress demanded tens of thousands of layoffs, the closure of
dozens of plants and draconian cuts in auto workers' wages and benefits.
Four
years ago, George W. Bush began his second term as president by proposing a
sweeping privatization of Social Security, a measure which was never formally
introduced in Congress due to overwhelming popular opposition. The plan was
quietly shelved after the debacle of Hurricane Katrina demonstrated the Bush
administration's gross incompetence and utter indifference to the plight of
poor and working class Americans. It has thus been left to Obama, who
occasionally postures as the heir of Franklin Roosevelt, to take responsibility
for dismantling the last legacy of the New Deal.
Patrick
Martin
Get on the daily free news emails at wsws.org for the NON
corporate rape and pillage slant!
*
WHO IS DOING OBAMA’S WELFARE PLAN FOR BIG BANKERS AND WALL
ST? BUSH’S VERY OWN ARCHITECT FOR BANKERS’ WELFARE TIMMY GEITHNER.
CHANGE? RIGHT! JUST THE KIND WALL STREET BOUGHT IN OBAMA!
*
THE
WALL ST. BANKSTER MANAGED PRESIDENT TURNING AMERICAN INTO A THIRD-WORLD “CHEAP”
LABOR DUMPSTER FOR HIS CORPORATE MASTERS!.... HE CALLS IT AMNESTY!
*
The
president that spends half his time hispandering for the illegals’ vote, and
has faced a nation while saying he was not there to “punish banksters”… has
done nothing for black America other than perform his rerun of his performance
of ‘Change”.. his endless sequels.
This
performer of the “transparency” charade, regularly meets in secret with the
Mexican fascist party of LA RAZA, and the congressional faction of LA RAZA, the
Hispanic Caucus, to hammer out expansion of the Mexican occupation.
And
then there are his endless lies about border security extolled by is LA RAZA
party head of HOMELAND SECURITY = PATHWAY to CITIZENSHIP.
*
THE ENTIRE REASON THE BORDERS ARE LEFT OPEN IS TO CUT WAGES!
“We could
cut unemployment in half simply by reclaiming the jobs taken by illegal
workers,” said Representative Lamar
Smith of Texas, co-chairman of the Reclaim American
Jobs Caucus. “President Obama is on the wrong side of the American people on
immigration. The president should support policies that help citizens and legal
immigrants find the jobs they need and deserve rather than fail to enforce
immigration laws.”
*
“The principal beneficiaries of our current
immigration policy are affluent Americans who hire immigrants at substandard
wages for low-end work. Harvard economist George Borjas estimates that American
workers lose $190 billion annually in depressed wages caused by the constant
flooding of the labor market at the low-wage end.” Christian Science Monitor
MOST OF THE FORTUNE 500 ARE GENEROUS DONORS TO LA RAZA – THE MEXICAN
FASCIST POLITICAL PARTY. THESE FIGURES ARE DATED. CNN CALCULATES THAT WAGES ARE
DEPRESSED $300 - $400 BILLION PER YEAR!
*
CALIFORNIA’S RAPID DRIFT TO BECOMING A THIRD-WORLD WELFARE
STATE OF MEXICO
The
California Budget Project, a liberal study group in Sacramento, brought the
income squeeze down to the state level in its Labor Day analysis.
Using
state tax data, the project said that the average adjusted gross income of all
California taxpayers - whether filing individually or jointly - fell from
$82,268 in 2000 to $68,434 in 2008, after adjusting for inflation. TOM ABATE
SFGATE.com
*
Didn’t
he punk us good?
Democratic
administration pushes ahead with Detroit downsizing
By
a reporting team
22 September 2010
22 September 2010
Thousands of Detroit residents turned
out Thursday and Saturday for public hearings on the radical downsizing of the
city being proposed by Mayor David Bing in the interests of big business and in
conjunction with the Obama administration.
Some 1,300 people crowded into two
auditoriums at the American Serbian Memorial Hall Thursday, in the north
central part of the city, and another 1,000 at Whittier Manor on the city’s
east side Saturday.
Unlike the first meeting, which was
immediately broken up into small group workshops, preventing any full-scale
discussion, the latest two meetings were conducted as plenary sessions, with
people able to raise questions from the floor and make comments to the city
officials.
Also unlike the first meeting, there
was no attempt to bar the distribution of political material to residents
coming into the meetings. Organizers had called the police to block such
distribution during the first session.
Both actions were taken to protect
Mayor Bing and his aides from public criticism. They had to be abandoned in the
face of widespread hostility, particularly at the first meeting, where many
residents vocally denounced the substitution of “breakout sessions” for an
actual hearing where residents would be able to confront top officials
directly.
The series of five public hearings will
be completed by Wednesday, September 22. After that, the actual decisions will
be made in consultation with a 55-person advisory committee hand-picked by
Bing, packed with Democratic Party loyalists and representatives of big
business, the union bureaucracy, and various churches. The plan will then be
road-tested at small neighborhood forums and then formally adopted. It is
expected to include the effective shutdown of city services in as much as 40
percent of the city, and the forced relocation of residents from those areas to
be abandoned.
The material assembled by the Detroit
Works Project—the formal name of the Bing initiative—paints a devastating
picture of the economic decline of Detroit and southeast Michigan as a whole.
Among the conditions detailed in brochures and graphs displayed at the
meetings:
- Detroit has experienced a 60 percent
population decline since its peak in 1950
- Michigan has lost 762,000
manufacturing jobs, many in the Detroit area
- Nearly half the population in the
city is functionally illiterate
- The city’s median household income
is $29,000, only $7,000 above the official US poverty level
- There are 55,000 properties in
foreclosure
- There is not a single grocery
store chain operating in Detroit
These conditions are an indictment of
the capitalist system. Detroit has generated untold profits for the capitalist
class over the past 100 years, with hundreds of thousands of workers toiling
under often brutal conditions, particularly in the auto plants that once
covered the city. But the profit bonanza has gone to benefit a privileged
financial elite, while the city has descended into unprecedented decay. Detroit
is the first city in the modern era to pass the one million mark in population,
and then fall back below it under the impact of industrial collapse.
In his remarks to the meetings Thursday
and Saturday, Mayor Bing made it clear that he has no solutions to this crisis.
He sought to blame the people of Detroit, for whom he has complete contempt. At
one point he referred to the city as a “hellhole,” a comment that no doubt
expresses his real feelings. A multi-millionaire businessman after his
professional basketball career, Bing moved from the wealthy suburb of Franklin
back into the city only after he was prevailed upon to run for mayor, winning
the election last year.
Bing blamed previous administrations
for the conditions in Detroit, although the giant auto corporation and banks
have played the dominant role in the city, regardless of the succession of
mayors in Manoogian Mansion. Bing is himself a creature of this business elite,
making millions as a subcontractor selling steel products to the auto industry,
then promoted by them to take over the mayor’s office after a corruption
scandal forced out Kwame Kilpatrick in 2009.
Bing repeatedly declared that the city
government’s role was to promote business profit, not serve the needs of the
people. “Our job is to create an environment where entrepreneurs and businesses
will want to invest,” he said. “We want to win back the trust.”
At one point during opening remarks
Saturday, Bing said the purpose of government does not include the creation of
jobs. “Yes, it is,” shouted an audience member. “That’s your opinion,” the
mayor replied arrogantly.
He singled out city workers for
slander, saying that while he was told “workers were lazy, corrupt and don’t
want to do anything, I also know that 80 percent want to do the right thing.”
Translated into English, this suggests that Bing intends to get rid of at least
20 percent of city workers.
Bing also referred to city residents as
“customers,” leading to widespread grumbling in the audience that they were
“citizens with rights,” not someone’s customer. Moreover, unlike customers of a
department store, Detroit residents cannot just go somewhere else to shop. The
city is where they live.
Despite the mayor’s efforts to portray
his administration as seeking “input” from the community, he and his aides
reacted with indifference to complaints about the notorious unresponsiveness of
city agencies. One worker said that he couldn’t reach anyone at a city office
about cutting weeds on his block, and demanded a cellphone number. A mayoral
aide responded, “Well, I cannot possibly take hundreds of individual phone
calls, and you will need to follow a process of contacting the community
centers where you live.”
An 80-year-old retired Chrysler worker
named Ernie spoke up at one point saying, “I have lived in this city for 60
years and have seen many changes. I worked very hard for the things I have. In
my neighborhood there are many older people living on the block, and it is
important that we have street lights. I was attacked myself a number of years
ago when the area was very dark. I called the city about the street lights
being out for over two weeks now and have gotten no response. We try to keep our
neighborhoods up, pay our taxes and do the best we can, but there is no
assistance from the city.”
Another resident, Margie, responded to
Bing’s plan to demolish 3,000 properties. “You talk about tearing down
properties. The banks haven’t helped people. You state in the material that
55,000 homes are in foreclosure and that we should expect more foreclosures.
Why don’t you come up with a program to assist people? Why not renovate some of
these houses and make them affordable for people to live in? Why is it that no
one wants to help the homeowners?” There was no reaction to this appeal.
D’Artagnan Collier, a founding member
of the Committee Against Utility Shutoffs and the Socialist Equality Party
candidate for the Michigan state legislature in the 9th district, on
the city’s northwest side, spoke from the floor at both Thursday’s and
Saturday’s meetings. He rejected Bing’s claim that there were no resources to
meet the urgent needs of Detroit residents.
“It is a matter of who controls them
and how they are distributed,” Collier said. Nationally, he explained,
“Billions of public tax dollars are used to bail out the banks, while education
and public infrastructure are starved.”
He pointed to the role of DTE Energy in
utility shutoffs and in the collapse of power lines that touched off
devastating fires throughout the city on September 7. Bing was a member of the
DTE board of directors for 20 years before becoming mayor, and DTE chairman
Anthony Earley headed the fundraising for his campaign.
Collier, a city worker, criticized
Bing’s attack on his fellow public employees. “The change Mayor Bing refers
to,” he said, “is associated with cutting the deficit, which means cuts in
public services and deterioration in the quality of life for most residents.”
LaTonya Nelson, who heard Collier
speak, told the candidate, “Just listening to you gives me an education as to
what is going on with DTE. A lot of people are saying DTE did not react soon
enough. What Bing is doing is a betrayal. The big picture is business, not the
people.”
Kenneth Reed, another city resident,
said, “Bing is with Tony Earley. And he was a Tier 2 supplier to the Big Three.
All of it was garbage. They think they can bamboozle people to thinking they
will have an input when they have already decided what they want to do.
“I know that they already have plans. I
was opposed to these plans earlier. Ten years ago Dennis Archer wanted to
charge an entry fee to go to Belle Isle [the main city park]. They are putting
together a Master Plan for Detroit. Young also supported it. Archer revived it
and put in a half a million dollars.
“I believe what the city is doing is
cutting services or reducing them to where people will feel compelled to move.
I believe they plan to have land bank authorities that will sell the land off
to developers. Detroit will be a modern-day Soweto.”
April 27, 2009
Geithner, Member and Overseer of Finance Club
Last June, with a financial hurricane gathering force, Treasury Secretary Henry M. Paulson Jr. convened the
nation’s economic stewards for a brainstorming session. What emergency powers
might the government want at its disposal to confront the crisis? he asked.
Timothy F. Geithner, who as
president of the New York Federal Reserve Bank oversaw
many of the nation’s most powerful financial institutions, stunned the group
with the audacity of his answer. He proposed asking Congress to give the
president broad power to guarantee all the debt in the banking system,
according to two participants, including Michele Davis, then an assistant
Treasury secretary.
The proposal quickly died amid protests that it was politically
untenable because it could put taxpayers on the hook for trillions of dollars.
“People thought, ‘Wow, that’s kind of out there,’ ” said John
C. Dugan, the comptroller of the currency, who heard about the idea afterward.
Mr. Geithner says, “I don’t remember a serious discussion on that proposal
then.”
But in the 10 months since then, the government has in many ways
embraced his blue-sky prescription. Step by step, through an array of new
programs, the Federal Reserve and Treasury have assumed an unprecedented role
in the banking system, using unprecedented amounts of taxpayer money, to try to
save the nation’s financiers from their own mistakes.
And more often than not, Mr. Geithner has been a leading architect
of those bailouts, the activist at the head of the pack. He was the federal
regulator most willing to “push the envelope,” said H. Rodgin Cohen, a
prominent Wall Street lawyer who spoke frequently with Mr. Geithner.
Today, Mr. Geithner is Treasury secretary, and as he seeks to
rebuild the nation’s fractured financial system with more taxpayer assistance
and a regulatory overhaul, he finds himself a locus of discontent.
Even as banks complain that the government has attached too many
intrusive strings to its financial assistance, a range of critics — lawmakers,
economists and even former Federal Reserve colleagues — say that the bailout
Mr. Geithner has played such a central role in fashioning is overly generous to
the financial industry at taxpayer expense.
An examination of Mr. Geithner’s five years as president of the
New York Fed, an era of unbridled and ultimately disastrous risk-taking by the
financial industry, shows that he forged unusually close relationships with
executives of Wall Street’s giant financial institutions.
His actions, as a regulator and later a bailout king, often
aligned with the industry’s interests and desires, according to interviews with
financiers, regulators and analysts and a review of Federal Reserve records.
In a pair of recent interviews and an exchange of e-mail messages,
Mr. Geithner defended his record, saying that from very early on, he was “a
consistently dark voice about the potential risks ahead, and a principal source
of initiatives designed to make the system stronger” before the markets started
to collapse.
Mr. Geithner said his actions in the bailout were motivated solely
by a desire to help businesses and consumers. But in a financial crisis, he added, “the
government has to take risk, and we are going to be doing things which
ultimately — in order to get the credit flowing again — are going to benefit
the institutions that are at the core of the problem.”
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