Bailout Bonanza

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By Ralph Nader

Is there a larger, more exploited, defenseless group of undifferentiated Americans than the 133 million individual federal income taxpayers? Their dollars are used to subsidize organized corporate interests, giveaway taxpayer assets like minerals under the public lands, and bail out speculative, self-enriching corporations and their crooked bosses.

As large corporations, and their trade associations, complete their takeover of the federal government—a process that President Franklin Delano Roosevelt called fascism in 1938—the corporations become the government.

Just look at the recent headlines in the business press. Article after article features abuses and over-runs by companies contracting with the Department of Defense and other agencies. The enormous volumes of waste, fraud and poor delivery affecting the Iraq war-occupation now only produces ho hum newspaper and television stories.

Recently, the student loan scandals, exorbitant burdens on students graduating from college imposed on them by companies with influence in Washington, like Sallie Mae, whose government guarantees make a mockery of capitalism, have riled members of Congress to some modest action.

Once again this year, the big boys on Wall Street stretched the envelope of risk and greed and ran down to Washington, D.C. to be bailed out by the accommodating Federal Reserve. Chairman Ben Bernanke testified before the Senate that he had no choice but to take on about $30 billion of Bear Stearns obligations or there could be a run on other big banks. Where was the Federal Reserve when this credit, debt and risk spree was building during the past five years?

There is no penalty for failure—whether on Wall Street or in Washington, D.C. for misusing or wasting the taxpayers’ monies.

When the heads of Citigroup and Merrill Lynch were asked to leave their positions recently as CEOs after tanking their companies’ shares, they could barely avoid tripping over the many millions of dollars they were taking with them through the exit door. Among many perverse incentives operating within these Wall Street firms, there are rewards for failure—big bucks rubber-stamped by the look-the-other-way, well paid Boards of Directors.

Back in 1971 and 1980 respectively, the White House proposed a $250 million loan guarantee for Lockheed corp., and a $1.5 billion loan guarantee for Chrysler with the government taking back warrants that it later sold for a profit. There was intense debate and discussion at public hearings in the House and the Senate before they authorized the guarantees.

Now federal agency bailouts of big business, even Mexican oligarchs, rarely seek Congressional approval. Just have the Executive Branch do what it wants. No public hearings. Midnight bailouts without transcripts.

I asked a powerful Senator: “What are the discernable legal limits on the Federal Reserve’s bailout authority and how much total risk can the Federal Reserve heap on the taxpayers?” “Can they go to a trillion dollars?” He did not know.

Shifting deficits, debts and unfair burdens to individual taxpayers while the rich and powerful become either tax escapees or big time welfare recipients keep pushing a limitless envelope on today’s and tomorrow’s taxpayers.

The New York Times’ prize-winning reporter David Cay Johnston, has written two books “Perfectly Legal” and just recently, the best seller “Free Lunch” that document these megatrends of corporate socialism—privatizing corporate profits and socializing corporate losses on the backs of individual taxpayers.

What can be done about these gigantic runaway sprees?

First, pass legislation that broadens individual taxpayers’ right to sue in federal court against waste, fraud and abuse, including those receivers of bailouts—the reckless, avaricious corporations who have Uncle Sam in their back pockets.

Second, have a voluntary checkoff on the 1040 tax return inviting individual taxpayers to join their own taxpayer defense organization. Such a group would have millions of small dues paying members and an on-the-spot skillful watchdog group in our national capital.

Finally, place our public elections off the private auction block and have them funded by well promoted voluntary checkoffs on the tax returns together with a certain amount of free radio and television time for ballot-qualified candidates seeking federal office.

These and other proposals, such as giving shareholders more power to restrain their top executives, will give taxpayers some grip on the wide-open spigot of taxpayer dollars delivered to the misfits of the giant corporate world.