Bob Barr

Senator John McCain attempted to disguise reality by calling the $700 billion Wall Street bailout a “rescue,” but it’s obvious that the only people he and his colleagues were rescuing were the executives who had made bad investment decisions, as well as the politicians who had pushed increased mortgage lending, irrespective of cost, triggering today’s crisis. Now it turns out that the companies getting bailed out will benefit twice.

Most everyone has seen the story of how executives at AIG partied at a resort after the taxpayers were stuck with the bill for an $85 billion bailout—now being supplemented with another Federal Reserve loan of $37.8 billion. But what’s $440,000, including more than $23,380 for spa services, among friends when the taxpayers are paying?

Normally politicians wouldn’t have any business complaining about the cost of a corporate retreat, but what might be unexceptional for high-flying companies in a booming economy becomes outrageous when taxpayers are getting stuck with the bill.  In this case they are paying twice, with the company collecting a new loan because its bottom line is even worse than originally thought.  

Loan-two to AIG is small change compared to the extra benefits that Wall Street will receive.  Many of the largest firms will be going to the spa, figuratively, at least.  You see, someone has to manage all of the securities and other assets that the government plans on buying with taxpayer funds.  And who better to manage them than the very companies that bought the bad paper in the first place!

The Treasury Department has requested proposals for asset managers, and according to the Wall Street Journal, the government “wants large, established firms with significant assets to work for the government’s program.”  That means managing at least $25 billion, and in some cases at least $100 billion, in private assets.  There will be a lot of money in fees—typically 1 percent of the assets managed, which could come to as much as $7 billion a year or more if government purchases go past $700 billion, as is widely expected.

Wall Street is looking forward to milking this latest cash cow.  Since government jumped into the investment business, the Journal tells us that “a range of firms—from large investment banks to boutique real-estate companies—have been angling to grab some of the advisory business.”   Representatives of some companies showed up in Washington to lobby even before Congress approved the bailout.  And who can blame them?  The Journal reports that “sales, financing and other traditional forms of real estate business have dried up with the credit crisis.”


Bob Barr

Bob Barr represented Georgia’s 7th district in the U.S. House of Representatives from 1995 -2003 and as U.S. Attorney for the Northern District of Georgia from 1986-1990.

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