Rep Frank: Sitting on bailout money? Sorry, that's illegal.

[SirNitram]

Link

Companies receiving help under the federal government’s financial bailout program are violating the law if they use the money for anything other than to ease lending, Rep. Barney Frank (D-Mass.) said Friday.

“I am deeply disappointed that a number of financial institutions are distorting the legislation that Congress passed at the president’s request to respond to the credit crisis by making funds available for increased lending,” Frank, the chairman of the House Financial Services Committee, stated. “Any use of these funds for any purpose other than lending — for bonuses, for severance pay, for dividends, for acquisitions of other institutions, etc. — is a violation of the terms of the act.”

The Treasury has said it will invest $250 billion directly into banks as part of the $700 billion package passed by Congress earlier this month.

In recent days, however, lawmakers have expressed concern that some of the money is going toward bonuses and to pay dividends, rather than to shore up the bank’s capital positions and to dissuade banks from hoarding money.

“I appreciate the fact that the secretary of the Treasury has re-emphasized that increased lending activity is the only legitimate purpose for taxpayer funding of these institutions,” Frank said. “He must make it absolutely clear to any participating entity that the federal government will insist on compliance.”

Congressional investigators led by Rep. Henry Waxman (D-Calif.), chairman of the House Committee on Oversight and Government Reform, are requesting broad data on how much the biggest banks participating in the program paid in salary, bonuses and benefits between 2006 and 2008.

Frank has scheduled hearings for Nov. 12 and Nov. 18 on the federal rescue program.

Good to see someone willing to stand up and demand action.

[General Zod]

Hopefully this means AIG's executives are collectively shitting themselves, although I'll be surprised if the government take any "real" action.

[Sea Skimmer]

Talk is cheap, lets see a company threatened with fraud and embezzlement charges to make a real example.

[The Big I]

Drawing a long bow here, but what if the US gov says we are declaring US debt null and void???

[CaptainChewbacca]

Drawing a long bow here, but what if the US gov says we are declaring US debt null and void???

Isn't that declaring bankruptcy?

[Sea Skimmer]

Drawing a long bow here, but what if the US gov says we are declaring US debt null and void???

Then all imports to the US would cease, collapsing the US economy and threatening our very ability to feed ourselves thanks to the enormous energy shortage.

Isn't that declaring bankruptcy?

No declaring bankruptcy is not declaring your debt does not exist. It’s declaring that your debt exceeds your assets and you need temporary legal protection against having to pay them. This buys time to restructure and find a way to pay, or much more often, you liquidate all assets and the courts work out how much goes to which debt holder. The debt holders still lose money, but the debtor ceases to exist if it’s a company, or if its an individual your debt is gone, but your credit is ruined and you have no assets. This does not really work at the nation state level. Nations states (well, African countries which barely count as states) have declared they have no debt before, never works out well for them or anyone else.

[The Big I]

Cool thanks for that.

[J]

Except it isn't illegal as he claims. If he'd actually read through all 451 pages of the bailout bill, he'd know that there's absolutely nothing which states that the money must be lent out, in fact there's nothing at all in that boondoggle of a bill detailing what the banks can or can't do with the bailout funds. The bank executives could take all $700 billion and wire it straight to their Swiss & Cayman Islands accounts and it would be 100% legal and by the book.

Barney Frank was one of the main buttmonkeys who pushed the bill through in its unaltered form, and rejected amendments which would've placed restrictions on the banks. He passed a bill which was just begging to be abused, and it's not like he didn't know this, every single Congress critter received countless faxes and phone calls telling them that this is exactly what would happen if the bill passed, and there was even a signed petition from over 150 economists in various colleges & universities telling them the exact same thing.

And now he wonders why there's gambling going on in the casino.

[Ryan Thunder]

Except it isn't illegal as he claims. If he'd actually read through all 451 pages of the bailout bill, he'd know that there's absolutely nothing which states that the money must be lent out, in fact there's nothing at all in that boondoggle of a bill detailing what the banks can or can't do with the bailout funds. The bank executives could take all $700 billion and wire it straight to their Swiss & Cayman Islands accounts and it would be 100% legal and by the book.

Impossible. How can you write 451 pages to say "Here's $700 billion on me."

Furthermore, who on Earth would be stupid enough to pass it if it did?

[Terralthra]

Impossible. How can you write 451 pages to say "Here's $700 billion on me."

Furthermore, who on Earth would be stupid enough to pass it if it did?

The original bill was 3 pages. The remaining 448 were to describe all the pork added to get it through the House and Senate.

[J]

Hopefully this means AIG's executives are collectively shitting themselves, although I'll be surprised if the government take any "real" action.

Nope, they're laughing at us all and backslapping each other while snorting cocaine in a luxury resort spa. They could not be happier, afterall, they've received a 135 billion dollar gift from the taxpayers. And they're going to get even more.

Impossible. How can you write 451 pages to say "Here's $700 billion on me."

Furthermore, who on Earth would be stupid enough to pass it if it did?

Here's a copy of the bill (PDF), all 451 pages. Show me the section which states the banks must lend out the bailout funds they receive. Or the part which says they can't just take the money and run. You can't. Because it doesn't exist.

[Junghalli]

Except it isn't illegal as he claims. If he'd actually read through all 451 pages of the bailout bill, he'd know that there's absolutely nothing which states that the money must be lent out, in fact there's nothing at all in that boondoggle of a bill detailing what the banks can or can't do with the bailout funds. The bank executives could take all $700 billion and wire it straight to their Swiss & Cayman Islands accounts and it would be 100% legal and by the book.

Holy guacamole, and here I thought my faith in our government couldn't get any lower.

[TrailerParkJawa]

Hi J,

Thanks for the link to the bill. While it might be amazing the bill contains no demand on how the banks use the money it doesnt really surprise me either.

It sorta disgusts me that Barney Frank is soap boxing when he should know full well what he say is wrong.

- TPJ

[Rogue 9]

And this is why all the Congressmen who voted for the bill need to lose their jobs come November 4. Which we all know isn't going to happen.

[Darth Wong]

As I've said before, America has a two-party system: one right-wing party and one far right-wing party.

[Ryan Thunder]

Hopefully this means AIG's executives are collectively shitting themselves, although I'll be surprised if the government take any "real" action.

Nope, they're laughing at us all and backslapping each other while snorting cocaine in a luxury resort spa. They could not be happier, afterall, they've received a 135 billion dollar gift from the taxpayers. And they're going to get even more.

Impossible. How can you write 451 pages to say "Here's $700 billion on me."

Furthermore, who on Earth would be stupid enough to pass it if it did?

Here's a copy of the bill (PDF), all 451 pages. Show me the section which states the banks must lend out the bailout funds they receive. Or the part which says they can't just take the money and run. You can't. Because it doesn't exist.

I was merely expressing my disgust. Sorry if I wasn't clear on that.

At the moment I'm trying to determine whether or not there's any way to declare the whole fuck up null because it doesn't actually do what it fucking outright said it's supposed to.

[SirNitram]

Unless they gutted it when it got punted to the House, there was a provision to cut off the flow if it wasn't working. The sad part is, the LIBOR is slowly descending, so one can argue it's starting to thaw the credit market.

[aerius]

Unless they gutted it when it got punted to the House, there was a provision to cut off the flow if it wasn't working.

I think it's still in there but damned if I'm going to read through the bill to confirm this, even a bored government worker like me doesn't have that much free time.

The sad part is, the LIBOR is slowly descending, so one can argue it's starting to thaw the credit market.

Thing is we don't know if that's because of the bailout bill, or if it's the mass co-ordinated Central Bank and foreign exchange currency swap action that's been going on in the last few weeks. Every country's central bank has been pulling out all the stops and doing all kinds of unprecedented stuff in the last while to try and balance the markets and get money flowing again. I believe, but of course can't confirm that it's the latter which is slowly freeing up credit, the timing of the LIBOR and TED spread drops points this, but I can't rule out a delayed effect from the bailout bill.

[SirNitram]

You got it in one. THere's no telling WHY the LIBOR rate has dropped. There's too many variables, including just 'Desperation to get money, even if it means grabbing a bag full of shit'. But one can spin it towards their pet cause. I fully expect some people are spinning it as proof things are getting worse on the credit front, even.

[Stargate Nerd]

If he'd actually read through all 451 pages of the bailout bill,

Much respect to you if you have done that.