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Rush Limbaugh

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RUSH: Let me try to explain the Geithner thing — and it’s very difficult to do. I am a layman when it comes to all this. But I’m going to try to set it up here in a general overview. After six months of benign neglect, false starts, and costly bad judgments, the Obama-Geithner-Summers-Pelosi administration has finally done what was obvious to all. Let the market establish market prices for these so-called toxic assets, and everybody’s supposed to go, ‘Yip yip yip yip yahoo.’ Now, why did they wait? What’s the delay here? Presumably the delay was to negotiate what percent of the costs would be picked up by private investors and what percent would be picked up by the government — i.e., taxpayers; i.e., us. And I still don’t know who these private investors are.

I have my suspicions, but I don’t know that any citizen can get involved in this. I don’t know who these private investors are. These private investors could well be Wall Street people for all we know. Private equity and hedge funds. They’re the same players, the same players. Except in this case they get all of the risk. Well, they have no risk. They get all the upside potential, there’s no downside potential. If they buy the toxic assets and they don’t make any money on it and the assets lose money, they don’t lose money. We do, the taxpayers! The government is going to subsidize them, essentially, which is just a repeat of what gave us the problem in the first place.

So after they worked out the breakdown of money in, they had to negotiate the money out. By ‘money in,’ I mean money in to save the toxic assets. So then they had to negotiate the money out. That is, the profits, if there are any, after people who buy these assets, then make any money on them. What percentage would go to the private investors and what percentage would go back to the government or back to us, back to the taxpayers? Now, as a negotiating tactic — and I think this is key to understand — as a negotiating tactic, the smartest president in history and the smartest administration in history did everything they could to assure that we’re going to get a worse deal and private investors get a better deal. Here’s what they did, they bashed Wall Street, and they still do.

They trashed the banks, and they still are. They denigrated profits, and they still are. Barney Frank is up there talking about legislation now that would tie income to performance when it comes to Wall Street executives and executives at other firms. He wants federal law, federal legislation, tying any income to performance. Of course, you know who’s exempted from all that; it happens to be unions. More on that in just a second. So they’re denigrating profits. They ran television hearings to humiliate market participants. They acted to void contracts retroactively. They threatened a 90% retroactive tax on bonuses. They demanded the names of private citizens at AIG! They encouraged the protests at the homes of AIG executives over the weekend. This is what the smartest president in history has done.

And, by the way, every time you read the word ‘Geithner,’ we need to put the word ‘Obama’ in there. This is Obama’s plan. He’s not sitting up there twiddling his thumbs while Geithner comes up with this. Geithner is not an independent contractor. This is Obama’s plan. So after all of this trashing of the private sector, private investors have every right to say that the risk of investing in these toxic assets is chump change compared to the risk of working with this Congress, this liberal Congress. ‘I’ll be glad to invest in your toxic assets, but I’m not going to have myself dragged up there and be made a fool of and ruined after this is all over.’ If this so-called partnership between government and investors is to be a marriage, whoever these private investors are had better get a very tight prenup agreement on this, otherwise they’re going to be the next AIG execs.

BREAK TRANSCRIPT

RUSH: Now, here’s my point on all of this. I guess, here we have… Let’s take a look at AIG, and forget for a moment what you think of AIG. AIG, an insurance company, gets bailout money — $170 billion of bailout money. We learn that of the $170 billion they pay out $165 million in bonuses. We also learn that everybody involved knew those bonuses were going to be paid and that Geithner and the Federal Reserve and the Treasury department knew of them, and they thought it was okay. Everybody was hunky-dory with this. Then we get to the conference legislation, or the legislation that would write the stimulus bill, and somehow it shows up in the stimulus bill. So people say, ‘What do you mean we’re bailing out AIG! How the hell can this happen?’

And so they take it out of there. They take the bailout out of the stimulus. When it gets to conference, somebody sees to it that the bailout and the exemption of any penalty on the bonuses is put back in the conference bill, the final stimulus bill, meaning somebody saw to it that those bonuses could be paid! Now, the question is: Who? Was it Geithner? Was it Obama? Was it Rahm Emanuel? Was it Chris Dodd? For the sake of this discussion, it doesn’t matter who it was. The bottom line is that we have now learned that on March 3rd, Geithner knew about the bonuses. He knew about it long before that. He was questioned about them by a Democrat congressman. The videotape’s on C-SPAN’s website. Geithner says he didn’t know about it ’til March 10th.

Last week, we had one of the most deceitful, shameful exhibits of Washington power in my lifetime, where everybody — every Democrat on a committee — was acting shocked and stunned that there were bonuses and exemptions for the bonuses to AIG’s bailout. They acted like they knew nothing about it. They got to act like innocent bystanders. All of this was for show. All of this was a diversionary tactic. All of this was to get members of Congress off the hot seat and position themselves as populists, raving and ranting against all these big-time power brokers on Wall Street, which this administration and the Democrat Party have done everything they can to make people hate. And so after that, what happens? Here comes the CEO of AIG, and he’s volunteering to do this for a dollar a year.

He had nothing to do with the bonuses, but he has to have himself dissected by members of Congress up there. I’d have told them to go to hell, but he has to sit up there and put up with all this, and it was all phony. It was all a joke. And then they come up with this 90% tax rate, retroactive. You’ve got Andrew Cuomo demanding the names, and then you have these same people sponsoring tours of protesters led by ACORN of AIG executives’ homes. So everybody knew the bonuses were going to be paid. There was legislation to exempt the bonuses from any limitation in the final stimulus bill, and yet last week happened. So what I am suggesting is that whoever these private investors are, they’re going to now go in and save the banks by buying up all these days toxic assets.

They had better get a prenup so that a year from now, they’re not brought up to face Barney Frank, while Barney Frank and the government get to sit there innocently standing by, acting like, ‘What the hell was this? How did this happen? The toxic asset plan!’ We gotta remember: they’re talking to Geithner today. Geithner’s explaining it to them in detail, and if the private investors, if this thing happens to work and the private investors do make a profit and it’s too big a profit, believe me: the Obama administration is going to go after them, and they’re going to be up there again unless they get an agreement that they’re not going to be treated this way. So they’ve gotta get a deal. If the venture makes a profit, no hearings or threats from government to get a bigger share of the profits.

If the venture loses money, no hearings or threats for investors to be responsible for the government’s share of the losses, no Barney Frank showboat hearings. Every congressperson has to take a blood oath: no retroactive tax increases, no public humiliation, no protests outside their homes, none of that that the AIG people had to put up with. Whoever these private investors are, they better be demanding that today. This administration did everything it could to assure a worse deal for taxpayers and a better deal for private investors who — they loathe, who they vilify, but — they desperately need in order to bail out the banks. They just don’t have the political capital, I guess, to successfully go in and ask for another trillion — even though they are.

This whole thing is smoke and mirrors. This whole thing is just a joke. In fact, you know, even at the New Republic today, John Judis says this: ‘…Geithner’s plan could work if the bad loans and seamy securities that the banks hold are actually worth something — say, 60 percent rather than 30 percent of their original value. If not — and there are plenty of skeptics who question that — then Geithner’s plan will transfer more money from taxpayers to private investors and bankers without reviving the big banks. That will amplify the growing populist outcry against the Geithner and [Obama], and make it more difficult to do what is necessary to revive the economy.’ We’re not going to know any of this, whether it’s worked or not, for a year. And I think one of the tricks the government has agreed in this toxic asset purchase plan that they’re going to loan the investors the money to buy the assets.

And they’re going to guarantee… They’re going to finance 93% of the loan. So I don’t know who these private investors are, but the government is going to give them the money to go buy these toxic assets in the form of a loan. It does not have to be repaid. That’s the deal. If there’s a loss, they don’t have to repay it, and if they win big, they don’t have to repay it. So the government is funneling. It’s a show, folks. It’s made to look like the private sector is bailing out the banks when it’s not. Hell, I’ll raise my hand and be a private investor for this! They’ll give me 93% of the money it takes to go in and buy some of these toxic assets? I’ll take that, especially when I can’t lose. So who are these private investors? These private investors are the people that Obama and Geithner loathe. They may as well be AIG. It may as well be Lehman Brothers.

It may as well be any of these people that you hear the Obama administration ripping to shreds each and every day. It’s just another bailout! The Toxic Asset Relief Program here is just another bailout. Whoever the private investors are — and I’ll guarantee you it’s going to be a select group and most of them donated to Democrats. I’ll guarantee you this. Ninety-three percent of their investment will be in the form of a loan from the government that doesn’t have to be repaid. Now, there’s a reason also why this is happening. The reason that the government is going to loan up to 93% of the purchase price of toxic assets on the part of the private investors is that what they’re hoping is that the investors will overpay for these bad assets. You got a bad asset. You got a worthless piece of paper. It’s ‘toxic,’ and it’s dragging your bank’s asset value down. You want to unload them.

That’s what the original TARP was about in November, by the way. Still haven’t gotten there, have we? You want to unload those assets, but you can’t find a way to do it. You have the Geithner plan. The government says, ‘You private investors out there, we’re going to loan you some money to go out and buy these assets.’ It doesn’t work if these assets are purchased at 30% or 20% of their original stated value. These are mortgages, in all cases. But if these private investors can be encouraged to pay over 50 cents on the dollar for these things, then the government can say, ‘Whoa, this worked! This is fabulous.’ So how do you get investors to overpay? You loan ’em all the money! You bail ’em out. You are loaning the private investors the money. Think of it this way.

AIG’s Financial Products Division is going to be given a bunch of money by the government (it’s going to be called a loan), and with the money the government lends to AIG, they are then going to be able to buy up their own toxic assets at (they hope) 60 cents on the dollar, and AIG is going to be able to show a huge profit on the transaction, and lo and behold, everything’s wonderful. Except what’s happened? What’s happened is that these toxic assets have been given a false value because the government’s involved, not the market. The government is hoping that by investing or lending most of the money to buy these things — with no downside, you don’t ever have to pay it back — the upside is that these investors will go out and spend far more for their assets than they’re worth, thereby getting rid of them.

It’s just a bailout. And the bailout is going to the same people who are being vilified left and right. So maybe the price for this is the vilification. So that’s where we’re at. This is why a lot of people do not like this. The reason Krugman doesn’t like it at the New York Times, is because the private investors are the same people who are in financial trouble now. They’re the people who hold the toxic assets, in essence. Look, folks, I know this is convoluted, and I know that it sounds complicated, but it’s very simple. It’s just another bailout in the guise of a loan. The government is lending money to people who will never have to pay it back.

Private investors, Wall Street hedge funds, whatever. The hope is that by loaning so much — quote, unquote, ‘loaning’ so much money — that the investors will overpay on the value of these securities, and thereby making them worth something. And even if they take a loss, the government absorbs it, you and I, and the toxic assets get to be taken off the books. The government will have claimed the private sector did this, when in fact it’s just another bailout. The key is, the people being bailed out here, the people who are giving an opportunity to make all this money, are the very people Obama has spent all of his time since being elected vilifying.

BREAK TRANSCRIPT

RUSH: Back to the phones, Detroit, Michigan, and Marvin, great to have you, sir, hello.

CALLER: Hello, Rush. Mega dittos from the Final Four city.

RUSH: Thank you, sir.

CALLER: And it’s an honor to speak to you.

RUSH: I didn’t know the Final Four was in Detroit. Congratulations.

CALLER: Yeah. Well, there’s something there. But anyway, you know, Rush, how does this Geithner plan differ from what got us in this mess in the first place.

RUSH: Which Geithner plan are we talking about, toxic assets?

CALLER: The one now, yes. The one now where he’s gonna buy up — or he’s going to get private investors to, you know, buy up these toxic assets — you know, toxic money, you know? So how does that differ from what got us in this mess in the first place?

RUSH: It doesn’t. The difference here is in language. The difference here in how it’s being the private investors. Okay, private investors are going to buy the assets. Then you say, ‘With what?’ Oh, they’re going to be lent the money by the government.

CALLER: Exactly.

RUSH: So the government is going to loan, quote, unquote, ‘private investors’ to buy up the toxic assets. Well, that’s cool. And then you learn that the people borrowing the money don’t have to pay it back, sort of like the subprime crisis.

CALLER: Exactly.

RUSH: So they borrow the money and they don’t have to pay it back. The hope from the government is that whoever it is borrowing all this money is proceeding so much that they’ll overpay for the assets, giving them value that will allow the banks to write off some of the assets here and show a little bit more positive balance sheet. And if they make a profit — if these, quote, unquote, ‘private investors,’ which I’m sure will include AIG people and hedge fund people. I’m sure some Citigroup people will be able to buy. I’m sure some Merrill Lynch will be able to buy. I’m sure all of these evil bankers and hedge funds will be in on this buy, and if they do happen to show a major profit, they get to keep it. If they don’t, if they show a loss, they don’t have to pay it back. It’s just like the subprime lending crisis.

CALLER: It’s no different than when they, you know, guaranteed the loans. The only people that made money were large companies and the banks and now the only people that are going to make the money are private investors which makes no sense to me, and we’re on the hook for it.

RUSH: Wait, see, this is the trick, though. Here we’ve got this administration supposedly nationalizing everything, and yet who are going to be the saviors here? Private investors! You see how they work the language?

CALLER: Yeah.

RUSH: The investors really are not private ’cause they’re not using their money. They’re being lent the money.

CALLER: Well, like you said, Rush —

RUSH: They’re being bailed out! This is just another circuitous bailout like Fannie Mae and Freddie Mac after they have gone down the tubes because of bad loans. The government is just becoming the lender of last resort here. These are no-recourse loans, meaning they don’t have to pay ’em back.

CALLER: Yeah. Wouldn’t it have been cheaper just to buy these toxic debts with this trillion dollars?

RUSH: Well… (laughs)

CALLER: (laughs)

RUSH: No. You know what would have been cheaper?

CALLER: What’s that?

RUSH: You could end all income taxes for a year. Just suspend all income taxes for a year and Social Security taxes, and the government would thus place $1 trillion in the pockets of people who make the country work. That would revive the economy and end this. If you’re going to spend a trillion dollars, give it back to the people. Just don’t collect taxes for a year. You can put a trillion dollars in the private sector. But that’s not what these people want to do.

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