Naomi Klein: The Borderline Illegal Deals Behind the $700 Billion Bailout By Amy Goodman

Amy Goodman: World leaders from nearly two dozen countries met in Washington over the weekend to discuss plans to increase regulation of international financial activity. They acknowledged that a failure of market oversight in countries like the United States had precipitated the financial crisis. Meanwhile, here at home, it's been a month into the Bush administration's more than $700 billion bank bailout. Last week, Treasury Secretary Henry Paulson outlined a new bailout strategy intended to boost consumer borrowing and promote financing for companies that give out loans. President-elect Obama's transition team is reportedly working on improving the management of the bailout come January 20th. According to Naomi Klein's latest article in The Nation, "The more details emerge, the clearer it becomes that Washington's handling of the Wall Street bailout is not merely incompetent. It is borderline criminal." The article is called "In Praise of a Rocky Transition." ... "Criminal"? Explain.

Naomi Klein: Well, there's a few elements now that are being described as illegal that we're finding out. First of all, the equity deals that were negotiated with the largest banks and also some smaller banks, representing $250 billion worth of the bailout money, this is the deal to inject capital into the banks in exchange for equity. The idea was to address the so-called credit crunch to get banks lending again. The legislation that enabled this was quite explicit that it had to encourage lending. Barney Frank, who was one of the architects of that legislation, has said that it violates the act if the money is not going to that purpose and is instead going to bonuses, is instead going to dividends, going to salaries, going to mergers. He said that violates the acts, i.e. it's illegal. But what we know is that it's going precisely to those purposes. It is going to bonuses. It is going to shareholders. And it is not going to lending. The banks have been quite explicit about this. Citibank has talked about using the money to buy other banks.....