The Office of the Special Inspector General for the Troubled Asset Relief Program released a report yesterday on last year’s government bailout of the insurance giant AIG. Timothy Geithner headed the Federal Reserve Bank of New York at the time, and he failed miserably.

Like a lot of Democrats, I’m not happy with President Barack Obama’s double standard on bailouts. If you’re a Wall Street financial giant, the federal government will shovel tens or hundreds of billions of dollars your way, without demanding basic accountability. The executives who ran those firms into the ground aren’t fired, and they even get their inflated bonuses because (according to the White House) there’s nothing they can do about bonuses that were promised in contracts.

Meanwhile, automobile manufacturers who asked the federal government for loans in December got a long list of strings attached. Now President Obama has made sure General Motors’ CEO got the boot and wants Chrysler to merge with a foreign company. Even then, the White House is indicating that GM and Chrysler may be headed for bankruptcy. If that happens, you can be sure that the United Auto Workers will be forced to accept huge concessions. Apparently what middle-class UAW members were promised in contracts is less important than the million-dollar bonuses AIG executives were promised.

David Sirota thinks Obama’s approach is reviving the tactics of Reaganism:

Reagan famously backed a massive increase in the defense budget and corporate welfare while pretending to be a budget hawk by bemoaning the supposed wastefulness of programs like welfare – programs whose expenditures were tiny in comparison to those on the Pentagon and corporate welfare.

Likewise, we’ve seen Obama support giving away hundreds of billions of dollars – no strings attached – to Wall Street banks while simultaneously presenting himself as getting tough on Corporate America with his promise to hold the auto industry accountable for its failures. Of course, the automakers are asking for a tiny fraction of what Wall Street has already gotten.

Look who loves Obama’s Reaganesque approach: Senator Chuck Grassley.

Grassley says it’s an issue of letting capitalism run its course. Grassley says, “When the government is intervening to make that point, it appears to a lot of people to appear to be a government running a private corporation and is that good? That’s the questions that are raised.” Based on the latest actions, analysts believe G-M and Chrysler will surely face bankruptcy, a merger or both.

Grassley says that’s the way the system works. “It’s a balancing act between being good trustees of the taxpayers’ money when it’s given to corporations like General Motors and the extent to which you rely just simply upon the company to make the decision.”

That’s classic Grassley–upset over the prospect of some money going to manufacturers but content to let the Troubled Assets Relief Program of the Wall Street bailout consume trillions. Hey, it’s just how the system works. Will the Iowa media call out Iowa’s senior senator on this hypocrisy? Don’t count on it.

The U.S. House of Representatives approved by 328 to 93 a bill that would put a 90 percent tax on bonuses over $250,000 that any financial institution receiving bailout money pays to employees. The bill is not limited to AIG, which sparked public outcry by paying at least 73 employees bonuses of more than $1 million.

Here is the roll call. All three Democrats representing Iowa in the U.S. House (Bruce Braley, Dave Loebsack, and Leonard Boswell) voted yes on retrieving most of the taxpayer dollars being squandered on excessive Wall Street bonuses.

Steve King was among the 87 House Republicans who voted no. It would be interesting to hear his reasoning. House Republican leader John Boehner claimed to be against the bill because the excessive bonuses were to be taxed at 90 percent rather than 100 percent. Riiiight.

Tom Latham, who voted against the Wall Street bailouts last fall, was one of 85 Republicans who joined the Democratic majority in voting yes today. I am curious to know when Latham cast his vote. According to Chris Bowers, “Republicans were running 2-1 against the bill for a while, but are now changing their votes in the face of overwhelming passage.”

UPDATE: The Democratic Congressional Campaign Committee put out a press release slamming King for this vote. I’ve posted it after the jump.

Remember how urgent it was for Congress to approve the Wall Street bailout last fall to free up credit? Not surprisingly, things didn’t work out that way:

A new report out of the Treasury Department Tuesday confirmed what many lawmakers, housing advocates, small businesses and individual consumers have known all along: That despite hundreds of billions of dollars flowing from Washington to the finance industry, bank lending among recipients of the Troubled Asset Relief Program fell in the last three months of 2008.

Among the 20 largest TARP recipients, median mortgage and business lending both fell by 1 percent over that span, Treasury found, while median credit card lending rose 2 percent, “reflecting greater reliance on existing credit lines by consumers.”

The findings were based on a survey of the 20 banks receiving the most federal help under the TARP, and marks the first in what will be a series of monthly reports analyzing the lending trends among bailed-out banks.

It would be nice to know what the banks are doing with the bailout money, but they don’t want to tell anyone.

How disappointing that Barack Obama’s Treasury Secretary Timothy Geithner wants to continue the misguided effort begun by George Bush’s Treasury Secretary, Henry Paulson.

Here are some more links on why Geithner’s plan “fails on almost every level.” Excerpt:

Robert Kuttner offers a strong analysis of Geithner’s strategy to salvage the banking industry in The American Prospect, noting that Geithner is explicitly avoiding the simplest and cheapest solution in favor of propping up the current Wall Street regime. The current plan is designed to support a financial architecture that has proven completely ineffective in maintaining the nation’s basic economic functions.

Someone who works for a non-profit organization told me last week that he has filled out a detailed six-page application for a $1,000 federal grant, while Geithner wants to get $350 billion on the basis of a vague two-page proposal.

Josh Marshall notes that “a lot of key political appointments at the Treasury haven’t been made yet, let alone been confirmed.” He takes a stab at explaining why:

one of the big issues is that it’s actually hard to find people with the requisite knowledge of banks and the capital markets who aren’t also compromised — either in policy or business terms — by the housing bubble and the rest of the financial collapse. And that raises again as a question: why have none of the people who were financial orthodoxy dissidents and saw what was coming been brought in to the administration. I know I’m hardly the first one to bring this up. And we know that the big appointees — Summers and Geithner — were part of the mix. But there aren’t even any of them further down into the appointment structure. They’re all still on the outside.

Disturbing.

When Barack Obama nominated Timothy Geithner for Treasury Secretary and appointed Larry Summers to be the chief presidential economics adviser, I became very worried. Summers had a hand in some of Bill Clinton’s deregulation policies that have contributed to our current economic problems, and Geithner was a key architect of the Wall Street bailout last fall.

Here and at other blogs, some commenters urged me to “give Obama a chance–he hasn’t even been inaugurated yet.”

Geithner confirmed my worst fears today when he rolled out the new-and-improved bailout plan (using the second $350 billion tranche from the Troubled Assets Relief Program). Economist James Galbraith came up with the name Bad Assets Relief Fund (BARF) to describe Geithner’s plan.

Other bloggers have already explained why Geithner’s proposal is an unimaginably pricey gift to Wall Street bankers at the expense of the public interest. This diary by MyDD user bobswern hits all the main points, drawing on a front-page story in the New York Times and other sources.

Writing about how Geithner prevailed over presidential advisers like David Axelrod, who wanted to attach more strings to the taxpayer money Wall Street bankers would receive, David Sirota observed,

Interestingly, the divide inside the administration seems to hearken back to a divide discussed very early on in the formation of the administration – the one whereby progressives were put in strictly political positions, and zombie conservatives were put in the policymaking positions. In this case, more progressive politicos like Axelrod was overruled by corporate cronies like Geithner.

The good news is that at least there seems to be something of a debate inside the administration, however tepid. The bad news is what I and others predicted: namely, that progressives seem to have been ghettoized into the political/salesmanship jobs, the conservative zombies shaping policy aren’t interested in having any debate with them. Worse, we’re now learning that those zombies are as rigidly ideological as their initial policies seemed to suggest.

I stand by my prediction that Geithner will turn out to be one of Barack Obama’s worst appointments. I can’t fathom why Obama wants to “own” the very worst aspects of the Bush administration’s failed Wall Street bailout, while also depriving the government of cash needed for other domestic priorities.

The stock market fell sharply today, perhaps because investors have no confidence in Geithner’s scheme and perhaps because the compromise stimulus bill that passed the U.S. Senate came straight out of bizarro world (do click that link, you’ll enjoy it).

I hope Obama will recognize his mistake and let Geithner and Summers go within a year or so, but they’re already poised to do plenty of damage to his administration.

Speaking of bad appointments, isn’t it amazing that Obama didn’t even make Senator Judd Gregg of New Hampshire promise to vote for the stimulus bill in exchange for being named Commerce Secretary? Why would you put someone in a cabinet position with influence over economic policy if that person doesn’t even support the president’s stimulus plan?

Apparently Obama’s also considering making a lobbyist for the Chamber of Commerce the main presidential adviser on judicial appointments. I’ve long anticipated that judges appointed by Obama would be corporate-friendly, pro-choice moderates in the Stephen Breyer mode, but I never imagined that a Chamber of Commerce lobbyist would be in a position to recommend only judges who would favor business interests.

If Tennessee Governor Phil Bredesen becomes Secretary of Health and Human Services, the Obama-Biden magnet is coming off my car.

A. Only when that member of Congress criticizes government policies that benefit the super-wealthy at the expense of most taxpayers.

See also Missouri blogger Clark on the same subject.

Speaking of hypocrisy, note the conspicuous absence of Republican outrage over $18 billion in taxpayer dollars from the Wall Street bailout being used to pay bonuses to corporate executives.

That figure is larger than the total value of all earmarks Congress approved in 2008.

As Michael Bersin observed, it’s also more than the price tag of the automakers’ bailout that so many Republicans lamented.

The House of Representatives passed a symbolic “disapproval” measure on Thursday to oppose the release of the second $350 billion tranche to the Treasury Department’s Troubled Assets Relief Program (TARP), more commonly known as the Wall Street bailout. About a third of House Democrats joined most of the Republicans (including Iowa’s Tom Latham and Steve King) in this measure.

However, all three Iowa Democrats (Bruce Braley, Dave Loebsack and Leonard Boswell) voted against the disapproval resolution, meaning they are on record not opposing the release of another $350 billion to the TARP.

The House action was merely symbolic because last week a similar “disapproval” resolution failed in the U.S. Senate. Chuck Grassley voted with most Republicans trying to block the release of the $350 billion, but Tom Harkin voted with most Democrats to reject the motion of disapproval. (President-elect Barack Obama personally contacted many senators urging them not to block the $350 billion.)

I believe that the events of the last few months have shown that the Wall Street bailout was costly and ineffective. It did not free up credit, as banks remain reluctant to lend. It did not stabilize the stock market either. New York Times columnist and Nobel Prize-winning economist Paul Krugman argues persuasively here that policy-makers are in effect “making huge gifts to bank shareholders at taxpayer expense.”

That said, perhaps the Obama administration will use the second half of the TARP money more competently than the Bush administration used the first $350 billion. I certainly hope so, not only for the sake of the economy and the banking system, but also for the sake of Democrats who now well and truly “own” this bailout.

I opposed the massive Wall Street bailout rushed through Congress this fall, but if the government can provide hundreds of billions of dollars to financial firms with no oversight, it’s only fair that $13.4 billion of the Troubled Asset Relief Program be used to prevent General Motors and Chrysler from collapsing:

“These are not ordinary circumstances,” Bush said at the White House today. “In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action.”

The cost of letting automakers fail would lead to a 1 percent reduction in the growth of the U.S. economy and mean about 1.1 million workers would lose their jobs, including those in the auto supply business and among dealers, the White House said in a fact sheet.

‘Necessary Step’

President-elect Barack Obama endorsed the plan, calling it in a statement a “necessary step” to avoid a major blow to the economy.

“I do want to emphasize to the Big Three automakers and their executives that the American people’s patience is running out,” Obama said later at a news conference. “They’re going to have to make some hard choices.”

The United Auto Workers are “disappointed” that Bush added “unfair conditions singling out workers,” the union’s president, Ronald Gettelfinger, said in a statement.

“We will work with the Obama administration and the new Congress to ensure that these unfair conditions are removed,” Gettelfinger said.

This diary by TomP has a lot more detail and reaction to the bailout deal.

It would be grossly unfair for only the workers to be asked to sacrifice to make these companies profitable. Some Republicans, notably Senator Bob Corker of Tennessee are explicitly trying to drive wages in union shops down to the level paid to non-union employees of Japanese automakers in the southern states.

But it’s no coincidence that the standard of living in states with more union workers is higher than the standard of living in the deep south.

I don’t know enough about the details to know whether this bailout can save GM and Chrysler, but failing to act was not an option with so many jobs on the line.

By the way, all three U.S. automakers have made a lot of mistakes over the years, but kudos to management of Ford Motors for locking in a large credit line while credit was easy to obtain. In case you were wondering, that’s why Ford is not currently on the brink of collapse, begging for a government bailout. Nevertheless, I’m sure Ford will have to do a lot of restructuring to adapt to this tough economy, just like GM and Chrysler. I can’t imagine 2009 will be much better for new car sales than 2008 was.

Chrysler has already idled all of its plants for a month. Ford is extending the holiday break at most of its plants until January 12, and GM plans massive production cuts next year.

Those actions may be necessary to save the automakers, but they will have disastrous ripple effects in all the communities where the idled factories are located.

Some of these problems could have been avoided if Congress had fixed our broken health-care system years ago. This report is more than two years old:

The competitive disadvantage of U.S. automakers resulting from the absence of a national strategy on health care financing is becoming increasingly clear. GM faces legacy costs (health care plus pensions for retired workers) of $1,500 per car. Together, the Big Three automakers support roughly 800,000 retirees, compared to less than 1,000 for foreign-owned competitors in the United States.

Clearly the failure to address America’s health care finance problems has become a major competitive disadvantage for our economy as a whole and has placed U.S. workers in a diminished bargaining position for wages and job security in relation to the rest of the industrialized world. Targeting retiree health costs offers an opportunity to provide strong incentives for industry action on fuel savings investment and reduces the competitive disadvantage.

Share any relevant thoughts in the comments.

UPDATE: Why I am not surprised to learn that banks like Goldman Sachs and Morgan Stanley are giving out large bonuses to some executives after receiving billions in bailout money from the federal government?

Note also that George Bush attached all kinds of conditions to the loans for automakers, while major financial institutions just got free money with no oversight.