Double Dippers Under TARP: New Jobs or Political Payoffs?
Updated April 23, 2009
Washington-watchers already know that the Troubled Asset Relief Program (TARP) has pumped 50 billion taxpayer dollars into Citigroup to keep the big New York bank afloat, making Citigroup number two on the TARP parade.
Here's what you may not know: That’s the same Citigroup that cut a $5.2 million deal with Governor Easley for subsidies from North Carolina taxpayers in 2004. The state incentives (plus an additional $1.2 million from Guilford County) were part of Citigroup’s plan to locate a credit card call center in Guilford County. But reeling from its losses, Citigroup, which last laid off 27 North Carolina workers in 2007, has recently announced over fifty thousand job cuts. How many will impact North Carolina workers remains unknown.
In an ironic note, while Citigroup was getting millions to expand in Greensboro in 2004, they axed 700 jobs in Charlotte just a year later, jumping over to South Carolina.
It’s not the only time that TARP funds have been awarded who’ve already hit up North Carolina taxpayers for hand-outs.
Madoff-Linked TARP Baby
GMAC, the finance arm of General Motors, is majority owned by private equity fund Cerberus Capital, whose leaders include former Treasury Secretary John Snow and former Vice President Dan Quayle. The company slurped up $5 billion from the TARP, but Governor Perdue recently forked over an additional $4.5 million to GMAC when the company promised to bring two hundred jobs to Charlotte.
The deal slips North Carolina taxpayers even more firmly into bed with one of Ponzi Schemer Bernie Madoff’s pals, Ezra Merkin. Merkin, who happens to be GMAC’s Chairman, also runs investment fund Ascot Partners. NY Attorney General Andrew Cuomo has joined the ranks of those suing Merkin for pumping 1.8 billion bucks into Madoff’s fund without doing due diligence. According to another civil lawsuit, Merkin’s clients allegedly weren’t told that Madoff had their money.
If Governor Perdue is going to choose this sort of operation for your corporate welfare dollars, we hope she’s willing to keep a sharp eye on GMAC – and that tough clawback provisions were inserted into that contract.
Stimulus Grant Aids Lobbyists
In another recent hand-out, Governor Perdue also announced $2.5 million in stimulus money for Durham’s nonprofit Self Help Credit Union for neighborhood stabilization. Their parent, the Center for Community Self Help, spent $1.5 million on lobbying since 2004 according to their IRS filings.
So what are they lobbying for? Why, the easy credit philosophy that was at the heart of the banking crisis. Martin Eakes, president of Self Help Credit Union, played a major role in creating the crash when in 2001, he encouraged Fannie Mae to adopt a goal of making the home ownership rate for minorities equal to that of white homeowners. Arguing that the lending industry’s over-reliance on credit scores prevents many poor minority consumers from attaining either prime or subprime loans, he said, “You can’t understand home ownership and race in America until you understand wealth.”
The Self Help conglomerate supports payday lending bans and giving bankruptcy judges the power to force lenders to accept lower mortgage rates by rewriting the terms of the contracts. But as Forbes wonders, “Who, then, really benefits from payday loan bans?” Federal Reserve economist Donald Morgan says that credit unions do, noting that “interest rates on overdrafts charged by credit unions and banks can exceed 2,000-percent, dwarfing the high interest rates on payday loans.” Morgan adds that credit unions have been particularly stung as payday lenders have cut into their overdraft-and-bounced-check-fee-revenue, which can amount to 60-percent of net operating income at a typical credit union, but is capped at 18-percent for banks.
In payday-loan-free North Carolina, the taxpayer-subsidized Self-Help Credit Union has thrived. According to filings with the IRS, its assets have jumped from $114 million in 2003 to $292 million last September, with a return on average assets of 1.4-percent, as opposed to the industry average of 1.1-percent. In what most certainly must be a coincidence, shortly after Eakes backed Obama’s $75 billion mortgage bailout requiring homeowners who pay their mortgages to also chip in to pay the mortgages of people who don’t, the Self Help Credit Union got their chunk of the stimulus cash.
Incidentally, Lew Myers, a former NC Department of Commerce executive who also chairs the Self-Help Center’s Board of Directors, is no stranger to getting taxpayers’ money. Along with his father-in-law, Sen. Floyd McKissick, he obtained $29 million for Soul City, a poster child for wasteful spending in Warren County back in the 70's.
The Center employs four lobbyists in North Carolina, including Eakes.
What’s Next?
Over the past decade or so, North Carolina taxpayers have ponied up millions – and promised billions more in future subsidies for corporations and nonprofit organizations in the state - so it shouldn’t surprise anyone that these same corporations are attempting to get their hands into the taxpayers’ pocketbooks again through the federal stimulus package.
Certainly everyone knows that new jobs must be created to revive the state’s struggling economy. The debate is over how those jobs will happen. Experience seems to indicate that companies who take corporate welfare do not establish new long-term, stable employment.
But we learned that before they started to double-dip.
