In the Center for Media and Democracy's break-through article on the American Action Network, we highlighted the resumes of the billionaires, corporate executives, and right-wing political operatives behind the group. Americans have a right to know more about who these guys really are, starting with AAN board member Robert Steel.
A few weeks ago, we broke the story of the grossly misleading American Action Network attack ad accusing Wisconsin Senator Russ Feingold of creating the federal deficit. We pointed out how such claims are preposterous considering that those behind AAN and the anti-Feingold ads helped destroy the economy, and that some of AAN's board members benefited personally from the Wall Street bailout spearheaded by the Bush Administration. The Washington, D.C.-based group, a 501(c) organization that receives anonymous corporate funding, has already spent $750,000 attacking Senator Feingold in television ads. Now, AAN is at it again, airing another misleading attack ad making similar claims.
AAN board member Robert Steel demonstrates this group's level of sleaze. Steel was Vice Chairman of Goldman Sachs for 30 years, where he profited from the kind of gambling that crashed our economy (although he bailed out before the crash). He left Sachs to help Henry Paulson mismanage the then-looming financial crisis at the U.S. Treasury Department, heading next to Wachovia Bank, where his Treasury connections no doubt helped ease its merger with Wells Fargo, which then accepted $25 billion in taxpayer-funded TARP dollars as part of consuming Steel's toxic Wachovia corporation.
The Revolving Door
After 30 years at Goldman Sachs, Steel followed fellow Sachs-alumni Henry Paulson to George W. Bush's Treasury Department, being appointed Under Secretary for Domestic Finance. Just before joining Treasury, Steel also served as co-chair of the U.S. Chamber of Commerce's "Committee on Capital Market Regulations," the powerful corporate-funded lobbying group's anti-regulatory crusade group. Paulson and Steel were old friends, and had a "Batman-and-Robin-like relationship," according to the Washington Post. Steel worked in Treasury from 2006 to 2008, then bailed just as the economy collapsed due to his and Paulson's under-regulation of banks and corporations.
Steel worked on a variety of major projects at Treasury, including the bailout of Bear Stearns. When Wachovia picked Steel as their CEO, many on the inside were amazed. It was rather shameless that, in the midst of a financial crisis, a bank would select as CEO the government's bailout negotiator. But, it just shows the revolving door between government and Wall Street (which leads to the policy failures affecting America's Main Streets).
Steel's Jaw-Dropping Priorities
Soon after Steel took the helm, Wachovia appeared ready to collapse. The bank began freezing customer's assets, including those of schools, and refusing credit to small businesses. However, in the midst of this apparent crisis, Wachovia still found it feasible to extend an $8 million loan to the National Republican Congressional Committee to help Republican candidates in the final weeks of the 2008 elections (despite the fact that the NRCC had not proven to be a reliable creditor in the past).
The story gets worse. By September, Wachovia was so close to failure that the U.S. government's Federal Deposit Insurance Corporation (FDIC) intervened to negotiate a Wachovia buyout. After a week of negotiations during which time the government extended Wachovia a line of credit to keep it alive, Citigroup was prepared to purchase Wachovia at the rock-bottom price of $1 per share, after Wells Fargo had rejected the chance to purchase the firm. Steel had recently purchased one million shares of Wachovia in a ploy to show his commitment to the company, so a sale at such a low purchase price would have really hurt his pocketbook.
The Citibank-Wachovia deal at $1 per share was sealed, as far as Citi was concerned. USA Today ran a full-page ad heralding "a new partnership" between the two banks. Similar ads ran in regional newspapers, and discussions about detailed human resource issues and other logistics had already begun, when the next day, it was announced that Wells Fargo would be buying Wachovia at $7 per share. This resulted in an extra $7 million for Steel, not to mention the chance to sit on the Wells Fargo board.
Treasure from the Treasury
The Wells Fargo flip-flop happened very quickly. What changed in such a short period of time? Two things:
- First, just after the Citibank deal was signed, Steel's buddy Henry Paulson quietly revised the tax code to give enormous benefits to banks that buy other banks. This allowed Wells Fargo to stealthily stick taxpayers with losses under the tax code, rather than through the FDIC. This resulted in a $7 billion dollar taxpayer-funded benefit to Wells Fargo that would eventually go directly to Wachovia's shareholders.
- Second, Congress passed the $700 billion federal bank bailout that would provide $25 billion in direct funds to Wells Fargo The very next day, Wells Fargo announced it would purchase Wachovia at the higher price. In addition, the bailout included a provision that contracts relating to acquisitions in which the FDIC is involved might not be enforceable. In a press release announcing the Wachovia acquisition, Wells Fargo said that "the capital investment from the government" -- the taxpayer bailout -- "will enable us to finance the Wachovia acquisition."
Although it was initially reported that the Wells Fargo purchase would not require government funds, the truth shows this assertion to be mere linguistic wrangling. Although the FDIC's budget was not implicated in the merger, taxpayer funds enabled Wells Fargo to buy Wachovia at an inflated price, greatly benefiting Steel in his personal capacity.
Will Americans Take Action, or Get Duped Again?
Robert Steel and his fellow Banksters are walking free and living large. And now, with characters like Steel leading front groups such as the American Action Network and American Crossroads, they are trying to convince voters to support more candidates who will do their bidding and stall needed financial reforms. Steel and AAN should be ashamed of running misleading ads blaming others for the economic crisis they and their buddies helped create, shockingly accusing reformers like Senator Feingold of putting our nation in hock -- even though Senator Feingold voted not once, but twice, against the Wall Street bailout, not once but twice to end the TARP, and pressed Congress to use the TARP funds to pay down the deficit. We should not stand idly by in the face of this sleight of hand and misdirection. The next time you see an ad ending with "paid for by American Action Network," just visualize Robert Steel laughing all the way to the bank with the Wachovia/Wells Fargo millions he snatched from American taxpayers through conveniently timed loopholes.