While our government is not taking care of the workers, it is certainly taking care of the bankers; $3 trillion handed to Wall Street so far, and no proposal to stop shoveling money into the banks anytime soon. Henry Paulson started this, but Tim Geithner is continuing it; actively continuing the illegal plundering of this nation’s wealth.
I want you to take some time for this. This is important. If you don’t have time now, bookmark this and come back to it when you do have time. I’m serious; a nation is at stake, your nation. This is not someone else’s responsibility, this is the responsibility of everyone who is eligible to vote in this country. Read this and then do something.
First, go to Bill Moyers Journal and watch the interview with William K. Black. I will quote some key parts and comment on them, but watch the interview all the way through. Mr. Black is not some blogger or journalist; he was a key Treasury official involved in resolving the Savings and Loan crisis of 1989. He knows what he is talking about.
BILL MOYERS: Who's covering up?
WILLIAM K. BLACK: Geithner is charging, is covering up. Just like Paulson did before him. Geithner is publicly saying that it's going to take $2 trillion — a trillion is a thousand billion — $2 trillion taxpayer dollars to deal with this problem. But they're allowing all the banks to report that they're not only solvent, but fully capitalized. Both statements can't be true. It can't be that they need $2 trillion, because they have masses losses, and that they're fine.
These are all people who have failed. Paulson failed, Geithner failed. They were all promoted because they failed, not because...
He’s being tactful in calling it failure. We were being lied to by the Bush Administration, and we are being told the very same lies by the Obama Administration. Maybe this is being done without Barack Obama’s knowledge and complicity? One has to doubt that, and in any case Geithner is the person he appointed.
BILL MOYERS: But he denies that he was a regulator. Let me show you some of his testimony before Congress. Take a look at this.
TIMOTHY GEITHNER: I've never been a regulator, for better or worse. And I think you're right to say that we have to be very skeptical that regulation can solve all of these problems. We have parts of our system that are overwhelmed by regulation.
Overwhelmed by regulation! It wasn't the absence of regulation that was the problem, it was despite the presence of regulation you've got huge risks that build up.
WILLIAM K. BLACK: Well, he may be right that he never regulated, but his job was to regulate. That was his mission statement.
BILL MOYERS: As?
WILLIAM K. BLACK: As president of the Federal Reserve Bank of New York, which is responsible for regulating most of the largest bank holding companies in America. And he's completely wrong that we had too much regulation in some of these areas. I mean, he gives no details, obviously. But that's just plain wrong.
We haven’t gotten to the bad part yet. Lying to Congress is by no means the worst part of what Timothy Geithner is doing.
BILL MOYERS: To hear you say this is unusual because you supported Barack Obama, during the campaign. But you're seeming disillusioned now.
WILLIAM K. BLACK: Well, certainly in the financial sphere, I am. I think, first, the policies are substantively bad. Second, I think they completely lack integrity. Third, they violate the rule of law. This is being done just like Secretary Paulson did it. In violation of the law. We adopted a law after the Savings and Loan crisis, called the Prompt Corrective Action Law. And it requires them to close these institutions. And they're refusing to obey the law.
The current policies are bad, they lack integrity, and they violate the law.
In all of the discussion about whether or not to “nationalize” the banks, this is the first time that it has come out that doing so is not really optional. There have been laws on the books for many years that require the Treasury Department to do so under certain circumstances. Mr. Black makes it clear that those circumstances are more than obvious and that, in order to avoid complying with the law, the Obama Administration is following the lead of the prior one in colluding with the bankers to cover up those circumstances.
BILL MOYERS: Yeah. Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong?
WILLIAM K. BLACK: Absolutely.
Not just what went wrong, but what is still wrong, and what is being done about it under the past administration and this one.
Now go read this article, written by Mr. Black after that interview. It’s a long article and some of the technical jargon is difficult. When you are wading through the jargon, don’t give up, because understanding that jargon isn’t important. You will get to more stuff that you can understand; you will read a lot of information that is really important.
How many readers recall the 1991-92 subprime crisis? It didn’t happen because we took prompt regulatory action against subprime S&L lenders that were following practices (e.g., qualifying borrowers at the teaser rate, offering “neg am” mortgages, etc) that we knew would lead to widespread failures.
That would've been under the leadership of George Bush. Um, the first one.
The Prompt Corrective Action Law, he explains, was written in order to take action while problems were still small and to minimize the cost of that corrective action to the taxpayer. The lesson learned from the S&L crisis was that concealing the problem, as they did for so long as they could, merely allowed it to grow bigger and more costly. By making the correction a requirement of law, it would assure that it was taken sooner and at a lower cost.
And it worked so long as the law was followed, which it was until the Clinton Administration began to let it slide. It was then obliterated altogether by the second Bush Administration, and Obama has continued to support its violation.
The context then is Geithner saying that it would cost the taxpayers $2 trillion to bail out the insolvent banks, yet virtually all the banks are reporting they are solvent and “well capitalized.” I noted that both statements could not be true. Geithner has every incentive to understate, not overstate, the cost of bailing out the banks and his $2 trillion estimate is materially lower than most analysts, so there is every reason to believe that the banks are not recognizing at least $2 trillion in losses. (…)
If Geithner is right about the scale of the banks’ insolvency many of the large banks have to be hopelessly insolvent, but engaging in accounting fraud to hide that insolvency. (…) They have been deeply insolvent since, at the latest, March 2007 when the secondary market in nonprime assets collapsed. (If we are fortunate it will never be restored because it was inherently dangerous. If it is it will cause future crises.)
The PCA law is characterized by mandates that the regulators ensure that a bank, well before, insolvency, is recapitalized – promptly. Failing that action, the PCA law requires the regulators to act to correct the problem by selling the bank or putting it in receivership. In the context we are discussing – the deep insolvency of many large banks that means that the law mandates receivership.
Even if you do not clearly understand precisely what all of the financial terms mean in that, the meaning of the overall statement is very clear; the Treasury Department has been failing massively in its responsibility, and is still doing so, and that the failure is a clear violation of law.
Further, there is no correction forthcoming. The law requires the replacement of the management of the failed institutions, that is not optional, it is required by the law and it is not happening. The reason it is required is that if it not done then you will see what is happening as we speak; a collusion between regulators and management to conceal the nature and degree of the insolvency of the institution. Management stands to gain by preserving its jobs and wealth, and regulators by concealing the degree of their own failure to regulate and/or to avoid the difficult and burdensome task involved in placing the failed institution into receivership.
Either a bank is solvent, in which case it does not need bailout money, or it is insolvent, in which case the Prompt Corrective Action law mandates that it be "nationalized" immediately. One or the other. But here we have banks stating that they are solvent and receiving massive amounts of bailout money. Taxpayer money.
We have already incurred two years of delay in resolving this financial crisis, and the cost is truly incalculable; trillions in Treasury funds shoveled into so called “recovery plans,” more trillions in lost assets – savings and retirement plans - for our citizens. We must apply the brakes, and compel government to do what will ultimately become necessary. The cost is rising every day that we delay.
Secretary Geithner is not simply writing the PCA law effectively out of existence; he is creating an unprecedented (and unauthorized) rival system in place that will maximize fraudulent bank CEOs’ perverse incentives.
President Obama supposedly told the bankers that he was the “only thing between you and the pitchforks.” It’s time to take him away as their safety net. It’s time to tell him to stop protecting them, and start protecting us.
He said he would listen to us. Let’s see if he will.
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