Must See TV: Economist Explains The Criminality Of The Collapse

THE COLLUSION BETWEEN THE BANKS AND TREASURY IS SYSTEMIC
If you weren't watching PBS this past week, then you wouldn't know a leading economist leveled some of the most provocative and insightful views yet about the coziness of the bankers with our government and how it continues even in the face of angry Americans losing jobs and money from coast-to-coast.

William K. Black, a professor of economics at the University of Missouri, was also a thorn in the side of the Keating Five in the early 90s. Black told Bill Moyers the credit rating services colluded with banks to unleash high yield, but potential toxic loans to flourish with relatively little government oversight by the Bush Administration. The evidence that rating services like the once-venerable Moody's slapped dubious AAA ratings on so-called pooled "liars loans" where the borrowers information was never verified has been well-known. Black said it was in both the borrowers and mortgage broker interest to inflate their earnings and credit history.

[CLICK HERE TO VIEW WILLIAM BLACK'S INTERVIEW ON BILL MOYERS]

Black's allegations point directly to the problem many people had with Treasury Secretary Timothy Geithner's appointment last December. He is simply doing the bank's bidding within the Obama Administration. The Goldman Sachs cabal of Henry Paulson, Robert Rubin and Lawrence Summers were involved with the company with as much a stake in the proliferation of subprime mortgages than any other institution, yet Federal bailout money was funneled back to Goldman Sachs and Geithner's plan to purchase toxic loans at a premium was cheered by Wall Street. I wonder why?

At one point during the interview Moyers asked if the Treasury was engaging in a cover-up to which Black said, "Absolutely."

They are scared to death. All right? They're scared to death of a collapse. They're afraid that if they admit the truth, that many of the large banks are insolvent. They think Americans are a bunch of cowards, and that we'll run screaming to the exits. And we won't rely on deposit insurance. And, by the way, you can rely on deposit insurance. And it's foolishness. All right? Now, it may be worse than that. You can impute more cynical motives. But I think they are sincerely just panicked about, 'We just can't let the big banks fail.' That's wrong.

Black also maintains if the banks are, indeed, not insolvent why do they need up to $2 trillion in bailout money?

To a banker the inclination to stem the amount of panic in the Market is clear. You don't make or maintain your wealth with a jittery Dow. To those who believe in transparency and justice for the bank's fraudulent behavior, the cover-up is beginning to be worse than the original crime since unemployment continues to rise at a clip of 650,000 jobs a month and the $700 billion allotted to jar open the credit markets have been essentially wasted.

In another interview this week Black sounded even more ominous about this crisis and the diagnosis made by the Treasury when he said it could paralyze the Obama presidency. "It will be the greatest looting of the American people in our history and it will destroy the Obama presidency if it continues." And we've seen the presidential hand-tying one bad policy can have on an Administration with Bush's war in Iraq.

The populist anger that continues to rise is partly a function of the inability to face the fact the same bankers who created this crisis in the name of sheer greed continue to flourish because they have gamed both sides for their financial benefit. At a time when the civic attitude of millions of Americans was at its highest in decades with the election of Barack Obama, no soon has the corruption of Washington totally squashed it.

Friedman Says The Unmentionable

NYT COLUMNIST SEES A ROCKY FIRST-TERM FOR OBAMA
It seems like people don't want to face the truth. Some people have been calling this era of economic downturn as not a Great Depression in the making, but, instead the "Great Repression".

It has been said here many times the presence of Treasury Secretary Tim Geithner and Larry Summers in tandem with the hovering spirit of Robert Rubin would portend for more of the same faulty economic decisions that got us into this fiscal turmoil. Nobody wants to say the banks are insolvent even as Citigroup flirted with sub-one dollar stock prices yesterday. And nobody would dare say the early-goings of the nascent Obama administration might flail in response to this crisis until Thomas Friedman wrote it yesterday in The New York Times and others quickly sought to skewer him. For instance, Vanity Fair's political blog.

"But do you know what I fear? I fear that his whole first term could be eaten by Citigroup, A.I.G., Bank of America, Merrill Lynch, and the whole housing/subprime credit bubble we inflated these past 20 years," said Friedman before illustrating how big this banking beast really is and how nobody has a clue how to solve it.

I hope my fears are exaggerated. But ask yourself this: Why couldn’t former Treasury Secretary Hank Paulson solve this problem? And why does it seem as though his successor, Tim Geithner, won’t even look us in the eye and spell out his strategy? Is it because they don’t get it? No. It is because they know — like Roy Scheider in the movie “Jaws,” when he first saw the great white shark — that “we’re gonna need a bigger boat,” and they’re too afraid to tell us just how big.

Instead, the administration seems to be relying on the American people to become inured to the price tags zooming by them. $700 billion there. $350 billion there. $14 billion there and $2 billion in aid to some far-flung despotic third-world country. After time, what's a few billion here or there. Most of us cannot grasp what a billion looks like anyway. Republicans like Sen. John McCain, on the other hand, are appalled at a mere $1.7 million earmarked to study the foul smell of pigs.

In the meantime, things are continuing to get worse. Jobless claims again rose to 651,000 spearing any hope that the we have hit the bottom. In reality, we may have reached that point, but the bottom is just becoming wider and will only persist until the administration confronts the banks in earnest.

I heard an interesting fact last week on Real Time with Bill Maher. The Chinese character for crisis is the same for the word opportunity. An interesting notion that Obama's pledge of change is not wholly grasping.

Geithner & Summers: Financial Enablers Return

Admittedly, the economy will be first and foremost on Barack Obama's presidential agenda. The president-elect has liberally sprinkled ex-Clintonites throughout his early cabinet and administration posts, but filling the Treasury with acolytes of former Fed boss Robert Rubin is worrisome.

Amidst, calls to bailout ex-Enron enabler Citibank, the fingerprints of Rubin lie within that companies financial blunders and the economy as a whole.

The Sunday New York Times ran a lengthy article on Citibank's foolish investment practices which enhanced the short term while nearly ruining the country's one-time largest bank.

Citigroup insiders and analysts say that Mr. Prince and Mr. Rubin played pivotal roles in the bank’s current woes, by drafting and blessing a strategy that involved taking greater trading risks to expand its business and reap higher profits.

It was under President Clinton that Rubin, under the Gramm-Leach-Bliley Financial Services Act repealed much of the Depression-era Glass-Steagall Act allowing banks to consolidate seemingly every financial service under one house. Citibank was one of the main beneficiaries of the act allowing it to absorb Travelers Insurance.

With the picks of New York Federal Reserve boss, Tim Geithner as Treasury Secretary and former Clinton treasury chief Lawrence Summers, the point that the same guys at the helm during the nascent stages of the financial debacle have resurfaced under a Democrat in Washington.

It's inevitably that Geithner, while lauded as intelligent and capable, will have to answer questions why Wall Street, located in his jurisdiction, did not prepare for its precipitious fall.

The mentor/pupil scenario that Time magazine puts forth in the Dec. 8 issue is a bit disconcerting also. According to the articles, Geithner (the pupil) was given the secretary's job on the basis that he could "handle" Summers (the mentor). Presumably, Summers would have been reunited with the Treasury office is not for his sexist remarks about women while at the helm at Harvard.

We are to be believed that Summers will not wield power from the National Economic Council and the same people who felt deregulation was a viable option 10 years ago will see the nation's economy differently today?

It was a bit disingenious and politically expedient for Obama to vow to bring change to Washington without a few old hands, yet choosing the very men responsible for the crisis that may swallow his presidency is extremely foolhardy.