McCain was poorly positioned to counter Isaac’s arguments because McCain had proposed the same accounting gimmicks Isaac was proposing. The defeat of TARP I embarrassed McCain and Senator Obama’s lead over Senator McCain in the polls increased substantially.
Right. McCain was and still is today all for accounting fraud. In the summer of 2008 I had several “conversations” (more like talking to a brick wall) with his campaign manager Kevin Daucher, some of them in writing and thus documented. I pointed out at the time that McCain had to get in front of this or he was going to lose. I went so far as to attend (as a private, concerned citizen, not as a lobbyist or corporate “hack”) one of his campaign events in Washington DC, at which time Tom Ridge told me while smiling for my picture with him that he, and thus I presume the McCain campaign, was fully aware of the scams – in somewhat-“sideways” language.
Senator Obama, as a candidate, and his administration after the election did not take a public position on covering up the losses. The Chamber of Commerce and bank lobbyists made the cover up of bank losses their top regulatory goal. Their strategy was to get Congress to extort the Financial Accounting Standards Board (FASB) to force a change in the accounting rules so that banks did not have to recognize loan losses. House Financial Services Capital Markets Subcommittee Chairman Paul Kanjorski (D., Pa.) held a hearing in March 2008. The hearing was a bipartisan assault on FASB. Kanjorski demanded the prompt adoption of the cover up. Otherwise, he promised the prompt passage of legislation to remove the FASB’s power to set accounting rules.
Exactly. Gee, we’ve documented that here too. Kanjorski is a traitor to his oath to uphold the Constitution, which incidentally demands equality before the law. This duty is something that CONgress conveniently forgets whenever it thinks it can find a “free lunch”, especially when the consequences of not doing so are that it’s 20-year history of suborning fraud would otherwise come crashing down upon their heads.
Instead of holding oversight hearings that exposed the Bush and Obama administrations’ evasion of the PCA and demanded compliance, prominent members of Congress encouraged it. House Financial Services Chairman Barney Frank (D., Ma.) said:
“This is important for all regulators. We need to give you some discretion in how you react to these things. I am asking everyone — the Office of the Comptroller of the Currency and others — if anything in the existing legislation deprives you of discretion in how you react … I insist that you tell us.”
Fraud is fraud. PCA is black-letter law. Evading it by lying is still fraudulent activity. Whether you make it “legal” ex-post-facto (as was done in 2009 by Kanjorski’s threats) or not is immaterial. A thing is either wrong or it is not. In this case it’s not only wrong, it’s crippling our economy and financial system.
The premise of this scam was that if we just “overlooked” the problem the banks would “earn their way out.” This was bogus from the start, because the underlying problem isn’t just the BS accounting, it’s the fact that the BS accounting allowed leverage (debt) to be cranked to unsustainable levels. You can’t fix this without taking that leverage out, and yet doing so requires recognition that the alleged “assets” aren’t worth what they are claimed at.
We see the depths of this every Friday when banks are closed and magically when the FDIC swoops in we have an institution that allegedly had more assets than liabilities is deemed insolvent and millions of dollars of losses are absorbed by the FDIC. How is this possible? There is only one way: The “assets” are being reported at FICTITIOUS values – we always know what the liabilities (in the case of a bank, these are the deposits) are to the penny!
For a banker, what’s not to love about the right not to recognize even massive losses on assets? He gets to keep his job, reputation, and obtain bonuses for blowing up the bank. For a senior regulator whose failures allowed the bankers to cause the “epidemic” of mortgage fraud (FBI 2004), the mother of all bubbles, and the Great Recession a cover up is ideal. Bank failures are supposed to lead to investigations by the Inspector General and can lead to embarrassing congressional oversight hearings.
Even worse than congressional hearings are 20-year dates with a guy named “Bubba.” Mr. Wall Street no like that – most of them aren’t gay, for openers, not to mention that the caviar, blow, limousines and expensive hookers they’re accustomed to aren’t available in prison.
There’s only one small problem with all the lies about asset valuations: The fundamental truth about those values doesn’t change no matter how much you lie about it. Therefore, those who are lying have two choices: either go under anyway, or start stealing literally everything in sight down to the carpet on the floor, fencing it to keep ahead of ever-increasing cash-flow demands that can’t be met by these impaired assets.
This is the black-hole vortex into which our economy is now spiraling. It is, in fact, the precise same mistake that was made by FDR. Instead of forcing those who did the evil things to admit their insolvency and be resolved, wiping out the imprudent (including those who invested in them) we are instead caught in the vortex and are unable to truly recover in our economy and markets.
Last time we “got out of it” by destroying the production facilities of essentially the entire developed world (except us, of course.) This time such a “fix” would entail irradiating that entire developed world, and thus one would hope that nobody is that dumb. Of course with the record we’ve seen thus far of “intelligence” coming out of DC…..
We’re headed for at best a Japan-style scenario and at worst something akin to the 1930s – if we’re lucky. We have dramatically increased the pain level that has to be absorbed by blowing $4.5 trillion in the last three years for one purpose above all others – covering up the fraud and scams through government spending.
It won’t work, as is now being documented as sector-by-sector fails as soon as the government tit stops dispensing “free” (really borrowed from China) milk. Housing is just the most-recent example; as soon as the “tax credit” expired home sales cratered – right into the summer selling season, prompting panicked Administration Officials to start muttering about “re-enacting” the homebuyer handout.
While Washington continues to play this game it might want to gaze toward the East, where there are rumors that the Chinese have taken a huge loss on their foreign bond holdings, and their Central Banker is rumored to have defected (to the US!) – a rumor that, thus far, I give little credibility to.
Of course should he suddenly be found to have suffered a “heart attack”…….