I passed up the obvious title: “Heckuva Job Larry!” That was the moment of President Obama’s appearance on The Daily Show with Jon Stewart that set all Americans cringing. Yes, he really said that Summers “did a heckuva job.” The candidate that was gifted the opportunity to run against the legacy of one of the worst presidents in U.S. history has, as president, used Bush as his role model to continue many disastrous policies. It was strangely fitting that he would channel Bush’s infamous praise (“Heckuva job Brownie”) for the FEMA chief who failed New Orleans so badly in the hurricane.
President Obama’s appointment of Summers as his chief economic advisor made the administration’s overall response to the crisis predictable. (Robert Kuttner gives a detailed explanation of the policies that Rubin’s protégés championed in his new book, A Presidency in Peril.) The response would follow the disastrous Japanese model that has harmed their economy and damaged their integrity. The dominant characteristics can be summarized quickly: (1) the government would act for the benefit of the largest financial firms and their CEOs, even when they directed massive frauds, by (2) engineering a cover up of the banks’ losses and the CEO’s misconduct; (3) the administration would use the fictional reports generated to conduct the cover up to declare victory (due to their brilliance); and (4) the same strategy would impair the recovery. (For more on the cover up, see here and here.)
And worse, the losses are still there. They’re just being hidden under the rug, but just like shoveling rotting fish under the carpet, it doesn’t make it stink less – it just makes it hard to see them – for a while.
There was no silver bullet. The administration made the losses disappear the old-fashioned way — with fictional accounting. I have already explained how the administration allowed the Chamber of Commerce, American Bankers Association, and the Fed to enlist the Congress to extort FASB to pervert the accounting rules so that most of the SDIs’ losses disappeared. The Fed also took over a trillion dollars in toxic, largely fraudulent collateral — and carefully avoided conducting due diligence to discover either the value or the fraud incidence of the collateral. In essence, the Fed took the toxic stuff off the balance sheets.
Extort is the correct word too. And the ugly part of it is that a loan that has a loss embedded in it when made only gets worse over time. That is, the recovery value always deteriorates in the general sense, as each month’s payment is not made. This is why “the first loss is the best loss” when it comes to these issues; there’s no way out of the box other than to admit to what happened and swallow.
Third, integrity is important. I really shouldn’t have to explain this. It depresses me that I have to argue that it is wrong to lie. Our democracy, our economy, our society, and our souls depend on restoring our integrity and the rule of law. Randy Wray and I have proposed a step that would demonstrate the president’s complete repudiation of Summers’ strategy and a return to the rule of law: Place Bank of America in receivership for its tens of billions of dollars in fraudulent loans and its multitude of foreclosure frauds. Don’t talk about doing the right thing — do it — and do it to a major contributor. Don’t do it because it’s a contributor, but because a bank that commits tens of thousands of frauds should immediately be placed in receivership.
But integrity never matters to Washington DC Bill. Nor does it matter to Wall Street.
Only money matters to both, which is obvious from the market reaction since the extortive act against FASB was committed – and that, it is clear, is what “turned the stock market” in 2009.
It wasn’t a “recovering economy” – there has been no meaningful recovery. It certainly wasn’t anything in the employment situation, nor in the common weal.
Rather, it was that theft and fraud were ratified as a “legitimate” business enterprise – so said Washington – and whether Obama like it or not, it was his Administration that did it.
Good stuff over at HuffPo from Bill Black – and well worth a read.
Remember when you go to the polls folks – if you think you’re voting to “stop” The Republicans from “allowing” the fraud to happen again, you’re not.
You’re just voting for which of the two bank robbers you like being assaulted by more – the guy with the red ski mask or the one with the black one.