James Galbraith wrote an article today that truly gets to the heart of this matter.
The original sin of Obama’s presidency was to assign economic policy to a closed circle of bank-friendly economists and Bush carryovers. Larry Summers. Timothy Geithner. Ben Bernanke. These men had no personal commitment to the goal of an early recovery, no stake in the Democratic Party, no interest in the larger success of Barack Obama. Their primary goal, instead, was and remains to protect their own past decisions and their own professional futures.
I won’t argue with his point here, but really, the same could be said about George W. Bush. These were the same people running the economics policy behind him during his presidency. Matter of fact, if we examine the players closely, these guys have been running the show for a very long time. Many of them were around over a decade ago and were integral in designing our current Ponzi scheme. We have documented Hank Paulson’s lobbying for removal of leverage limits and his being at the helm of Goldman Sachs when their little subprime ‘investment vehicles’ began to turn sour.
Up to a point, one can defend the decisions taken in September-October 2008 under the stress of a rapidly collapsing financial system. The Bush administration was, by that time, nearly defunct. Panic was in the air, as was political blackmail — with the threat that the October through January months might be irreparably brutal. Stopgaps were needed, they were concocted, and they held the line.
No, I can’t defend those actions at all. I don’t care how ‘scared’ the administration and Congress were, the fact that they were scared by the very people that created this mess tells me that they should have immediately questioned what they were being told. It’s like catching a burgler stealing your television in the middle of the night and he says, ‘Oh, really, I need to do this for your own good – if I don’t steal this TV, you’re just going to sit around all day watch and get fat; so, I’m saving you – but you should give me all your food, just to be sure.’ Who in their right mind is going to believe that? Well, Congress and the Bush administration apparently did.
But one cannot defend the actions of Team Obama on taking office. Law, policy and politics all pointed in one direction: turn the systemically dangerous banks over to Sheila Bair and the Federal Deposit Insurance Corporation. Insure the depositors, replace the management, fire the lobbyists, audit the books, prosecute the frauds, and restructure and downsize the institutions. The financial system would have been cleaned up. And the big bankers would have been beaten as a political force.
Team Obama did none of these things. Instead they announced “stress tests,” plainly designed so as to obscure the banks’ true condition. They pressured the Federal Accounting Standards Board to permit the banks to ignore the market value of their toxic assets. Management stayed in place. They prosecuted no one. The Fed cut the cost of funds to zero. The President justified all this by repeating, many times, that the goal of policy was “to get credit flowing again.”
The banks threw a party. Reported profits soared, as did bonuses. With free funds, the banks could make money with no risk, by lending back to the Treasury. They could boom the stock market. They could make a mint on proprietary trading. Their losses on mortgages were concealed — until the fact came out that they’d so neglected basic mortgage paperwork, as to be unable to foreclose in many cases, without the help of forged documents and perjured affidavits.
But new loans? The big banks had given up on that. They no longer did real underwriting. And anyway, who could qualify? Businesses mostly had no investment plans. And homeowners were, to an increasing degree, upside-down on their mortgages and therefore unqualified to refinance.
These facts were obvious to everybody, fueling rage at “bailouts.” They also underlie the economy’s failure to create jobs.
And here is where I cannot possibly state this any better. This is the heart of our entire problem. The fact is, until the insolvent TARP banks are dismantled and every person involved in perpetrating this fraud is prosecuted, we have absolutely no hope of any economic recovery. All our taxpayer money, the product of our hard work, will continue to be used to prop up the insolvent banks in order to hide their massive fraud which was perpetrated against us. None of this money gets lent out or otherwise put into the economy. It all goes to bankers’ bonuses and to conceal their festering ‘assets,’ to pay for them to foreclose on people’s homes and even more devastating, for the big banks’ to speculate in commodities (oil, food), pushing up the prices of things we need to survive. Meanwhile, starved for cash, which is all being sucked up by the banks, American businesses are dying, taking with them thousands of jobs.
Geithner, Summers and Bernanke should have known this. One can be fairly sure that they did know it. But Geithner and Bernanke had cast their lots, with continuity and coverup. And Summers, with his own record of deregulation, could hardly have complained.
They did know. It was all intentional. They wanted to cover up the fraud and corruption because once the American people knew how they had been robbing us blind and increasing the prices we paid for everything from homes to cars to food and gas, they might be afraid we’d react like this:
President Obama didn’t see this. Or perhaps, he didn’t want to see it. His presidential campaign was, after all, from the beginning financed from Wall Street. He chose his team, knowing exactly who they were. And this tells us what we need to know, about who he really is.
Who Obama really is, is the same as pretty much everyone in Washington DC – they are the ‘elite’ who like their closed system of bankers > Wall Street > government just the way it is. That’s why it is said that Wall Street never backs a loser. More accurately Wall Street creates the winners. It suits them just fine. Eventually though, they’ll have stolen everything and there will be nothing left to steal. Do we have to wait that long America? Is that when you’ll finally figure it out and be enraged enough to force this looting operation to stop? I think it should be clear by now that waiting for the government to stop a looting operation that they benefit from is not only stupid, it’s never going to happen. It’s up to you.