The Crisis That Could Bring Down Obama

[biopowertoday]

If you have not watched Bill Moyers interview--below. please do so. Highly informative



http://www.commondreams.org/view/2009/04/16-8

Published on Thursday, April 16, 2009

by The Progressive


The Crisis That Could Bring Down Obama

by Ruth Conniff

Goldman Sachs reports better-than-expected profits this quarter. Wells Fargo cleared record profits last week. The President, understandably, points to signs of hope and encourages Americans to be optimistic about the economy. But when do we move from healthy confidence to a confidence game? The banks are reporting profits thanks to massive infusions of taxpayer bailout funds. It's simply silly to be lulled by cheery-sounding reports when the institutions are actually insolvent. At some point we have to take a clear-eyed look at the massive failure of our financial system. Ignoring it won't make it go away.

That's more or less what Elizabeth Warren, the distinguished chair of the Congressional Oversight Panel, says in her panel's six-month report on the bank bailout. Warren, the government's watchdog, concedes that there are differences of opinion on her panel, which probably accounts for her very carefully couched discussion of the crisis. Although she told The Observer that it is "preposterous" that the government hasn't fired the bank managers who are responsible for the derivatives disaster, her panel's report is cautious, with a scholarly explanation of the crisis in her video introduction. Nonetheless, the underlying criticism is obvious.

In a financial crisis like the current one, Warren explains, the government has three choices: 1. Liquidate failed banks. (That's what happened in the S&L crisis. The government took over institutions, fired the managers, wiped out investors, but protected depositors. A lot of savings and loans simply went out of business.) 2. Put them in receivership. (That's what Sweden did in the 1990s: failed managers were fired and replaced, depositors were protected, and the banks were returned to private hands under new management with healthier balance sheets.) or 3. Subsidize the banks. This last option is what led Japan to its "lost decade"--the real value of bank assets are obscured, as the government funnels tax money into insolvent banks, propping them up indefinitely. This last is the approach the United States is now taking.

If you want to hear someone absolutely destroy that approach to the current crisis, check out a round of recent interviews with William Black, the professor of economics and law at the University of Missouri who was deputy director of the Federal Savings and Loan Insurance Corp. during the S&L crisis in the 1980s. Black, who liquidated a few banks in his time and earned the eternal enmity of Charles Keating, minces no words in describing the massive fraud by bankers and the regulators, including Treasury Secretary Tim Geithner, whom he describes as abetting them.

"This whole bank scandal makes Teapot Dome look like some kind of kids' doll set," Black told the investors' journal Barron's in an interview published in the print edition on April 13. (The interview appeared online on April 9, but you need a paid subscription to access the site). He covers the same points in a highly watchable interview on Bill Moyer's Journal...................

[dkf]

1. Elizabeth Warren says Wells Fargo and Goldman Sachs are insolvent?

That is quite an assertion and unsupported by anything I have seen.

She shouldn't generalize so broadly.

[KoKo]

2. Remember Goldman took TARP money plus money from FDIC

and now it says it wants to pay back TARP...but doesn't acknowledge the FDIC loans it still has. The kickbacks from AIG that we gave fit in, also with money Goldman took. There have also been reports that Wells Fargo overstated it's positions.

We won't know all the deatils...but we do know that Goldman certainly has "ins" with those in charge and to suspect favoritism is not unreasonable until we have all the facts. So far the transparency just isn't there. :shrug:

[dixiegrrrrl]

3. According to the article, Black made the statement, not Warren.

"We have lost the ability to be blunt," Black tells Barrons. He is talking about the person he describes to Bill Moyers as a "failed regulator," Geithner. "Now we have a situation where Treasury Secretary Tim Geithner can speak of a $2 trillion hole in the banking system, at the same time all the major banks report they are well capitalized. And you have seen no regulatory action against what amounts to a $2 trillion accounting fraud. The reason we don't see it--aren't told about it--is that if they were honest, prompt corrective action would kick in, and then they would have to deal with the problem banks."

In other words, the banks are insolvent. That's why they must rely on the Troubled Assets Relief Program. But at the same time, they are claiming to be healthy. Both things can't be true.

[girl gone mad]

7. You must not have seen very much.

Several analysts have said the same thing.

[Stellabella]

4. Why exactly would this bring down President Obama?

It would bring down the country. But this isn't his fault - it's Bush, Cheney, and the repukes who are responsible for this mess.

[biopowertoday]

5. Pres Obama is putting his faith -and his political capital in two

folks. geithner and summers. The rest will be history, Obama owns the crisis now.

[Doctor_J]

6. Now if they would use those record profits to stimulate the economy

by making lots of small business loans, etc., it might actually "trickle down"

[yurbud]

8. I was sick to my stomach as soon as Obama picked his economic team

I hoped he was going to neuter them by putting them in those positions, but it looks like the opposite happened.

[MasonJar]

9. I trust Elizabeth Warren and William Black more than Geithner and

Summers. They are not corporate pawns. Obama has made a big mistake turning to these Wall Street gurus. If he does not implement regulations, I am through with him. It is already getting out that Geithner and/or Summers do NOT think they are necessary.

[macebowman]

10. Elizabeth Warren

Warren headed up the NBRC back in the day. That's the National Bankruptcy Review Commission. They kind of set the stage for the bankruptcy reform bill passed during the Bush administration. Black, he headed up the Institute for Fraud Prevention while the greatest Ponzi scam of all time was going on.

Now, what was that about corporate pawns?

[bertman]

11. I find it interesting that Goldman Sachs is ready to pay back TARP, but we can't find out

who the recipients are of the TWO TRILLION that's been loaned out by The FED.

Anyone want to guess who one recipient might have been?