3
3
2
There are two reasons. One, the regulators are much closer to the bankers than to the executives at GM. The regulators are, after all, from the banking industry. Naturally they have a lot of sympathy with their former colleagues.
But the more important reason for not firing the banksters is this: the Obama administration doesn't want to change bankers, because if they do, if they'd be putting honest people in, who didn't cause the problem, and their first job would be to map out the scope of the problem. And that would destroy the cover up.
Who's covering up?
Geithner is covering up, just like Paulson before him. Geithner is publicly saying that it's going to take $2 trillion -- a trillion is a thousand billion -- $2 trillion taxpayer dollars to handle this problem. But they're allowing the banks to report that they're not only solvent, but fully capitalized. Both statements can't be true. It can't be that they need $2 trillion because they have massive losses, and that they're just fine, thank you.
These are all people who have failed. Paulson failed, Geithner failed. They were all promoted because they failed. Example: Geithner was one of our nation's top regulators, during the entire subprime scandal. He took absolutely no effective action. He gave no warning. He did nothing in response to the FBI warning that there was an epidemic of fraud. All this pig in the poke stuff happened under him, yet now he even denies that he was a regulator. Read his testimony before Congress:
TIMOTHY GEITHNER: "I've never been a regulator, for better or worse. And I think you're right to say that we have to be very skeptical that regulation can solve all of these problems. We have parts of our system that are overwhelmed by regulation. It wasn't the absence of regulation that was the problem, it was despite the presence of regulation you've got huge risks that build up."
Well, he may be right that he never regulated, but his job was to regulate! That was his mission statement. He was president of the Federal Reserve Bank of New York, which is responsible for regulating most of the largest bank holding companies in America. And he's completely wrong that we had too much regulation in some of these areas.
How could this be happening, and why is it happening?
Until you get the facts, it's hard to understand. And, of course, the entire government strategy is to keep people from getting the facts -- especially the facts about how bad the condition of the banks is. So, as long as we keep the old CEOs who caused the problems, are they going to go around vigorously mapping out the problems? Finding the frauds? Taking away people's bonuses? Not a chance. Hence, keeping the old CEOs was a strategic part of the cover-up. And the bonuses are in integral part of keeping everyone "on board" vis-a-vis the cover-up.
"Therefore, I am disillusioned with Barack Obama," Black says. "I think, first, his policies in this regard are substantively bad. Second, I think they completely lack integrity. Third, they even violate the rule of law. This cover-up is being managed the same way that Secretary Paulson managed it -- in violation of the law. We adopted a law after the Savings and Loan crisis, called the Prompt Corrective Action Law. And it requires them to close these institutions. But the Obama administration is refusing to obey that law."
Black continues, "Even though the Obama administration pretended otherwise, they could have closed these banks without nationalizing them. And how do you accomplish that? Well, you do a receivership. Ronald Reagan did receiverships. It's not nationalization and nobody called it nationalization. Paulson could have done this, and Geithner too. In fact they were mandated to do this, by law. Instead they ignored the problem. And nobody called them on it."
Where's Congress? Where's the press, you might ask. This was grounds for another "Pecora" investigation, just like in the 1930s. http://www.huffingtonpost.com/robert-kuttner/pecora-whirling_b_222072.html. In the Great Depression, we said, "Hey, we have to learn the facts. We have to ask, what caused this disaster, so that we can take steps, like pass the Glass-Steagall law, that will prevent future disasters." So where's our investigation today? Answer: It doesn't exist. Why? Because no one wants the entire truth to be widely known. What else can you call this besides a cover-up?
What would happen if, after an airliner crashes, we said, "Oh, we don't want to look in the past. We want, like Obama, to be "forward looking." We don't want to pass blame.
That's not the way it works with airliner crashes, and for good reason. What happens is that we have a nonpartisan, skilled inquiry. We spend lots of money on it, get really bright people. And we find out, to the best of our ability, what caused every single major plane crash in America. And because of that, aviation has an extraordinarily good safety record.
Well, we ought to follow the same policies in the financial sphere. We have to find out what caused the disasters, or we will keep repeating them. And here, we've got a double tragedy. It isn't just that we are failing to learn from the mistakes of the past. We're failing to learn from the successes of the past.
In the Savings and Loan debacle, we developed excellent ways for dealing with the frauds, and for dealing with the failed institutions. And for 15 years after the Savings and Loan crisis, it didn't matter which party was in power. The U.S. Treasury Secretary would fly over to Tokyo and tell the Japanese, "You ought to do things the way we did in the Savings and Loan crisis, because it worked really well. Instead you're covering up the bank losses, because you say you need confidence in "the system.' And so it is that you feel you have to lie to the people to maintain that confidence. But in the long term, that's not going to work. You will cause your recession to continue and continue." And so it was that the Japanese came to call it "the lost decade." That was the result of their unwillingness to face the truth. So, now we get into the same kind of trouble, and what do we do? We adopt the Japanese approach of lying about the toxic assets and a whole lot more. And you know what? It's working just as well for us as it did in Japan.
