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The bald fact is that Timothy Geithner, the Secretary of the Treasury, and others in the administration, along with the banks, are engaged in a cover up to keep us from knowing what really went wrong.
But why is it so important to keep us from knowing what really went wrong?
Why? Because they are scared to death. They're scared to death of a total financial and economic collapse in the US and the world. They're afraid that if they admit the truth that many of the large banks are actually insolvent, Americans will run screaming to the exits in the belief that there isn't enough deposit insurance to cover all their bank deposits and CDs. But that's foolish.
So, what might actually happen, at this point, if they keep from us the true health of the banks, is the same as what happened in Japan: The banks will either stay enormously weak, or the US Treasury will be forced into increasingly absurd giveaways of huge amounts of taxpayer money. Realistically, and frighteningly, those are the only two alternatives.
And, it's why the Bush administration and now the Obama administration has kept secret from us what was being done with AIG. Specifically, AIG was being used secretly to bail out favored banks like UBS and Goldman Sachs, which was Treasury Secretary Paulson's firm, where he had been their CEO. Goldman got the largest amount of money, $12.9 billion from Paulson's US Treasury. And they didn't want us to know that. So it was only Congressional pressure -- and not just Congressional pressure on Geithner, but Congressional pressure on AIG, by telling them, "We will not give you a single penny more unless we know who received the money."
Also to be noted: when he got to be Treasury Secretary, Paulson created a recommendation group to tell Treasury what they ought to do with AIG, and he put Goldman Sachs on that very board -- even though Goldman Sachs had a massive vested stake in what was going to be decided by that board. Now, throughout most of American history, that would have been a scandal of such proportions that he, Paulson, wouldn't again be allowed in civilized society.
So, how did he get away with it? I don't know whether we've lost our capability of outrage. Or whether the cover-up has been so successful that people just don't have the facts to react to it.
How can we get the facts? We need members of Congress to hold the necessary hearings. And we can blast this out. But if you leave the failed CEOs in place, it isn't just that they're terrible business people, though they are. It isn't just that they lack integrity, though they do -- because they were engaged in these frauds. Bottom line: they're never going to disclose the truth about their bogus corporate assets.
And we have to know about the bogus corporate assets in order to know what?
To know everything. To know who committed the frauds. Whose bonuses we should recover. How much the assets are worth. How much they should be sold for. Is the bank insolvent, such that we should resolve it in this way? You need to know the facts to make intelligent decisions. Problem is as already noted: the Obama administration feels compelled to leave in place the people that caused the problem, because they don't want to face the facts. Of course this is not a new political phenomenon. The Reagan Administration's central priority, at all times, during the Savings and Loan crisis, was covering up the losses.
Generally, people in power -- political power and financial power -- act in concert when their own behinds are in the ringer. In this kind of a crisis, the banker says, "You've got to keep the information away from the public or everything will collapse. If they understand how bad it is, they'll run for the exits." And it is true that our situation is dire.
Consider:
a) Washington's massive $125 trillion in debt and unfunded obligations to Social Security and Medicare.
b) Washington's debt is now ballooning at the rate of nearly $1.6 trillion per year -- more than triple last year's record deficit ... and more money than we have circulating in actual currency!
c) There is $9 trillion in NEW deficits the Congressional Budget Office says the government will create over the next ten years, bringing our national debt to more than DOUBLE the value of all goods and services produced in this country.
d) Our leaders are now borrowing and printing every dollar they can just to service this massive debt -- and, as a result, the value of our money has plunged 14% in the last six months alone.
