By Ivan G. Goldman
Now that the economy is burdened with banks too big to fail, citizens have been turned into sled dogs pulling these behemoths anywhere they want to go. It didn’t have to be this way. Even if the crazy derivatives they created had to be guaranteed, the banks didn’t have to be.They could have been broken into smaller corporate entities. It’s been done before and is a thoroughly American policy dating back to trust-busting Teddy Roosevelt.
Part of the problem lies in the personnel. When President Obama went looking for a CIA director, he settled on Leon Panetta, a smart, tough bird who knows his way around and also had minimal ties to the intelligence community. But when he needed helpers to figure a way out of our economic quagmire, he followed an opposite strategy, choosing Wall Streeters from within the club. Not surprisingly, their lofty perspectives gave them no clue as to what’s going on down here in the financial sludge where the rest of us reside. This week The New York Times measured the bailout toll to U.S. taxpayers at $2.5 trillion and rising.
Timothy Geithner, Obama’s Treasury Secretary, and Lawrence Summers, who heads his National Economic Council, have spent their entire lives inside the same privileged enclaves that gave birth to our economic ruin. They didn’t come into office questioning the structure that suckled them. Like their predecessors in the Bush Gang, they’ve been passing acres of cash to the same fools and con artists who gambled away the global economy.
Meanwhile, for the next stage of the Troubled Asset Relief Program (TARP), Geithner and Summers have developed a scheme designed to be so complex that we won’t understand what they’re doing while they pass on more tax dollars to the criminally insane. More on that later.
Before the Senate approved Geithner’s nomination, it focused on his personal income tax problems without paying much attention to the rest of his history. His father held an earldom in the Ford Foundation, and he went straight from college to the sinister lobbying outfit operated by Doctor Death himself, Henry Kissinger. Its primary purpose is to gain influence in Washington for a super-secret list of clients that you can bet never included Mother Teresa.
From there, Manchurian Candidate Geithner joined the entourage of Robert Rubin and Summers, who, with the aid of Alan Greenspan and others, set TNT under New Deal banking regulations, eventually wrecking the world economy as they made lots and lots of money for themselves and their friends. Inside the sweet circle, Geithner climbed up to Treasury awhile, then the State Department, the Council on Foreign Relations, and the Federal Reserve. There, as late as 2007, he was working to reduce capital requirements for banks so they could shoot craps for even higher stakes with other people’s money.
When the financial structure he’d helped to debase came apart, Geithner was well-known as a Fed hawk in favor of guaranteeing virtually all the banks’ IOU’s and asking virtually nothing in return. After returning to Treasury, he’s continued the class war against 99.8 percent of Americans, allowing the same old flatulent financiers to regulate themselves. Moody's, Standard & Poor's, and Fitch, the firms that awarded triple-A status to trillions in worthless paper, are still paid by the companies whose financial instruments they’re supposed to rate.
Obama has certain goals he clings to – such as reforming the health-care non-system that forced his mother on her death bed to battle insurance company gnomes contending the cancer killing her was no business of theirs. On other matters Obama often compromises. He sat on his hands, for example, while big banks managed to mutilate a bankruptcy reform bill, prompting outraged Senator Dick Durbin of Illinois to complain that the banks still "own" Capitol Hill. The government owns huge blocks of stock in "troubled" banks that brought on their own troubles, but Geithnerand Summers have made no move to put individuals representing the taxpayer-stockholders on their boards.
Using taxpayer funds to contribute to key congressional election campaigns, banks managed to block legislation that would have allowed bankruptcy judges to jawbone down mortgage principal. The result will be more foreclosures that will actually make banks’ troubled assets more troubled. It doesn’t make any sense. Would you rather let the financially troubled family stay in that house down the block with a reduced mortgage or kick them out and create another vacant house that's a sitting duck for vandals and thieves?
The next phase of Geithner’s TARP plan is to get super-rich speculators to buy rotten assets by guaranteeing their investments against loss. This will set the prices artificially high, earning profits for insiders on both ends of the deal.
Goldman, a former editor for Investor’s Business Daily, suggests that if you still have twenty dollars left to spend, consider buying his new novel The Barfighter (The Permanent Press; 2009).