Friday, December 11, 2009

Geithner and Summers: Doing God's Work

It has been perfectly clear from the beginning of the Obama administration that if you have not been part of the problem, you are not qualified to understand the problem.  Geithner and Larry Summers both played significant roles in the creation and the precipitation of the current Financial Crisis and have continued their roles in effecting a "recovery" which benefits the financial sector at the expense 22% of the workforce who do not have jobs, at the expense of families who are losing their homes, and at the expense of the children of this country of whom a minimum of 25% nationwide (in some areas it is 90%) are currently on food stamps.  Meanwhile, the bankers get their salaries and their bonuses: can you imagine the horror of only getting $500,000 (26th to 100th highest paid in TARP banks) per year or being limited to only $7,000,000 salary and only $3,000, 000 in stock options (AIG CEO, who threatened to quit in disgust at the indignity).  The bankers have resumed the high risk trading which caused this crisis: they have avoided regulation with their cries of liquidity, liquidity! and raised the Ultimate Extortionist threat in the Zombie bank and the Systemically Dangerous financial institution with government guarantees: The Moral Hazard gold plated.  Even after TARP banks pay back the TARP money, they still continue to enjoy government guarantees that keep their credit rating higher than if those government guarantees were not in place.

The bankers get to keep the profits and the public gets the losses.  This "jobless recovery" has been all about saving the financial sector and continuing business as usual.  Geithner and Larry Summers were installed by the banks with the assistance of a Citigroup executive who went to college with Obama relegating all those economists you worked the campaign with Obama in secondary roles and Volcker isolated and neutered.

Not only was the AIG bailout illegal as we have discussed in an earlier post, but Geithner as New York Fed president actually had a direct role in designing the AIG bailout.  Matt Taibbi has worked hard to document the Citi connection, although there are those who would say Goldman Sachs benefited the most.  The recent AIG move to spin off two insurance subsidiaries and have their Treasury debt reduced has raised the question of how legal is it for the government to give up collateral from a company in which it has 79.9% ownership for preferred stock in the two subsidiaries and reduction of AIG debt to the government in the amount of $25 million while AIG retains the common stock of the two subsidiaries.  There is obviously no economic benefit to the government.  To these questions, Representative Grayson has sent a letter the Federal Reserve (he should have also sent it to the Treasury) asking how can these actions be justified or reasonable.  It is nothing short of an accounting boondoggle for AIG at the expense of the American people, including those who are jobless, hungry, and becoming homeless.

In yet another article on Geithner as a regulatory failure and a protector of our financial system as it existed prior to the Financial Crisis and the restoration of the status quo, William K. Black, who has actual successful regulatory experience from the savings-and-loan crisis (interestingly, the same parts of the country were effected by that housing crisis as in the current crisis) says and shows how Geithner did not protect the public, is not competent, and may not have been honest in his actions.

For eight reasons why Larry Summers should be sacked as the manipulative director of this rescue of the financial system status quo, an article by Joseph Mazza details the history of Summers in creating this Crisis from the 1990's to the present. The Australian economist Bill Mitchell has also called for the sacking of Obama's economic advisors, particularly Summers,  and for whoever is responsible for writing Obama's economic speeches citing the December 3rd speech on joblessness in which the President implied the United States is running out of money.  He finds it unconscionable that whoever is doing the writing does not understand basic economics.

Mr. Bernanke has also been a diversion from the action "heroes" of Geithner and Summers.  There is a strong move to not reappoint him, when the nation would be a lot healthier and more ethical if Geithner and Summers were the ones tarred and feathered.  Still, Mr. Bernanke has questions the people should have answered and here are ten reasons to fire Bernanke.  As I have said previously, I do not want Bernanke fired until we know who the replacement might be.  It is very unlikely that a regulatory economist is ever going to get the job, because it would not be good for Goldman Sachs and what is good for Goldman Sachs is good for America, because banks, according to the CEO of Goldman Sachs, do God's work.

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