This isn't going to work. The Economist magazine accuses Geithner of
covering up just how bad the bank fraud is.
BILL MOYERS: In other words, they could have closed these banks without nationalizing them?
WILLIAM K. BLACK: Well, you do a receivership. No one -- Ronald Reagan did receiverships. Nobody called it nationalization.
BILL MOYERS: And that's a law?
WILLIAM K. BLACK: That's the law.
BILL MOYERS: So, Paulson could have done this? Geithner could do this?
WILLIAM K. BLACK: Not could. Was mandated-
BILL MOYERS: By the law.
WILLIAM K. BLACK: By the law.
I first published an article about the PCA law over a month ago entitled: "Why is Geithner Continuing Paulson’s Policy of Violating the Law?" (February 23, 2009).
I was the staff leader for Federal Home Loan Bank Board Chairman Ed Gray’s successful reregulation of the S&L industry. That reregulation provided the tools that allowed the agency to place in receivership many of the worst control frauds. Gray inherited (and for a time supported) a dominant strategy of covering up the scale of the S&L industry’s insolvency. He personally recruited vigorous senior regulators such as Michael Patriarca and Joe Selby to reverse that strategy. The PCA law was adopted largely in response to the enormous cost to the taxpayers of our predecessor’s failed strategy of not closing insolvent S&Ls.
http://www.pbs.org/...
Not nationalizing the zombie banks is a huge mistake, one of several.
The other disaster is the lack of REAL tax breaks for workers/consumers which would spur consumer spending, which obviously is in the toilet. "sorry", an extra $12 to $14 bucks a week in your paycheck is a joke. that is immediately nullified by increases in gasoline taxes, sin taxes, etc.
Jeffrey Sachs:
Two weeks ago, I posted an article showing how the Geithner-Summers banking plan could potentially and unnecessarily transfer hundreds of billions of dollars of wealth from taxpayers to banks. The same basic arithmetic was later described by Joseph Stiglitz in the New York Times (April 1) and by Peyton Young in the Financial Times (April 1). In fact, the situation is even potentially more disastrous than we wrote. Insiders can easily game the system created by Geithner and Summers to cost up to a trillion dollars or more to the taxpayers.
Here's how. Consider a toxic asset held by Citibank with a face value of $1 million, but with zero probability of any payout and therefore with a zero market value. An outside bidder would not pay anything for such an asset. All of the previous articles consider the case of true outside bidders.
Suppose, however, that Citibank itself sets up a Citibank Public-Private Investment Fund (CPPIF) under the Geithner-Summers plan. The CPPIF will bid the full face value of $1 million for the worthless asset, because it can borrow $850K from the FDIC, and get $75K from the Treasury, to make the purchase! Citibank will only have to put in $75K of the total.
Citibank thereby receives $1 million for the worthless asset, while the CPPIF ends up with an utterly worthless asset against $850K in debt to the FDIC. The CPPIF therefore quietly declares bankruptcy, while Citibank walks away with a cool $1 million. Citibank's net profit on the transaction is $925K (remember that the bank invested $75K in the CPPIF) and the taxpayers lose $925K. Since the total of toxic assets in the banking system exceeds $1 trillion, and perhaps reaches $2-3 trillion, the amount of potential rip-off in the Geithner-Summers plan is unconscionably large.
http://www.huffingtonpost.com/...
He (Black) equated the entire US financial system to a giant "ponzi scheme" and charged Treasury Secretary Timothy Geithner, like Secretary Henry Paulson before him, of "covering up" the truth.
http://digg.com/...
PPIF: Largest transfer of wealth from the poor to the wealthy class in world history. The "democrats" are presiding over this travesty.