[Corp. Watch] Big Finance's hidden collapse is on par with Iraq War cover-up

[Corporation Watch]

Legacy of Lies: The Great Economic Cover-Up

  By James Ridgeway

(Mother Jones, April 9) -- Remember back in February, when Bill  
Clinton urged Obama to be more "upbeat" about the economy? Clinton  
actually implied that the president could be making the financial  
crisis worse by being honest about how bad it was, thereby rattling  
public confidence -- and with it, the market.

	You'd have thought the primary campaign would be enough to convince  
Obama that nothing good could come from Clinton homme. But the  
president has clearly taken a page from Clinton's playbook.

	He now largely avoids statements that might frighten the horses in  
favor of cheerful declarations that we are at "a turning point in our  
pursuit of global economic recovery," while at the same time promoting  
the latest bank bailout plan, which he says will get us there.

	There are plenty of reasons why its wrong to try to buoy up a sinking  
economy on a raft of positive rhetoric -- among them, the fact that it  
obscures what actually happened in the past, and clouds our judgment  
about what should be done to "fix" it.

	Newsweek's Daniel Gross wrote an article recently about the Orwellian  
linguistic feat by which the government seeks to re-brand the piles of  
worthless crap created by our financial system:


> Remember those toxic assets? The poorly performing mortgages and  

> collateralized debt obligations festering on the books of banks that  

> made truly execrable lending decisions?

>

> In the latest federal bank-rescue plan, they've been transformed  

> into "legacy loans" and "legacy securities" -- safe for professional  

> investors to purchase, provided, of course, they get lots of cheap  

> government credit.

>

> It's as if some thoughtful person had amassed, through decades of  

> careful husbandry, a valuable collection that's now being left as a  

> blessing for posterity.


	According to the New York Times, the administration is now taking  
things a step further by promoting a plan that would let us ordinary  
folks buy what are being called "bail-out bonds" -- shares in mutual  
fund-type bundles of lousy mortgage securities.

	These are supposed to eventually become profitable, thereby allowing  
us to share in the wealth. But of course, they could also go the other  
way.

	As the Times notes: "If, as some analysts suspect, the banks' assets  
are worth even less than believed, the funds' investors could suffer  
significant losses."

	In other words, having been screwed once by Wall Street, we're now  
being asked to bend over for a twofer—which some people just might do,  
if they believe the rhetoric that happy days are about to be here again.

	Another point of view came from William K. Black, who was the chief  
federal regulator during the S&L crisis, in a long interview with Bill  
Moyers on Friday.

	Black calls Bernie Madoff a "piker" in comparison with the Wall  
Street giants that committed mass fraud, and are now nonetheless  
raking in government funds.

	When Moyers asks Black "why the bankers who created this mess are  
still calling the shots" instead of being fired like the auto  
executives, Black mentions the close relationships between Washington  
and Wall Street, which applies to Tim Geithner and Larry Summers as  
much as to Henry Paulson.

	Then he talks about what he doesn't hesitate to call a "cover-up":


> BLACK: But the other element of your question is, we don't want to  

> change the bankers, because if we do, if we put honest people in,  

> who didn't cause the problem, their first job would be to find the  

> scope of the problem. And that would destroy the cover up. ...

>

> MOYERS: Who's covering up?

>

> BLACK: Geithner is covering up, just like Paulson did before him.  

> Geithner is publicly saying that it's going to take $2 trillion ...  

> taxpayer dollars to deal with this problem. But they're allowing all  

> 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 masses losses, and that they're  

> fine.


	Black insists that "the entire strategy is to keep people from  
getting the facts … about how bad the condition of the banks is."

	So instead of closing bad banks, as regulators did after the S&L  
crisis, the government is simultaneously pumping money into them and  
covering up their losses, while avoiding any hard-nosed investigation  
into their past conduct -- all based on the idea that "we have to lie  
to the people to create confidence."


> MOYERS: Are you saying that Timothy Geithner, the secretary of the  

> Treasury, and others in the administration, with the banks, are  

> engaged in a cover up to keep us from knowing what went wrong? ...

>

> BLACK: Absolutely, because they are scared to death ... of a  

> collapse. They're afraid that if they admit the truth, that many of  

> the large banks are insolvent, ... Americans are a bunch of cowards,  

> and we'll run screaming to the exits. And we won't rely on deposit  

> insurance. And, by the way, you can rely on deposit insurance. And  

> it's foolishness. ... Now, it may be worse than that. You can impute  

> more cynical motives. But I think they are sincerely just panicked  

> about, 'We just can't let the big banks fail.' That's wrong. …

>

> MOYERS: So, you're saying that people in power, political ... and  

> financial power, act in concert when their own behinds are in the  

> ringer, right?

>

> BLACK: That's right. And it's particularly a crisis that brings this  

> out, because then the [banking] class 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."


	Promoting this scenario, of course, serves the interests of these  
same bankers, since it insists that the only way to prevent complete  
catastrophe is to keep bailing out the big financial institutions,  
regardless of their credibility and regardless of the cost.

	Black believes that the only antidote for this self-serving myth lies  
in Congress having the wherewithal to launch a real investigation and  
reveal the facts to the American people -- and then base future  
policymaking on these facts, instead of on a legacy of lies.