We recently had James K. Galbraith on our show and since I think he is one of the top economists in the country and he has been critical of the Obama administration bailout plan, I asked him if he could pick one person he would put in charge instead who it would be? He said William K. Black.
So, we just had Professor Black on the show to get his perspective on the bank bailout plan. Remember, he was one of the top regulators who helped to successfully steer us out of the S&L crisis. He is also the author of "The Best Way to Rob a Bank is to Own One."
His analysis of the Geithner bailout plan was devastating. First, you must understand this point he makes - if the banks are not insolvent, why do they need a $2 trillion bailout?
Of course, they're insolvent. That's why we have to put so much money into them in the first place. To claim otherwise, as the entire Obama Treasury Department has, is at best incredibly disingenuous. Prof. Black then goes on to explain that Geithner's plan is "the worst possible strategy" because it is a "fundamental misdiagnosis of the crisis."
You can watch the whole interview here. Here is a slightly shorter version of the interview:
Here are some of the devastating quotes from the interview:
Cenk Uygur: Would you suggest that some of these top bankers in the country be arrested for fraud?William K. Black: You obviously have to make the ... do the investigation, but yes, there would be plentiful numbers of the top executives that we would find committed these kinds of frauds. They certainly have institutions that follow a pattern that only makes sense if you're engaged in accounting fraud.
...
William K. Black: They [Larry Summers and Tim Geithner] helped make the Asian crisis worse.
Cenk Uygur: Really? How?
William K. Black: They used the IMF type policies that make things worse and then he [Geithner] went to IMF and made things worse. The guy has a track record of failure everywhere he's gone.
...William K. Black: This [Geithner's bank bailout plan] is the worst possible strategy.
...
William K. Black: [Describing Geithner's reasoning] If we just lie to the people enough and if we can get them believe our lies, then they will become confident and then we'll get through the recession at next to no cost ... and the banks will all be fine.
...
Cenk Uygur: Your thought is eventually we're going to recover obviously because that's how things work and we're doing a stimulus bill and things unrelated to this and then when we do [recover], people will say, "You see," I'm worried that they'll say, "you see, they were right." And all it will cost us is several hundred billion dollars if we're lucky, maybe a couple of trillion dollars if we're unlucky. And that money will go to the same people who caused the problem. And life goes merrily along.
William K. Black: No, except that it's trillions, if we're lucky, will go under their plan to the people that caused this crisis. And it will be the greatest looting of the American people in our history and it will destroy the Obama presidency if it continues."
The emphasis for the quotes above were added. You can also see an excellent interview of Prof. Black on Bill Moyers Journal here.
Let's hope Prof. Black is wrong, but it doesn't look like it (he might be a little more pessimistic than some, but his reasoning is sound). This is beginning to feel a little like before the Iraq War when some warned of impending disaster and the administration and mainstream media blew them off. I'm afraid I can hear them saying a couple of years from now, "But no one could have seen it coming."