These two fellas pictured to the left are the most prominent members of my Rogues Gallery of Perps who destroyed the world’s economy and as you may have noticed, they are nowhere near done. Oh by the way, That is Tim Geithner nibbling the ear of Larry Summers. Why am I being so harsh to old Larry and Timmy? Well, because they are the most visible and incompetent rogues currently in vogue. They both are nibbling on the ear of the president and have the potential to fatally derail his presidency. The list of rogues is long and in one of my future blogs I hope to try to compile a list for induction into my Great Depression Hall of Fame or perhaps my Great Depression Hall of Shame. I have been studying the history and causes of this Great Depression for 8 or 9 months trying to tease out the villains and their responsibility or culpability in this mess here in the land of Absurdistan and Larry Summers and his protege Tim Geithner play a prominent role. Larry was an economics professor at Harvard and a former chief economist at the world bank. He took over from Robert Rubin who was a Co Chairman at Goldman Sachs. As you may know Bob went through the swinging door between banking and government to Citigroup Vice Chairman. Larry Summers before assuming the Treasury Post had been working behind the scenes with Republican banking interests led by Senator Phill Gramm which led to sweeping changes in banking deregulation and the passage of laws that have led to this Depression today. Rubin and Summers worked hard with the Goldman Sachs bankers and others to repeal the Glass-Steagall depression era act which had separated banking from investment banking, insurance and brokerage.Now a bank like Goldman Sachs could move everything under one roof and Bill Clinton in a foolish action far worse than Monica, signed it into law. It would turn into a disaster. The next act by Larry Summers in terms of its ultimate impact on this depression is probably far worse. He and his boy in the office Tim Geithner, were instrumental in passing the Commodity Futures Modernization Act of 2000 which abrogated any oversight from Federal Agencies such as the CFTC on financial derivatives such as Credit Default Swaps(CDS), interest rate, currency swaps and other financial “vehicles” which Warren Buffet has called Weapons of mass financial destruction. The exposure of US banks to the downside risk of exposure to CDS was recently released by the Comptroller of the Currency in its quarterly Report:
It is a 33 pg pdf and amazingly readable but take a look at which banks have the greatest exposure and make sure you are sitting down. These CDS are why Paulson and Summers and Co. forced the US taxpayer into owning AIG by the way. Turn to pg 13 and look at the numbers: JP Morgan Chase holds $88 Trillion, BOA $38 Trillion, Citibank $32 Trillion, Goldman Sachs $30 Trillion and Wells Fargo $5 Trillion. Just 5 of the biggest US banks hold $193 TRILLION in derivative exposure! It was these banks who received a large share of the $170 Billion sent to AIG. These CDS are indeed toxic assets dwarfing sub prime CDOs. Is it any wonder that the banks and the Obama economic team want to hide horrific numbers like this from the taxpayers and the rest of the world? If I am reading this report correctly there is no way in hell to remotely pay off these bad unbacked bets.
I’m sure Larry Summers and Tim Geithner had no idea that their actions had the potential to bring down the world economy when they pushed through this disastrous deregulation 10 years ago. They were foolish, stupid and clueless then. So please explain to me why Barak Obama chose these rogues to head his economic brain trust?
As I point out time and again, the Financial interests have hijacked our government and are furiously lobbying the Fed , the Treasury and the Congress to bail them out by tapping the taxpayer with their immoral and unfair privatization of profits and socialization of risk. They must be stopped and our only faint hope is the education of the taxpayer and our representatives. Simon Johnson who was the chief economist of the IMF in 2007-08 has an article in the latest Atlantic which lays out in great detail the magnitude of the current unfolding disaster. A must read:
And finally I have a humble proposal. One of the history’s great bubbles was the South Sea Bubble in the 18th century in which bankers conned the British government into buying bonds which eventually were defaulted upon. A resolution was introduced in Parliament asking that the British bankers should be stuffed into a sack with a hundred angry snakes and tossed into the Thames. I think it is a resolution we should reactivate in our congress.