BUSINESS
01/10/2013 01:04 pm ET Updated Jan 10, 2013

Matt Taibbi: The Government Lied To Americans About Bank Bailout

The government made some rather flimsy claims during the financial crisis -- among them, that the bank bailout would help struggling homeowners and that the big banks were fundamentally sound.

But, according to Rolling Stone's Matt Taibbi, the claims weren't just flimsy; they were outright lies.

"The lie was the bailout," Taibbi told HuffPost Live on Thursday. "That was really part of the whole rescue effort, was telling the American public that all of these companies were healthy when in fact they weren't."

Days after Lehman Brothers collapsed in 2008, then-Treasury Secretary Hank Paulson said that "the American people can remain confident in the soundness and the resilience of our financial system." But even last year, four big U.S. banks, including Citigroup, failed the Federal Reserve's stress tests.

Looking back today, many experts claim that the recession would have been worse had the country's biggest banks failed. A recent poll, for example, found most top economists agree that the bank bailouts reduced the unemployment rate.

But if you ask Taibbi, he'll say such improvement may prove temporary, especially since Wall Street only stayed intact because of the government's implicit promise to bail out the industry again if necessary. "They just threw a ton of money at Wall Street, papered over the problems, and... waved a wand over it and said everything will be all right," Taibbi said.

Taibbi has been hammering home the argument that the financial system is still fundamentally broken. In a recent Rolling Stone article, Taibbi wrote that the "only reason investors haven't run screaming from an obviously corrupt financial marketplace is because the government has gone to such extraordinary lengths to sell the narrative that the problems of 2008 have been fixed."

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