William K. Black on Geithner: "The Guy Has a Track Record of Failure Everywhere He's Gone"

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."

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Comments

[plebeianswillrevolt]

Great work Cenk........... Thank you!

I was particularly disgusted at the NYT article yesterday stating that Wall Street pay levels have RETURNED to the stratosphere..... WTF????

Taxpayer bail out money. These commissions are direct charges from my savings... IRA., 401k. They are again stealing my (little) money.

Theives!

[platanoman]

I don't know if you can blame Larry Summers and Geitner for the Asian Crisis. They took just as much risk as the United States. They don't have a flexible economy like the US, so they were really hit hard.

[CaptD]

Great interview, 60 Minutes or PBS should have Prof. Black on (with Geithner) to discu$$ our solution to our Financial Crisis....

[JakeMontero]

we are still in Iraq and yes, Geithner's track record s&cks. not a great start for the new pres.

[truthynesslover]

Dont worry..........China will save us.

[BlackSwan13]

Oh yea, but Ariana talked to her buddy in the West Wing and they had a conversation that reminded her of her time in Cambridge. You know, our good friend Lawrence Summers. Dreamy isn't it. I know this is too cynical to be posted, but I can't believe your excellent article is relegated to a hidden spot on this website and Ariana's talk with Summers gets high view. People will see through this type of journalism, and you can hear the rumblings even on this website.

[RedneckDem]

From what I'm reading Arianna is in no way endorsing Geithner or Summers strategy.

[BlackSwan13]

No she is not, but by claiming that it is a wrong cosmology is completely out of touch and outdated understanding of how humans make moral decisions. Michael Gazzaniga has shown that things like philosophy and cosmology have little to with shaping or changing human action. Who you hang around with certainly does though. And when you want to embed yourself in the whitehouse west wing and talk the old old language of Cambridge and have philosophical discussion shows how out of touch many journalists are with reality. Michael Gazzaniga's view of morality, strange as this may seam, is more in line with what people from Harvard and Cambridge etc. etc. could learn from the ordinary people on the streets. What are your views on this or that? really translates into who are you talking to. Reporters like Amy Goodman understand this and so they are not anxious to have fluffy discusssions with Summers. They are out there talking to rel people, the hurt and hungry that understand what Summers and Geithner and President Obama are doing in this country.

[sueinmn]

After the greatest heist of all time by the financial firms, hasn't our government made themselves insolvent? no longer able to meet it's financial obligations? Who will bail us out? A communist vountry? Oh My!

[enoughalready13]

The banking system right now is basically legalized gambling, except that AT LEAST with gambling, there are rules and regulations!!! There are minimums and maximums on bets, there are stiff rules against card counting with black lists for those who continually try to game the tables, there are margin calls with large sums of money in play, there are strict rules and training for dealers, there are cameras and security for constant oversight, and there is little tolerance for bad behavior. And if you lose your shirt in the process as a gambler, you file for bankruptcy - the government doesn't pay your debts!

Banking and bankers, as a whole, is unchecked Vegas gone wild wild west!!! No accountability, no oversight, no minimums and maximums on taking risk, no margin calls for backup assurances, no penalties for gaming the system, no lists of those who continually cheat/rob/steal from others, and complete presumption that if all else fails, go to the government for a bailout! Unreal.

[ProgressiveBum]

This is probably the best insight I've heard since this whole sordid mess started...

[winstonian22]

Greeeeeeeeeeeeeat. That's really reassuring.

[jetgirl]

Wild accusations with no real proof...again.

[ichan]

I tend to agree with the many theories going around that we are basically being taken for a ride by a "power elite", economic terrorists, gangsters...etc...I guess you could call it the proverbial "man"... Paying money to the very people that got us here is essentially like a hostage/terrorist situation...But HOW do you break up a mob like that, without having the whole system fall apart. I guess you could have a strong government intervention which replaces the bad apples with an small army of ethical bankers and executives as Black seems to suggest... but could you do it efficiently enough without the bad apples taking the system down as you set up the intervention. If the markets turn down, it creates the argument you have to save them again. Also any type of really strong gov't intervention would be spun as Socialist/Communist, unconstitutional...etc. etc. Obama seems like a very smart man, and i'm sure after being in Chicago all those years, he knows how gangsters operate. I hope there is a "backend" to his current plan. So we pay the ransom money and get the system rolling again...the gangsters feel like they won and go about their business again, then when they least expect it. We start serving them... that would be a great ending to this crime drama.

[jerrycurls]

You'll notice how he never explains how Geithner made the IMF or the Asian crisis worse, he just sort of did.

"How did he make the Asian crisis worse?" The interviewer asked him; "you know," answers William Black, "by making it worse."

Thanks for clearing that up.

You people have to stop your bellyaching about Geithner and realize that he has a thankless job.

[Horatio2]

Most of the negative comments here seem to be by people who either didn't watch the video carefully or who cannot bear to see any hint of criticism thrown Obama's way. If Obama is headed down a bad path the best thing his supporters can do is warn him! Guess what, Black voted for Obama and he has plenty of criticism for both republican and democratic administrations. Is it so hard to believe that Obama is listening to bad advice regarding the economy? He's a smart guy, but he's a lawyer not an economist. Is it so hard to believe that he is trusting people who on paper appear to be qualified for their jobs, but who in reality just played the politics in their field well (i.e. kissing up to the banking industry)? If all this comes to light later after the economy is totally trashed and the bankers have succeeded in robbing the US, this scandal will be "Baraq's Iraq" (to coin a phrase), and you can kiss the democratic party goodbye for a long time. I urge all Obama supporters to take what William Black is saying seriously.

Why Is Geithner Continuing Paulson's Policy of Violating the Law?
http://www.huffingtonpost.com/william-k-black/why-is-geithner-continuin_b_169234.html

Surreal Fiddling While Rome Burns
http://www.cato-unbound.org/2008/12/10/william-k-black/surreal-fiddling-while-rome-burns/

[goldsteiner]

the republicans already failed miserably by looting our country to the point we are in this depression. Obama should dump and investigate geithner, summers, and anyone linked to goldman sachs, paulson, and robert rubin. they have all committed financial treason. there are many incredibly intelligent people in this country who can step into these jobs without the stench of being part of the masters of the financial universe and would be willing to serve their COUNTRY instead of their small elite and be PROUD to do it for a "measly" $100,000 and government benefits. remember those who PROUDLY served in our military and died for our country for a fraction of that salary! we MUST rid our country of these masters of the financial/political/social universe!

[Horatio2]

I totally agree! There's some hope emerging from the TARP Congressional Oversight Committee today in a pretty good report and video:

http://cop.senate.gov/reports/library/report-040709-cop.cfm

They talk about Black's approach as a politically difficult option that they might have to pursue if it looks like the current approach doesn't gain traction. What I find galling is the lack of outrage over a pretty clear pattern of fraud and law-breaking. This is reason enough to take over and audit these banks.

[harrymellon]

Im an Obama Democrat but he has turned out to be a damn liar just like Geithner. These guys are cutouts designed to distract us from actual change. They say one thing but their actions are the opposite whether its torture,wiretapping, defense spending, war, drugs etc. We were set up as a nation to be looted and enslaved and they needed a strong, charismatic, cult of personality type to lead us lemmings off a cliff as the pied piper does.

[poiuyty]

Every day geitner serves is a boost to the GOP.