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Bush Lied About Bailed-Out Banks Health

From an outraged ABC News:

Former U.S. Treasury Secretary Henry Paulson testifies before a House of Representatives Oversight and Government Reform Committee on Capitol Hill in Washington, July 16, 2009.

They Lied: Watchdog Says Treasury and Fed Knew Bailed-Out Banks Were Not ‘Healthy’

Before the $700B Bailout, Senior Government Officials Had Financial Concerns About Nine Bank Instiutions Receiving TARP Funds

By MATTHEW JAFFE

WASHINGTON, Oct. 5, 2009—The Treasury Department and the Federal Reserve lied to the American public last fall when they said that the first nine banks to receive government bailout funds were healthy, a government watchdog states in a new report released today.

Neil Barofsky, the special inspector general for the Troubled Asset Relief Program (SIGTARP), says that despite multiple statements on Oct. 14 of last year that these nine banks were healthy and only receiving government funds for the good of the country’s economy, federal officials knew otherwise.

"Contemporaneous reports and officials’ statements to SIGTARP during this audit indicate that there were concerns about the health of several of the nine institutions at that time and, as detailed in this report, that their overall selection was far more a result of the officials’ belief in their importance to a system that was viewed as being vulnerable to collapse than concerns about their individual health and viability," Barofsky says.

Last October, the government was in the midst of trying to contain the worst financial crisis in decades. On Sept. 7, 2008, mortgage giants Fannie Mae and Freddie Mac were placed under conservatorship. On Sept. 15, the massive investment bank Lehman Brothers filed for bankruptcy. The next day, insurance giant AIG needed an $85 billion government loan to avoid collap

On Oct. 13, after Congress had passed the $700 billion financial bailout program earlier that month, Treasury provided capital injections for nine institutions that together held over $11 trillion in assets: Bank of America, Citigroup, Wells Fargo, JP Morgan Chase, Goldman Sachs, Morgan Stanley, Merrill Lynch, State Street and the Bank of New York Mellon. As of June 2008, these nine banks accounted for around 75 percent of all assets held by U.S. banks.

In announcing the initial $125 billion provided to these banks, former Treasury Secretary Hank Paulson on Oct. 14 said, "These are healthy institutions, and they have taken this step for the good of the U.S. economy. As these healthy institutions increase their capital base, they will be able to increase their funding to U.S. consumers and businesses."

That same day, the Treasury Department, the Federal Reserve and the FDIC also released a joint statement reiterating that "these healthy institutions are taking these steps to strengthen their own positions and to enhance the overall performance of the US economy."

Barofsky finds, however, senior officials at the Treasury and the Fed had serious concerns about the health of some of these banks. Fed chief Ben Bernanke, for one, told the watchdog that the central bank believed each of the nine institutions faced certain risks given the economic environment.

"Senior government officials had affirmative concerns at the time the nine institutions were selected about the health of at least some of those institutions," Barofsky says. "The Federal Reserve had concerns over the financial condition of several of these institutions individually and for all of them collectively absent some governmental action. And former Secretary Paulson noted concerns about the outright failure of one of the institutions."

Merrill Lynch, for example, had suffered several consecutive quarters of severe losses. One month earlier, Merrill had agreed to be acquired by Bank of America. Merrill’s situation was so dire, though, that later that winter Bank of America’s CEO Ken Lewis told the Fed and Treasury that he was considering pulling out of the deal due to Merrill’s substantial fourth-quarter losses. In the face of ensuing government pressure, Lewis and Bank of America eventually completed the deal and received an additional $25 billion in government aid.

Since last October, the bailout has generated widespread outrage. While supporters say it saved the system from collapse, detractors say it helped only Wall Street and not Main Street, since banks have not boosted lending and unemployment and foreclosures have risen.

Barofsky, who last month called it "highly unlikely" that taxpayers would recoup their full investment, says the government’s "inaccurate statements" last fall only made the program more controversial

"In addition to the basic transparency concern that this inconsistency raises, by stating expressly that the ‘healthy’ institutions would be able to increase overall lending, Treasury may have created unrealistic expectations about the institutions’ condition and their ability to increase lending," Barofsky says. "Treasury and the TARP program lost credibility when lending at those institutions did not in fact increase and when subsequent events — the further assistance needed by Citigroup and Bank of America being the most significant examples — demonstrated that at least some of those institutions were not in fact healthy."

"The lesson is straightforward," the watchdog advises. "Accuracy and transparency will enhance the credibility of Government programs like TARP and restore taxpayer confidence in the policy makers who manage them; inaccurate statements, on the other hand, could have unintended long-term consequences that could damage the trust that the American people have in their Government."

In a letter to Barofsky, the Fed’s General Counsel agreed with the report’s findings, noting that "an important lesson illustrated by the events that shocked the financial systems over the past two years is that transparency and effective communication are important to restoring and maintaining public confidence, especially during a financial crisis."

However, Treasury’s Office of Financial Stability did not explicitly agree with the watchdog’s report. While Treasury called the report "a useful contribution," they also told Barofsky, "While people may differ today on how the contemporaneous announcements about the reasons for selecting the initial nine recipients should have been phrased, any review of such announcement must be considered in light of the unprecedented circumstances in which they were made."

Considering the daily litany of lies and misrepresentations that we have gotten from the Obama administration, this seems like a bit of selective outrage.

"Senior government officials had affirmative concerns at the time the nine institutions were selected about the health of at least some of those institutions," Barofsky says. "The Federal Reserve had concerns over the financial condition of several of these institutions individually and for all of them collectively absent some governmental action. And former Secretary Paulson noted concerns about the outright failure of one of the institutions."

Where exactly does Mr. Barofsky say that “the Treasury Department and the Federal Reserve lied to the American public last fall”?

Wasn’t there concern about every bank and financial institution at this time? If the whole system was about to go down, how could any of these banks be truly “healthy”?

And, after all, why would we be bailing out these institutions unless there were some “financial concerns” about them? Why bail out completely healthy banks?

And would it have helped to restore confidence in the system to say that these, most of the top financial institutions in the country were “un-healthy”?

Even Winston Churchill called the battle of Dunkirk a victory.

In a letter to Barofsky, the Fed’s General Counsel agreed with the report’s findings, noting that "an important lesson illustrated by the events that shocked the financial systems over the past two years is that transparency and effective communication are important to restoring and maintaining public confidence, especially during a financial crisis."

Oh, yes. We have had nothing but “transparency and effective communication” from the Obama administration, especially when it comes to talking about the financial crisis.

No, this looks like yet another attempt to blame the Bush administration. This time over the choice of words in the midst of an unprecedented crisis.

Since last October, the bailout has generated widespread outrage. While supporters say it saved the system from collapse, detractors say it helped only Wall Street and not Main Street, since banks have not boosted lending and unemployment and foreclosures have risen.

You see it’s the banks who are to blame for the continuing recession, foreclosures and even higher unemployment. Not the Obama administration.

And, surprise, surprise, it also looks like an attempt to weasel out of yet another Obama promise:

Barofsky, who last month called it "highly unlikely" that taxpayers would recoup their full investment, says the government’s "inaccurate statements" last fall only made the program more controversial.

You see, things were much worse than the Bush administration ever let on. The Obama people had no way of knowing how bad things really were when they promised that the taxpayers would get their money back.

It’s Bush’s fault that all of that taxpayer money is down the drain.

This article was posted by Steve on Monday, October 5th, 2009. Comments are currently closed.

7 Responses to “Bush Lied About Bailed-Out Banks Health”

  1. proreason says:

    The two biggest mistakes Bush made were to not communicate about his policies, and to appoint two liberals to the higherst financial offices in the country, the Fed and the Treasury Secretary.

    Why has nobody questioned whether those lifelong liberals had ulterior motives when they rushed into Dubya’s office Sept 18, 2008 to declare the world would end if they weren’t given unlimited financial power to manipulate finanancial institutions instantly?

    Bernacke appears to be a well-intentioned person, but who really knows? And Paulsen is so obviously and inextricably linked to his criminal brethren at Goldman Sachs that it is impossible to think he was capable of actining as an objective observor.

    One thing we do know for sure is that a Liberal Fascist was elected President of the Unites State 47 days later, even though his campaing was on the ropes when Paulsen and Bernacke made their questionable assertions about the collapse of Western Civilization.

  2. Rusty Shackleford says:

    Could be that the democrats are doing their best to re-write history before it’s really even history.

    Indeed, as was already mentioned elsewhere, the destruction of anything “Bush” does seem to be high on their agenda.

    “Coming up, Alogre says he has incontrovertible proof that global warming is Bush’s fault” nextoprah.

  3. qbit says:

    The inability of the Colonists to get power to issue their own money permanently out of the hands of George III and the international bankers was the Prime reason for the revolutionary war. ~Benjamin Franklin

    The bold efforts the present bank has made to control the Government…. are but premonitions of the fate that awaits the American people should they be deluded into a perpetuation of this institution, or the establishment of another like it. ~ Andrew Jackson

    There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt. ~John Adams

    The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these pronciples, the taxpayers will be saved immense sums of interest. The privilege of creating and issuing money is not only the supreme prerogative of government, but it is the governments’s greatest creative opportunity. ~ Abraham Lincoln

    Permit me to issue and control the money of a nation, and I care not who makes its laws. ~Mayer Anselm Rothschild

    Money is a new form of slavery, and distinguishable from the old simply by the fact that it is impersonal, there is no human relation between master and slave. ~Leo Tolstoy

    Some of the biggest men in the United States, in the field of commerce and manufacture, are afraid of something. They know that there is a power somewhere so organized, so subtle, so watchful, so interlocked, so complete, so pervasive, that they had better not speak above their breath when they speak in condemnation of it ~Woodrow Wilson

    Very soon, every American will be required to register their biological property in a national system designed to keep track of the people and that will operate under the ancient system of pledging. By such methodology, we can compel people to submit to our agenda which will effect our security as a chargeback for our fiat paper currency. Every American will be forced to register or suffer being unable to work and earn a living. They will be our chattel and we will hold the security interest over them, forever. By operation of the law merchant under the scheme of secured transactions. Americans, by unknowingly or unwittingly delivering the bills of lading to us will be renderered bankrupt and insolvent. Forever to remain economic slaves through taxation, secured by their pledges. They will be stripped of their rights and given a commercial value designed to make us a profit and they will be none the wiser. For not one man in a million could ever figure our plans and if by accident one or two should figure it out, we have in our arsenol plausable deniability. After all, this is the only logical way to fund government, by floating liens and debt to the registrants in the form of benefits and privileges. This will inevitabley reap to us huge profits beyond our wildest expectations and leave every American a contributor to this fraud which we will call ‘Social Insurance’. Without realizing it, every American will insure us for any loss we may incur, and in this manner, every american will unknowingly be our servant, however begrudgingly. The people will become helpless and without any hope for their redemption and we will employ the high office of the president of our dummy corporation to foment this plot against America. ~’Colonel’ Edward Mendell House

    I am a most unhappy man, I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world, no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men. ~Woodrow Wilson

    We are grateful to the Washington Post, the New York Times, Time Magazine and other great publications whose directors have attended our meetings and respected their promises of discretion for almost fourty years. It would have been impossible for us to develop our plan for the world if we had been subjected to the lights of publicity during those years. But, the World is now more sphisticated and prepared to march towards a World Government. The supranational sovereignty of an intellectual elite and World Bankers is surely preferable to national auto-determination practiced in past centuries. ~David Rockefeller

    The technotronic era involves the gradual appearance of a more controlled society. Such a society would be dominated by an elite, unrestrained by traditional values. Soon it will be possible to assert almost continuous surveillance over every citizen and maintain up-to-date complete files containing even the most personal information about the citizen. These files will be subject to instantaneous retrieval by the authorities. ~Zbigniew Brzezinski

    The truth is, there is no Islamic army or terrorist group called Al Qaida. And any informed intelligence officer knows this. But there is a proaganda campaign to make the public believe in the presence of an identified entity…The country behind this propaganda is the US. ~Robin Cook (former British Foreign Secretary)

    The whole aim of practical politics is to keep the populace alarmed,and hence clamorous to be led to safety, by menacing it with an endless series of hobgoblins, all of them imaginary. ~H.L. Mencken

    • Rusty Shackleford says:

      And your point is???

      Edit: I got it…I was just being ….mysteriously aloof.

      Seriously…good collection of quotes.

  4. proreason says:

    “The whole aim of practical politics is to keep the populace alarmed,and hence clamorous to be led to safety, by menacing it with an endless series of hobgoblins, all of them imaginary.”

    bingo

  5. VMAN says:

    Bush lied banks died. It’s bush’s fault, It’s bush’s fault, It’s bush’s fault, It’s bush’s fault!!!! Na na na na boo boo

    When can we get these children out of Washington? 2010 ain’t soon enough!


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