Fmr Secy O’Neil: TARP Goal Deceive Public
As we already knew (and as I wrote in Bailout Nation), the purpose of forcing all the major was to hide the fact that Citigroup was destitute.
ABC is reporting that former Treasury Secretary Paul O’Neill said that the heads of the major U.S. banks were summoned to Washington and told they were required to take the money “So that those who needed it would not be stigmatized.”
“So they all took the money. Stop and think about that. What was the purpose of this policy? To deceive the people so that the public would not know which banks were in danger of failing? Why didn’t any of the CEO’s, claiming not to need the money, have the courage to refuse?” O’Neill said in an e-mail to ABC News. “If banks now claim they want to return the money because they don’t need it, why do they have to raise new capital to replace the money from we the people in order to repay the government?”
O’Neill said that unfortunately the government is permitted to practice a policy of deception for the greater good of the society.
“Is the public ever going to have clear facts regarding any of the individual institutions?” he said. “For months I have been calling for a public disclosure of all bank assets by rating class, along with facts showing the face value of so-called toxic assets along with the associated current book keeping value and associated reserve account. The public and members of Congress seem to be accepting of the idea that a handful of people in the administration and the Fed should do all of this in secret.”
As we suspected . . .
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Source:
Banks Feel the Heat to Pay Back Bailout Billions
MATT JAFFE
ABC.com, April 15, 2009
http://abcnews.go.com/Business/Politics/story?id=7337061&page=1
April 15th, 2009 at 12:14 pm
I’ll take the money.
Sheeeeeeet
April 15th, 2009 at 12:16 pm
Let’s not forget Tiny Tim has been granted Extraordinary Powers.
That could mean an unwind of GM, C or some other nuclear-sized cockroach.
April 15th, 2009 at 12:18 pm
I think we got at least one, maybe more, sacrificial lamb coming in the near future. GM and Citi would be good bets, IMO. That way, they sacrifice one on Main Street and one on Wall Street.
April 15th, 2009 at 12:19 pm
Themistocles saved Western Civilization in the 5th century BCE by lying to the Athenian people so he could get the funding to build a large navy. He overhyped the danger posed by a relatively insignificant group of island pirates to get the go-ahead to build a big fleet. He lied because he knew that the Athenians didn’t have the stomach to contemplate war against Persia. Because of his lie, there were enough ships to defeat the Persians at the Battle of Salamis and force them out of Greece.
Thanks, History Channel!
Just sayin’ — lying to the peeps for the greater public good in a democracy isn’t anything new…
April 15th, 2009 at 12:19 pm
Look back in history…go ahead. Every single time that phrase “for the greater good” is trotted out or used indirectly, there’s a lot of decisions about other’s people’s futures being made made by a very, very select few.
April 15th, 2009 at 12:24 pm
@Transor,
Exactly. Perception creates reality, and sometimes, the reality created by one perception is overruled by a new reality created by a new perception.
People would have much fuller, more enlightened lives if they only realized that everything is perception, and perception is everything.
April 15th, 2009 at 12:36 pm
It seems that they all needed money although some needed a lot more than others. It is also clear that at the time none of them could raise it in any other way. Now the stronger of them can raise it in normal ways and they want to do so, before their leadership is forced to cut its outrageous compensation. If we could get some real numbers on the table we can see not only who is in serious trouble, but also who has leadership that would rather risk the company than risk their own personal compensation.
April 15th, 2009 at 12:42 pm
@franklin:
I was just talking about the occasional noble lie, not an elitist outlook with infite capacity to rationalize. I believe that reality is reality and we’re all just the blind men descibing the elephant.
April 15th, 2009 at 12:47 pm
Citi shorts are being squeezed now…when that is over, it may go right back to a buck.
April 15th, 2009 at 12:50 pm
The TARP is indeed a deception – it was initiated because fractional reserve banking had broken down completely and the ATMs were about to run dry last fall as $ were hoarded world-wide. In other words, when you went to C for the cash in your savings account, it WASN”T ACTUALLY THERE. The “liquidity crisis” is therefore simply a media smokescreen for a number of very large insolvent institutions. Of course the Government would also be one if not for the irrepressible Dr. Bernanke and his trusty printing press.
Just because we are bigger than Argentina doesn’t mean we’re not an insolvent Banana Republic. Just because the market has been up for a few weeks doesn’t mean you should stop reading Roubini and Marc Faber.
April 15th, 2009 at 12:56 pm
And a Saudi prince owned alot of stock in said citibank… hmmm…
saudi = oil … US requires and uses 25% of the world oil when it has only 4% of the know reserves… hmmm…
TARP… without it… the world would be a little bit different… yet we still might need to learn mandarin.
April 15th, 2009 at 12:58 pm
John Najarian just pumped Google on the mid day Fast Money and sure enough, idiots are spiking it. Tell me again why the world needs this show?
April 15th, 2009 at 1:00 pm
I say, stigmatize away. Then let the chips fall where they may.
Are we really suffering from a shortage of banks in this country?
April 15th, 2009 at 1:00 pm
and where is his disclosure?
April 15th, 2009 at 1:01 pm
Given that the Najarian brothers are option traders, I don’t understand their bullish bias.
April 15th, 2009 at 1:12 pm
you don’t get truth out of a government during a crisis? i need to lie down and absorb this shocking and unexpected news!
regrettably for the chicago school economists and 18th century philosophers, truth depends on the context and the possible outcomes of truthful disclosure. “market information yearns to be spun.” during a hostage negotiation, you simply don’t say to the hostage taker, “you’re not getting the money and you’re going to end up dead or in jail.” why not, it’s the truth! yes, but then the truth has unfortunate consequences.
for consumers and investors, the better simile is shouting fire in a crowded theater. but obviously, the landscape here is that things are seriously messed up, and only time can heal deep wounds. so prop up as much of the status quo as possible, fill in the seriously gaping holes, and wait for time and tides to self correct back to normal.
the explicit indicator here is when pronouncements shift from facts to behavior. “keep calm” is a sure signal you should expect there is some reason to panic, even though you also understand that panic will just make things worse for everybody. and, sure enough, what we hear from the fed and treasury is “we will do everything it takes” (a behavior pronouncement) instead of “the big banks are bust” (a fact statement).
the announced near future release of the “stress tests” is going to be a stress test of disclosure. i’m predicting the stress tests will show that “the fed is committed to meet all future liquidity requirements.”
April 15th, 2009 at 1:14 pm
arcticpup Says:
“And a Saudi prince owned alot of stock in said citibank”
and
“saudi = oil … US requires and uses 25% of the world oil when it has only 4% of the know reserves… ”
Is there any wonder why then that Obama took it upon himself to bow to the Sultan?
April 15th, 2009 at 1:19 pm
“…for the greater good of the society.”
Credit is being tightened, and rates and fees are being increased. The banksters are being served AT THE EXPENSE OF THE ECONOMY.
April 15th, 2009 at 1:25 pm
“How to Succeed in Government, Without Really Trying”
Remember:
1) It takes time, to do things now
2) It takes longer, to do things quickly
3) It’s more expensive, to do things cheaply
4) It’s more democratic, to do them secretly
April 15th, 2009 at 1:25 pm
Mannwich Says:
“I think we got at least one, maybe more, sacrificial lamb coming in the near future. GM and Citi would be good bets, IMO. That way, they sacrifice one on Main Street and one on Wall Street.”
Why should Main street be expected to sacrifice anything?
April 15th, 2009 at 1:49 pm
@drollere: Very nicely put.
I actually think that the more interesting aspect of the ABC story that quoted Paul O’Neill is the jockeying going on among the TARP banks to not be TARP banks anymore.
GS, revealing a bit of its true colors as Wall Street’s resident asshole suck-up pre-med student, wants out from under TARP but apparently needs to replace 50% of the TARP capital to do so. Even the WSJ is calling bullshit on that. The biggest swine of all are just being true to their own nature and looking out for #1, fuck everybody else, fuck patriotism, fuck Western Civilization. This is where conspiracy theories break down.
April 15th, 2009 at 1:51 pm
Was the disguise really to fool the world? The amount of $$ we are talking about is welll
$1.14 quadrillion get a load of this!
No, that’s not a made up word. A quadrillion is one thousand trillion dollars. Not $4 trillion, but $1000 trillion – and change.
Here’s the breakdown, according to the International Bank of Settlements, which acts as banker for the world’s central banks:
1) Listed credit derivatives stood at USD 548 trillion;
2. The Over-The-Counter (OTC) derivatives stood in notional or face value at USD 596 trillion and included:
a. Interest Rate Derivatives at about USD 393 + Trillion;
b. Credit Default Swaps at about USD 58 + trillion
c. Foreign exchange derivatives at about USD 56 + trillion;
d. Commodity Derivatives at about USD 9 trillion;
e. Equity Linked Derivatives at about USD 8.5 trillion; and
f. Unallocated Derivatives at about USD 71+ trillion.
World derivative debt is $1.14 Quadrillion USD. For the US banks share of that see Table 1, page 22 of 33 at
http://bluelori.blogspot.com/2009/04/all-hail-government-sachs.html
April 15th, 2009 at 2:02 pm
@Lori: Some of the derivatives effectively cancel out others and thus add to zero. But you have a point..
April 15th, 2009 at 2:04 pm
I’m confused, I though he purpose of forcing all the major was to hide the fact that Goldman Sachs was destitute.
Remember the Treasury’s motto: “What good for Goldman Sachs is good for Hank Paulson.”
April 15th, 2009 at 2:06 pm
drollere – excellent observations with high likelihood that Ben Bernanke already has one of his flunkies lifting your ending quote verbatim ““the fed is committed to meet all future liquidity requirements.”
April 15th, 2009 at 2:06 pm
Agree with the deception interpretation but virtually all the explanations I’ve heard including O’Neil’s seem to just give me greater cognitive dissonance: Why worry about stigmatizing one or two money center banks or a bank run with the FDIC around unless (a) there was evidence that far more institutions including non-banks, municipalities, etc were effectively insolvent and/or (b) there was no model available to deal with a major, international bank receivership on the scope of a Citi because no one had done the necessary contingency planning and there wouldn’t have been enough personnel in a down-sized governmental regulatory regime to do the job even if a viable model was ready at hand.
Off topic, I’ve been trying to find a quote from the great depression era, I think in reference to the second major decline in 1931. Paraphrased the quote went roughly like this: “The fools and speculators were killed first; the smart ones were killed later.”
Anyone got a source for a quote expressing sentiments (something) like that? It was suggested in another forum that it might have been quoted in Galbraith’s book, The Great Crash, but I have no way to search that. Anyone got a clue? It’s been bugging me lately (not that that should matter to anyone).
April 15th, 2009 at 2:07 pm
we’re on our way to becoming “The United States of Argentina”
April 15th, 2009 at 2:38 pm
JPM trading up. Someone knows something, and it is options expiration week. You can bet someone has been tipped off and there is a rally on JPM earnings, like GS. Sell the reaction to the news.
Last Chance Saloon for the XLF coming up. Keep the FAZ handy but don’t pull the trigger just yet.
April 15th, 2009 at 2:51 pm
@ben
I’m with you on the hedging, I’ve hedged my longs. Plus a little.
If my intc gets called away I automatically go into bear mode and am at ~50% cash
April 15th, 2009 at 3:02 pm
franklin,
you go w/ “People would have much fuller, more enlightened lives if they only realized that everything is perception, and perception is everything.”
Lenin, and Stalin, at the minimum, were feeding their peasants that line, that is, the one’s that could still hear b/c they were not, yet, murdered.
~~
to the post,
I’m still surprised that O’Neill ’signature’ FedRes Notes don’t trade at a Premium, to Snow’s, Paulson’s, and, all too soon, Geithner’s..
guess it just goes to show: “You can take the boy out of the Market, but you can’t take the Market out of the boy..”
April 15th, 2009 at 3:30 pm
hoffer Says:
“Lenin, and Stalin, at the minimum, were feeding their peasants that line, that is, the one’s that could still hear b/c they were not, yet, murdered.”
well put
April 15th, 2009 at 3:39 pm
So much for this stuff, eh? Open Govt my ass.
http://my.barackobama.com/page/community/post/president/gGxHny
TRANSPARENCY AND OPEN GOVERNMENT
By WEBMASTER – Jan 29th, 2009 at 3:08 pm EST
Also listed in: 8 groups
Comments | Mail to a Friend | Report Objectionable Content
Tags: Administration, Federal-Register, government, HOPE, Obama, Open-government, people, promise, register, review, transparency
THE WHITE HOUSE
Office of the Press Secretary
_____________________________________
January 21, 2009
MEMORANDUM FOR THE HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES
SUBJECT: Transparency and Open Government
My Administration is committed to creating an unprecedented level of openness in Government. We will work together to ensure the public trust and establish a system of transparency, public participation, and collaboration. Openness will strengthen our democracy and promote efficiency and effectiveness in Government.
Government should be transparent. Transparency promotes accountability and provides information for citizens about what their Government is doing. Information maintained by the Federal Government is a national asset. My Administration will take appropriate action, consistent with law and policy, to disclose information rapidly in forms that the public can readily find and use. Executive departments and agencies should harness new technologies to put information about their operations and decisions online and readily available to the public. Executive departments and agencies should also solicit public feedback to identify information of greatest use to the public.
Government should be participatory. Pubic engagement enhances the Government’s effectiveness and improves the quality of its decisions. Knowledge is widely dispersed in society, and public officials benefit from having access to that dispersed knowledge. Executive departments and agencies should offer Americans increased opportunities to participate in policymaking and to provide their Government with the benefits of their collective expertise and information. Executive departments and agencies should also solicit public input on how we can increase and improve opportunities for public participation in Government.
Government should be collaborative. Collaboration actively engages Americans in the work of their Government. Executive departments and agencies should use innovative tools, methods, and systems to cooperate among themselves, across all levels of Government, and with nonprofit organizations, businesses, and individuals in the private sector. Executive departments and agencies should solicit public feedback to assess and improve their level of collaboration and to identify new opportunities for cooperation.
I direct the Chief Technology Officer, in coordination with the Director of the Office of Management and Budget (OMB) and the Administrator of General Services, to coordinate the development by appropriate executive departments and agencies, within 120 days, of recommendations for an Open Government Directive, to be issued by the Director of OMB, that instructs executive departments and agencies to take specific actions implementing the pinciples set forth in this memorandum. The independent agencies should comply with the Open Government Directive.
This memorandum is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by a party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.
This memorandum shall be published in the Federal Register.
BARACK OBAMA
April 15th, 2009 at 3:44 pm
…ahem… well… there is something to be said for “the greater good of society”, is there not?
April 15th, 2009 at 3:54 pm
“O’Neill said that unfortunately the government is permitted to practice a policy of deception for the greater good of the society.”
True that. An other example, the hot-air cheer leading the government is fronting. Have anyone noticed how numbers provided by the government are revised more frequently these days, specifically the job numbers? You can’t trust these numbers, they are -20% of actual most the time!!! Imagine if companies do this… wait, some do, we can them wall street banks.
April 15th, 2009 at 4:32 pm
Leftback, we are just a more anglo looking banana republic as I am not sure there has ever been a banana republic where the supermajority of citizens were white. Favortism, reliance upon foreing money, decent tourism industry and some agriculture exports. It is sad how no one is picking up on this theme – blatant looting and deception as long as the stock market is rallying it is alright.
O’Neil was one of the more honest (relative term here) in the bush administration and at least he left with a modicum of decency and some principle. Here are the top ten signs we are truly living in an american banana republic.
http://thebarricadeblog.com/2009/04/11/the-top-10-signs-you-are-living-in-a-banana-republic-and-my-favorite-100-billion-omelet/
April 15th, 2009 at 5:36 pm
@Stuart: got gold? Interesting how we got a soft PPI and CPI and gold didn’t sell off. Bullish.
@pigpen: Nice link, thanks. The message is getting across, blogs leading as usual.
April 15th, 2009 at 6:24 pm
Gee, thanks pigpen. Now I think I’ll go kill myself………or a worse alternative, go work out.
April 15th, 2009 at 6:47 pm
Tea Parties and Bo the pooch.. that’s the ticket.
April 15th, 2009 at 7:06 pm
Like Jim Rogers has said many times “you can’t believe the government”. Every gummint released economic and employment number has been revised worser since at least mid 08 and often more than once. We get the knee-jerk bump up after the headline “economy shows signs of stabilizing”, “job losses stabilize” and then 4 weeks later they get revised substantially worser with little comment. Headlines, stimulous packages and foreclosure moritoria muddy the water but it’s the same trend.
April 15th, 2009 at 7:17 pm
The next 3 or 4 months will be key, if we get new waves of foreclosures and abandonments we’ll have some sort of extraordinary US agency action taking maybe millions of underwater homes from the 19 Sacred Banks at prices that won’t BK them and then rewrite the the new mortgages or leases to “fair values” to prevent financial collapse and social upheaval.
April 15th, 2009 at 7:36 pm
@ rktbrkr
it’s all a big show- to restore calm and confidence- whether it works or not is another story. As indicated my Mish and Minyan- the whole Goldman Sachs “early announcement” was so orchestrated that it was apparent that they were trying to buffalo everyone with their bullshit numbers- early announcement no less- what a fucking charade-
check out the quotes from 1929 to 1931-
http://www.gold-eagle.com/editorials_01/seymour062001.html
April 15th, 2009 at 10:35 pm
What was the purpose of this policy?
To deceive the public into believing that ALL banks were in the same amount and kind of trouble. That way when they came up with their alphabet soup of bailout programs it would be more palatable for the public.
April 15th, 2009 at 10:40 pm
Leftback, ya, noticed that too, although there is really two markets. The real physical market and the paper market controlled by the Wall St. goons. Still, I hear alot of people finally connecting the dots in seeing a tsunami of treasuries hitting the market and, while kicking and screaming, they are coming to the realization that the Fed is going to buy more and more treasuries. Gold I think is sensing the inevitable conclusion of that plus what the unsustainable levels of debt ultimately mean. That BS about the IMF, the announcement originally came out last year btw – talk about an announcement gaining alot of mileage, anything they sell won’t see one second in the market. Interesting how it’s Gordon Brown pushing it. Oh the irony.