Report: Paulson Lied to Congress, Public
At various points in the financial crisis, former Treasury Secretary Henry M. Paulson Jr. publicly discussed the health of the banking sector.
As it turns out, many of the things he said were false. The ad hoc way that monies were doled out also comes under fire.
These were not forecasts about the future that went awry, but rather, misstatements of facts regarding the solvency and capitalization of individual banks (NYT):
“The inspector general who oversees the government’s bailout of the banking system is criticizing the Treasury Department for some misleading public statements last fall and raising the possibility that it had unfairly disbursed money to the biggest banks.
A Treasury official made incorrect statements about the health of the nation’s biggest banks even as the government was doling out billions of dollars in aid, according to a report on the Troubled Asset Relief Program to be released on Monday by the special inspector general, Neil M. Barofksy. . .
Mr. Barofsky’s office also says that regulators were wrong to tell the public last year that the earliest bailout recipients were all healthy.”
CNN/Money adds:
Bailout special inspector general Neil Barofsky says in an audit that Treasury Department officials painted an overly rosy picture, creating “unrealistic expectations,” when they called the first bailout banks “healthy” institutions that would be able to lend more with government help.
We will see if this political storm blows over, or if this is a scandal that has legs . . .
>
Source:
Report on Bailouts Says Treasury Misled Public
LOUISE STORY
NYT, October 5, 2009
http://www.nytimes.com/2009/10/05/business/economy/05bank.html
Bailout cop: Treasury set ‘unrealistic expectations
Jennifer Liberto,
CNN/Money, October 5, 2009: 6:55 AM ET
http://money.cnn.com/2009/10/05/news/economy/bailout_report/index.htm
October 5th, 2009 at 10:18 am
Yawn, nothing new here. We all know both Paulson and Bernanke lied through their teeths. One guy lied about the health of the banks, and the other guy denied we were in a recession until 2 months ago.
October 5th, 2009 at 10:24 am
Maintaining public confidence, no matter what has to be said or done is front and center in the game plan to turn this ship around. Heaven and Earth will be moved to bury this.
October 5th, 2009 at 10:27 am
By now we all know that the financial industry has turned our public offices into a cesspool of corruption. What we are waiting to see is if Obama rises to the occasion and starts criminal investigations against not only some of the principal regulator officials but also some of the CEOs and BODs of the big IBs and mega banks. I’m for one not holding my breath…
October 5th, 2009 at 10:39 am
I’m shocked! Simply shocked!
October 5th, 2009 at 10:42 am
what banking scandal has legs?
please list corrupt too greedy too fail banking officials that have been prosecuted and are in jail ?
Trust or public confidence has been shredded ( assuming you don’t watch the pablum on MSM )
IMO the only way Obama has a chance for another term is to fire Geithner, Summers, other Goldman Sacks cronies and prosecute
Bu this is not going to happen!
October 5th, 2009 at 10:44 am
Obama already had a chance and he missed it. Really disappointed in his handling of the crisis since I voted for him. Business is usual as before in Wall Street.
October 5th, 2009 at 10:44 am
What is the scandal? As manhattanguy notes, everyone knew Bernacke and Paulson were lying, and most folks wanted it that way.
Robes, we have a tax cheat heading up Treasury and a tax scofflaw of epic proportions heading up Ways and Means. Nothing will change, it is what it is. If you want to go conspiracy theory, were the CFC/BOA “friends of Angelo” tapes really deleted? Unlikely, and if they emerge a couple dozens DC players go down. It is a game, Wall St and DC get paid and the rest of us get played.
October 5th, 2009 at 10:44 am
Damnit…I am going to repost this because this is MAERSK!
http://www.lloydslist.com/ll/news/maersk-abandons-recovery-hopes-and-looks-to-slash-officer-jobs/20017704117.htm?src=rss#
Maybe you guys don’t look at them the way I do, but these fellows are the box shipping giants of the world. Period. I think this is big news, maybe I’m totally off base, but this seems to be the biggest headline I didn’t see this weekend.
October 5th, 2009 at 10:51 am
Banks still not healthy, else why nationalization, FASB accounting rules now fantasy, TARP, etc.? Banks still waiting for housing to turn around and save them. Oh, CRE now turning down. Consumer de-leveraging, and defaulting.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aBSFMAyyENko
U.S. consumers are “overdebted” and the country’s banking system has been “basically bankrupt,” Soros said in Istanbul today.
The saga continues. Same chapter, different verse.
October 5th, 2009 at 10:57 am
That’s a shock. Paulson should be in prison. That’s the bottom line.
October 5th, 2009 at 11:01 am
This reminds me of a sculpture of some guy who lost a shoe as he was pinned up against a wall by bull.
October 5th, 2009 at 11:21 am
Barf-o-sky…
*puke*
October 5th, 2009 at 11:21 am
This may seem far-fetched – or IS it?
Eliot Spitzer.
Bring him out of (hot) hooker-imposed exile and put him in charge of investigating, and eventually prosecuting, these bastards.
If the man could get done half of what he got done in New York, the country will owe him a major debt of gratitude.
October 5th, 2009 at 11:22 am
The problem is not that they lied, the problem is that the American people believed them “again”….
October 5th, 2009 at 11:26 am
@worth: I said the SAME thing earlier this year. Bring him back for some redemption. America loves a comeback story.
@contra: So true. We should expect these folks to lie by now, but I think that too many people want to believe the lie because the truth is so sobering to confront.
October 5th, 2009 at 11:39 am
The government will always paint a rosier picture than necessary. So its no surprise.
But if things were *worse* than what they said, wouldn’t that actually be further justification for the bailouts?
October 5th, 2009 at 11:44 am
@Mannwich,
You, sir, are brilliant and ahead of your time.
That said, are we sure “that the American people believed them again”? I mean, I don’t know what more the public could have done in terms of outrage and outcry against the bailout. We DEMANDED that our Washington representation not pass the legislation, yet they did so anyway. I think we are onto their b.s., which is the only reason that health care hasn’t been brought to a vote yet. Maybe the silver lining to the bailout being passed in the face of loud protestation is that our reaction served as a wake-up call that Washington has been put on notice.
What’s a citizen to do, when his/her elected representative refuses to act according to our plainly expressed directives?
October 5th, 2009 at 11:45 am
worth
Agreed. He’s the bull dog we need; with all his warts, yes. But the problem is that too many in Congress are up to their necks in this going back a decade or more. They want to look like they’re doing something about this without actually doing it. They don’t want to be revealed for the on-the-take crooks that they are. And of course too many in the exec branch now are the same. Summers, Geithner, etc. And Obama only wants to “look forward”; I wonder why.
So how do we get an aggressive and honest prosecution of the crimes that have taken place? Seems rather hopeless, eh? The only hope we have is for aggressive state AGs to take this on; especially NY. That’s where the rats will be smoked out.
October 5th, 2009 at 11:45 am
@Bruce
The Maersk story is big news—but (a) 170 job cuts is nothing and (b) they aren’t cutting 170, they are simply laying off 170 Danish officers and hiring 170 cheaper ones in Asia so it’s net-net.
Maersk has a terrible first half of the year, and expects a terrible 2nd half, but nothing new that gets me too wound up.
October 5th, 2009 at 12:00 pm
I wouldn’t be surprised if Paulson comes back with a “Noble Lie” argument, along the lines of:
“I felt — and still feel — that it was incumbent upon all of us to avoid panic and reassure the American people of the fundamental soundness of our financial system. I completely reject the notion that I misrepresented the overall health of our financial system. I would say that the earnings of these institutions in the first quarter of 2009 supports the accuracy of my representations.”
Hank, that will be $5,000.
October 5th, 2009 at 12:07 pm
What a surprise! NOT
D.C. + Wall Street = Den of Thieves
October 5th, 2009 at 12:13 pm
Kort:
Maybe not, but the Baltic Dry Index is doing nothing, and Maersk is ubiquitous. And the low cost shipper. I can understand the FDIC out of money, true un/subemployment over 20%, but I would have thought Maersk would not be making statements like “We are giving up on the recovery” at this point in our global deleveraging. To me this is a “leading indicator”……..
B in T
October 5th, 2009 at 12:29 pm
“We will see if this political storm blows over, or if this is a scandal that has legs . . .”
Back in the 1930s, the scandals (eventually) focused on the financial perps by the other perps in the Congress — not immediately, as the Congress of the 30’s initially played the same game of bemused concern and inaction. But then there came a true Black Swan, the appointment of Ferdinand Pecora, who was the fourth prosecutor to be assigned to investigate the crash and its causes, and the ongoing financial shenanigans.
Pecora was intended to be yet another ineffectual just-for-show toothless tool of the Congress, and was seen as not much of a threat to the ongoing inaction, so he was actually granted subpoena powers (which none of his predecessors were able to wrangle). He then turned out to be The Cure That Congress Never Wanted, and went on to publicly unmask the corruption and causation, forcing the Congress to get serious about legislating regulations to prevent the practices that caused the crash, in order to preserve the illusion that they were there to protect the United States instead of protecting their own campaign coffers.
http://en.wikipedia.org/wiki/Pecora_Commission
A repeat of this is highly unlikely this time around. Our current Congress has enough distractions (health care, terrorism, foreign wars) for the sheeple that they are highly unlikely to be stampeded into enacting legislation to regulate the out-of-control financial industry, and we will get to repeat the process at least once.
Also, in the 1930s, a strong president who was serious about shaking up the financial industry came into power, and Barack Obama is neither a strong president (he prefers to let the Congress lead) nor desirous of doing anything to rock the boats of the purveyors of campaign funding — this holds true for the financial, insurance, and health care industries. He is the champion of the status quo.
In short, there is not a shred of political will directed toward fixing our crazed financial industry, nor is there likely to be until 2012 at the earliest.
I suspect it will require a catastrophe on the order of the US Treasury defaulting on its debt, and the reduction of the Bananamerican economy to mere smoldering rubble before the Congress will be motivated to act. Perhaps widespread de-throning of incumbents in the 2010 elections will shake them up a bit, but as I have already stated, they have more than enough issues to muddy the minds of the voting sheeple and manage to retain their seats on the Goobermint Gravy Train.
So my bet is that the political storm never arrives — at least this time around. By the time the Congress is finally motivated to act, we will have a whole new set of crimes and criminals, so Hank Paulson and friends will be happily rolling in their illicit dough with not a care in the world that they will ever be called to account for their crimes.
October 5th, 2009 at 12:40 pm
Lots of calls for Spitzer to the forefront…heard him being interviewed few days ago and thought the same…he’s extraordinarily smart and would be a real asset!
October 5th, 2009 at 1:30 pm
the gubmint had really no choice other than lying and propping up zombie banks. i think it would be much worse otherwise. this way we have a slow decline over years instead of an immediate train wreck. to steal from Todd Harrison, they bought the cancer and sold the car crash. i think since queasing doesn’t ultimately work, Sammie is now selling dollars to prop up the markets. at some point the market will stop rallying despite a falling dollar.
October 5th, 2009 at 1:36 pm
Mannwich @ 10:57
If Obama’s attorney general is going to investigate anyone from the Bush administration, it ought to be Paulson, not the CIA field guys.
October 5th, 2009 at 2:14 pm
I think you’ll die of old age waiting for the O administration to go after any banksters.
The O administration doesn’t have the spine to make ANY difficult decisions….much less go after Paulson.
It’s fucking pathetic.
October 5th, 2009 at 2:25 pm
Chris – I agree. Can’t understand at all there not being a firm decision made on any important issue facing this country.
October 5th, 2009 at 3:04 pm
Tell them what they want to hear not what they need to know…
I just heard Brian Wesbury say that the government wanted the banks to teeter on the edge so that they could swoop in to demonstrate that the government could ‘fix’ something. This statement was of course the lead in to his everlasting mantra that the government can’t fix anything.
October 5th, 2009 at 3:12 pm
Call me old fashioned, or call me a Founding Father, but the role of government is NOT to FIX things.
It is to do the things that only a sovereign government can do, such as field a standing army, administer justice (including the guarantee of a level playing field for business, i.e. no monopolies) and maybe…well, that’s about all I can come up with. Build roads? Private sector can handle. Utilities? Private. Health insurance? Private. R&D? Private. Education? Ditto. May the best provider(s) win.
Anyone come up with something else that ONLY the government can do? Besides collect taxes?
October 5th, 2009 at 3:19 pm
Fight a war
October 5th, 2009 at 4:26 pm
Thanks Thor. I presumed that “fielding a standing army” would include all armed forces and their raisons d’etre, but no harm in spelling it out, right?
Another biggie that used to be considered gov’t-only, but can now be done by the private sector, is anything space-related (satellites, exploration, joy rides, visits to other celestial bodies).
October 5th, 2009 at 5:03 pm
My point is the circular logic of Wesbury. He is of the belief that the government caused the mess and that they then purposefully ignored, denied or prey tell lied about the soundness of the financial system all the while hoping that the catastrophe would force an intervention to save the system and hence the world. This unprecedented action and subsequent kick save then gave the government the necessary justification for their existence and highlighted the need for the Feds. Wesbury went on to say that at the end of the day all that was needed was a few tweaks in the accounting scheme, insinuating that the real culprit was the minor annoyance known as mark-to-market accounting.
This line of reasoning is absolutely preposterous and just goes to show how a belief system, once completely accepted as truth or fact, can be so irrational.
October 5th, 2009 at 5:38 pm
re: Spitzer
http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Why+was+Spitzer+outed%3F
we should wonder..
“…Greg Palast offered an answer to these questions in “Eliot’s Mess”, also
posted here the other day:
“While New York Governor Eliot Spitzer was paying an ‘escort’ $4,300 in
a hotel room in Washington, just down the road, George Bush’s new
Federal Reserve Board Chairman, Ben Bernanke, was secretly handing over
$200 billion in a tryst with mortgage bank industry speculators.
“Both acts were wanton, wicked and lewd. But there’s a BIG difference.
The Governor was using his own checkbook. Bush’s man Bernanke was using
ours.
“This week, Bernanke’s Fed, for the first time in its history, loaned a
selected coterie of banks one-fifth of a trillion dollars to guarantee
these banks’ mortgage-backed junk bonds. The deluge of public loot was
an eye-popping windfall to the very banking predators who have brought
two million families to the brink of foreclosure.
“Up until Wednesday, there was one single, lonely politician who stood
in the way of this creepy little assignation at the bankers’ bordello:
Eliot Spitzer.
“Who are they kidding? Spitzer’s lynching and the bankers’ enriching are
intimately tied…”
http://darwiniana.com/2008/03/19/why-was-eliot-spitzer-outed/
October 5th, 2009 at 6:04 pm
Way to dig, Hoff!
Adultery is one thing (one BAD thing). But the man found a willing participant, agreed to terms, and as the article states, USED HIS OWN MONEY. Screwing NOBODY in the process, other than the hooker, himself, and his family (which sucks, don’t get me wrong).
But I got zero problem with that guy championing our cause, because he’s the only one who could/would do it the way it needs to be done: sleazily, effectively, and legally.
October 5th, 2009 at 8:39 pm
>> The problem is not that they lied, the problem is that the American people believed them “again”….
The American people did NOT believe them. Since Paulson/Bernanke were GOP nominees, that hurt the GOP.
Let’s see what happens now that Obama and the Dems have continued the previous policies. The clock is ticking.
October 5th, 2009 at 9:32 pm
@Moss: Completely and totally true. The Bill Clinton model.
Tell them what they want to hear. Do what the funders want. PERIOD. Hat tip tp Cevienne. Wherever he is.
Gues fantasy football can be a great diversion. Good for you.
October 6th, 2009 at 4:17 am
Has anyone read this
A shocker of a news: Gulf and european countries are putting an end to trade Oil in dollar. It is finally happening. The final step to killing the dollar.
Dollar on the verge of murdered
fresbee
October 6th, 2009 at 7:11 am
worth,
this docu http://www.hbo.com/docs/programs/outrage/index.html
is, as well, tres` telling. the hypocrisy, rampant, in DC, is well exposed from the vantage point taken in the piece..
October 6th, 2009 at 10:30 am
Paulson lied Obama makes a speech. Spitzer rumors. October rocks!