Geithner’s Power Grab

by DAVE LINDORFF

Wait a minute! Did I hear correctly? Did Treasury Secretary and former New York Federal Reserve Bank screw-up Tim Geithner really tell a House Financial Services Committee today that he needed “new powers” to allow the federal government to take control of non-bank financial corporations whose actions threaten the financial system or the economy and “break them up”?

The subject under discussion at the hearing was AIG, and Geithner and Fed Chairman Ben Bernanke, under attack for those AIG “bonus payments” to executives, were trying to talk tough about the evil insurance giant.

But aren’t the powers that Geithner is calling for exactly the powers that he and Bernanke already have in the case of the banking industry?

Yes they are.

So why aren’t we seeing the Obama administration and the Fed going after the banking giants that have been co-conspirators with AIG in wreaking havoc with the US and the global economy by creating dodgy structured financial instruments that allowed banks and other financial companies to make huge off-balance-sheet bets that virtually guaranteed a future collapse?

Good question, but not one that the House Finance Committee was asking.

Instead of doing the obvious—which would be to use the Fed’s and the Federal Deposit Insurance Corporation’s powers to take over failed banking institutions, break them up, and sell the healthy parts off to stronger institutions—Geithner, Bernanke and the Obama financial team have been pouring dollars into a group of zombie banks that are already technically insolvent by any honest accounting standards, and that have no chance of standing on their own. They are borrowing money at such a prodigious rate that the Chinese government, America’s major creditor, and the United Nations, are talking about the need to do away with the dollar as the global currency, to be replaced by some basket of currencies, and in the process virtually assuring that the US currency will shrink dramatically in value, They are putting a colossal debt upon future generations of Americans. And they are putting at risk all the progressive goals that voters sent Obama to Washington expecting him to enact: health care reform, energy reform, education reform, etc.

If Geithner and Bernanke think it is important, and appropriate, to break up dangerously large and threatening enterprises like AIG, why are they not even talking about breaking up Citigroup, Bank of America, Wells Fargo, Goldman Sachs and other overlarge large banking firms?

Too big to fail should simply mean too big to exist. It’s that simple.

Not one more dollar should be spent trying to rescue these zombie banks. In fact, they should be ordered to give back the hundreds of billions of dollars that were already poured into them, most of which they have reportedly simply invested in Treasury notes, since there was nobody creditworthy who wanted to borrow the money.  Then the regulators should move in and shut all the big banks down, and begin the process of tearing them apart. Those parts that are deemed hopelessly in debt because of huge holdings of Credit Default Swaps and other toxic financial products should be shut down, with shareholders and bondholders taking the hit.  The healthy parts—the banks with all the deposits—can be auctioned off in pieces to smaller state and regional banks.

Never again should there be federal banks whose branches and brokerage and insurance subsidiaries span the nation and the globe.

There is no need for such entities.  For one thing, they are too powerful politically, with operations in every congressional district, much like the Pentagon and the arms industry, and we’ve seen where that gets us. For another, particularly when it comes to insurance, the regulators are state based, making national companies largely out of reach. Finally, national banks have little or no interest in small businesses and their credit needs.

If large global firms need bank loans, let the banks organize syndications to accommodate them. That has always worked in the past, and in fact, is still done for big global firms.

Geithner should be forced to explain why he needs new powers to break up non-bank financial companies, if he is unwilling to use the powers he already has to break up too-large banks.

Then he should be fired and someone should be brought in to replace him who will demand the breakup of those banks.

While we’re at it, President Obama should also be asked why his Treasury Secretary needs “new powers” to go after companies like AIG that are too large for the good of the country. That power already resides in the Federal Trade Commission and the Justice Department, both of which can use their anti-trust authority to break up companies that are deemed anti-competitive—surely an apt characterization of AIG.

While average Americans all know that corporations have become far big and too powerful, making the old Rockefeller Standard Oil Trust look quaint by comparison, anti-trust in Washington has become almost a dirty word. It needs to be dusted off and trotted out as a major policy tool, if this country is to return to economic health.

DAVE LINDORFF  is a Philadelphia-based journalist and columnist. His latest book is “The Case for Impeachment” (St. Martin’s Press, 2006 and now available in paperback). He can be reached at dlindorff@mindspring.com

Dave Lindorff is a founding member of ThisCantBeHappening!, an online newspaper collective, and is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press).

Like What You’ve Read? Support CounterPunch
September 02, 2015
Paul Street
Strange Words From St. Bernard and the Sandernistas
Jose Martinez
Houston, We Have a Problem: False Equivalencies on Police Violence
Henry Giroux
Global Capitalism and the Culture of Mad Violence
Ajamu Baraka
Making Black Lives Matter in Riohacha, Colombia
William Edstrom
Wall Street and the Military are Draining Americans High and Dry
David Altheide
The Media Syndrome Between a Glock and a GoPro
Yves Engler
Canada vs. Africa
Ron Jacobs
The League of Empire
Andrew Smolski
Democracy and Privatization in Neoliberal Mexico
Stephen Lendman
Gaza: a Socioeconomic Dead Zone
Norman Pollack
Obama, Flim-Flam Artist: Alaska Offshore Drilling
Binoy Kampmark
Australian Border Force Gore
Ruth Fowler
Ask Not: Lost in the Crowd with Amanda Palmer
Kim Nicolini
Remembering Wes Craven’s The Hills Have Eyes
September 01, 2015
Mike Whitney
Return to Crisis: Things Keep Getting Worse
Michael Schwalbe
The Moral Hazards of Capitalism
Eric Mann
Inside the Civil Rights Movement: a Conversation With Julian Bond
Pam Martens
How Wall Street Parasites Have Devoured Their Hosts, Your Retirement Plan and the U.S. Economy
Jonathan Latham
Growing Doubt: a Scientist’s Experience of GMOs
Fran Shor
Occupy Wall Street and the Sanders Campaign: a Case of Historical Amnesia?
Joe Paff
The Big Trees: Cockburn, Marx and Shostakovich
Randy Blazak
University Administrators Allow Fraternities to Turn Colleges Into Rape Factories
Robert Hunziker
The IPCC Caught in a Pressure Cooker
George Wuerthner
Myths of the Anthropocene Boosters: Truthout’s Misguided Attack on Wilderness and National Park Ideals
Robert Koehler
Sending Your Children Off to Safe Spaces in College
Jesse Jackson
Season of the Insurgents: From Trump to Sanders
August 31, 2015
Michael Hudson
Whitewashing the IMF’s Destructive Role in Greece
Conn Hallinan
Europe’s New Barbarians
Lawrence Ware
George Bush (Still) Doesn’t Care About Black People
Joseph Natoli
Plutocracy, Gentrification and Racial Violence
Franklin Spinney
One Presidential Debate You Won’t Hear: Why It is Time to Adopt a Sensible Grand Strategy
Dave Lindorff
What’s Wrong with Police in America
Louis Proyect
Jacobin and “The War on Syria”
Lawrence Wittner
Militarism Run Amok: How Russians and Americans are Preparing Their Children for War
Binoy Kampmark
Tales of Darkness: Europe’s Refugee Woes
Ralph Nader
Lo, the Poor Enlightened Billionaire!
Peter Koenig
Greece: a New Beginning? A New Hope?
Dean Baker
America Needs an “Idiot-Proof” Retirement System
Vijay Prashad
Why the Iran Deal is Essential
Tom Clifford
The Marco Polo Bridge Incident: a History That Continues to Resonate
Peter Belmont
The Salaita Affair: a Scandal That Never Should Have Happened
Weekend Edition
August 28-30, 2015
Randy Blazak
Donald Trump is the New Face of White Supremacy
Jeffrey St. Clair
Long Time Coming, Long Time Gone
Mike Whitney
Looting Made Easy: the $2 Trillion Buyback Binge
Alan Nasser
The Myth of the Middle Class: Have Most Americans Always Been Poor?