FacebookTwitterGoogle+RedditEmail

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).

More articles by:
June 30, 2016
Richard Moser
Clinton and Trump, Fear and Fascism
Pepe Escobar
The Three Harpies are Back!
Ramzy Baroud
Searching for a ‘Responsible Adult’: ‘Is Brexit Good for Israel?’
Dave Lindorff
What is Bernie Up To?
Thomas Barker
Saving Labour From Blairism: the Dangers of Confining the Debate to Existing Members
Jan Oberg
Why is NATO So Irrational Today?
John Stauber
The Debate We Need: Gary Johnson vs Jill Stein
Steve Horn
Obama Administration Approved Over 1,500 Offshore Fracking Permits
Rob Hager
Supreme Court Legalizes Influence Peddling: McDonnell v. United States
Norman Pollack
Economic Nationalism vs. Globalization: Janus-Faced Monopoly Capital
Binoy Kampmark
Railroaded by the Supreme Court: the US Problem with Immigration
Howard Lisnoff
Of Kiddie Crusades and Disregarding the First Amendment in a Public Space
Vijay Prashad
Economic Liberalization Ignores India’s Rural Misery
Caroline Hurley
We Are All Syrians
June 29, 2016
Diana Johnstone
European Unification Divides Europeans: How Forcing People Together Tears Them Apart
Andrew Smolski
To My Less-Evilism Haters: A Rejoinder to Halle and Chomsky
Jeffrey St. Clair
Noam Chomsky, John Halle and a Confederacy of Lampreys: a Note on Lesser Evil Voting
David Rosen
Birth-Control Wars: Two Centuries of Struggle
Sheldon Richman
Brexit: What Kind of Dependence Now?
Yves Engler
“Canadian” Corporate Capitalism
Lawrence Davidson
Return to the Gilded Age: Paul Ryan’s Deregulated Dystopia
Priti Gulati Cox
All That Glitters is Feardom: Whatever Happens, Don’t Blame Jill Stein
Franklin Lamb
About the Accusation that Syrian and Russian Troops are Looting Palmyra
Binoy Kampmark
Texas, Abortion and the US Supreme Court
Anhvinh Doanvo
Justice Thomas’s Abortion Dissent Tolerates Discrimination
Victor Grossman
Brexit Pro and Con: the View From Germany
Manuel E. Yepe
Brazil: the Southern Giant Will Have to Fight
Rivera Sun
The Nonviolent History of American Independence
Adjoa Agyeiwaa
Is Western Aid Destroying Nigeria’s Future?
Jesse Jackson
What Clinton Should Learn From Brexit
Mel Gurtov
Is Brexit the End of the World?
June 28, 2016
Jonathan Cook
The Neoliberal Prison: Brexit Hysteria and the Liberal Mind
Paul Street
Bernie, Bakken, and Electoral Delusion: Letting Rich Guys Ruin Iowa and the World
Anthony DiMaggio
Fatally Flawed: the Bi-Partisan Travesty of American Health Care Reform
Mike King
The “Free State of Jones” in Trump’s America: Freedom Beyond White Imagination
Antonis Vradis
Stop Shedding Tears for the EU Monster: Brexit, the View From the Peloponnese
Omar Kassem
The End of the Atlantic Project: Slamming the Brakes on the Neoliberal Order
Binoy Kampmark
Brexit and the Neoliberal Revolt Against Jeremy Corbyn
Doug Johnson Hatlem
Alabama Democratic Primary Proves New York Times’ Nate Cohn Wrong about Exit Polling
Ruth Hopkins
Save Bear Butte: Mecca of the Lakota
Celestino Gusmao
Time to End Impunity for Suharto’’s Crimes in Indonesia and Timor-Leste
Thomas Knapp
SCOTUS: Amply Serving Law Enforcement’s Interests versus Society’s
Manuel E. Yepe
Capitalism is the Opposite of Democracy
Winslow Myers
Up Against the Wall
Chris Ernesto
Bernie’s “Political Revolution” = Vote for Clinton and the Neocons
FacebookTwitterGoogle+RedditEmail