Subscribe Feed (RSS)Dirty Secret of the Financial Crisis:
November 24th, 2008 by webmaster | 1 Comment | Filed in Economic Justice, Financial Crisis
Our Banking
System
Is Broken
By William Greider
The Nation via Alternet.org
November 23, 2008 - Henry Paulson’s $700 billion plan to save the world is dead or dying, but the bailout was not killed by his arrogance or his grossly misleading claims about what the public’s money would buy. The plan collapsed because it didn’t work. The Treasury secretary has launched a PR offensive to revive his falling influence. Too late. The Democrats should be equally embarrassed. In September their leaders in Congress rushed to embrace the Paulson solution, no hard questions asked. They now claim they were duped.
Paulson’s squad at Treasury pumped $250 billion into the largest banks, buying their stock at inflated prices on the assumption it would persuade investors to step forward with their capital too. Instead, savvy financial players realized Paulson was spitting into a high wind, trying to save a system with stout talk.
Here is the ugly, unofficial truth that neither Wall Street nor the government will acknowledge: the pinnacle of the US financial system is broke — with perhaps $2 trillion in rotten financial assets on the books. Nobody knows, exactly. The bankers won’t say, and regulators won’t ask, or at least don’t dare tell the public. Official silence naturally feeds the conviction that banking’s problems are far worse than we’ve been told. The Levy Economics Institute of Bard College puts it plainly: “It is probable that many and perhaps most financial institutions are insolvent today — with a black hole of negative net worth that would swallow Paulson’s entire $700 billion in one gulp.”
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Tags: Financial Crisis, William Greider
