Econ Wm Black: Treasury plan is 'greatest boondoggle in history'

Reading finance analysts Blodget-Black-Krugman-Stiglitz-Shiller-Johnson-Roubini-DeLong, an Obama supporter is left with the feeling: Jesus, I hope these guys are wrong about what Treasury Secretary Timothy Geithner is doing.

One of the problems is Geithner's Public-Private Investment Program (PPIP).

From TechTicker:

While much of the focus is on the stress tests and banks' efforts to raise cash, the real story is Geithner's Public-Private Investment Program (PPIP), says William Black, an Associate Professor of Economics and Law at the University of Missouri - Kansas City.

The PPIP is the 'greatest boondoggle in the history of the world,' says Black, a former bank regulator who was counsel to the Federal Home Loan Bank Board during the S&L crisis. As occurred during the S&L era, Black says the PPIP will allow banks to exchange 'trash for cash' and turn 'real losses into faulty gains.'

If the goal of Tim Geithner and other regulators was 'to rip off the American taxpayer for the benefit of the least-deserving wealthiest people you can imagine, well - mission accomplished,' Black says.

Among the masses and a growing number of economists is the distinct sentiment that what Obama and Geithner are doing is in a word: Wrong.

And boondoggling. Isn't that what the Republican geniuses who got us into this mess do?

What does that mean? That banks make a lot of money and the rules of the game have always favored capital?

We know that, that's kind of why many people get into finance: To make money. If this seems unfair, change the rules and start gearing American capitalism towards the middle class. Like soon.

One thing certain is that Obama needs to rebut these economists who are scaring the hell of a growing number of his supporters who just don't feel sufficiently conversant to understand or much less defend what is going on in the financial temples. And looking to the Recovery Accountability and Transparency Board doesn't seem all that revealing.

And by anecdote, some dudes sure seem confident that the DOW is going back down to 6,500 in the foreseeable future.

How bad is it? Tell me right away.

S&L Crisis Reformist: Gov-Industry Cover-Up Is Huge

Update: Black's response can be read at Black's response to bloggers.

William K. Black, senior regulator during the 1980s S & L crisis and associate professor of economics and law, says the government understates the immense scale of exotic financial products fraud and is lying about the current health of our financial system to prevent a meltdown.

Confidence is oxygen, pointed out Warren Buffett last October. I keep up my hope that Obama is simply rolling out the recovery program (and sparing us all the details) so as not to scare the hell out of everyone, thinking that the immediate effects of the recovery ought to be different than a shock-and-awe campaign. But secrecy doesn't exactly work well nor should it in democracies, right?

A rolled-out truth and outright lying don't work at all, in Black's view. Here's an excerpt from his interview with Bill Moyers broadcast last Friday night. About the scariest stuff on the crisis I have read yet:

WILLIAM K. BLACK: ... What would happen if after a plane crashes, we said, 'Oh, we don't want to look in the past. We want to be forward looking.' Many people might have been, you know, we don't want to pass blame. No. We have a nonpartisan, skilled inquiry. We spend lots of money on, get really bright people. And we find out, to the best of our ability, what caused every single major plane crash in America. And because of that, aviation has an extraordinarily good safety record. We ought to follow the same policies in the financial sphere. We have to find out what caused the disasters, or we will keep reliving them. And here, we've got a double tragedy. It isn't just that we are failing to learn from the mistakes of the past. We're failing to learn from the successes of the past.

BILL MOYERS: What do you mean?

WILLIAM K. BLACK: In the Savings and Loan debacle, we developed excellent ways for dealing with the frauds, and for dealing with the failed institutions. And for 15 years after the Savings and Loan crisis, didn't matter which party was in power, the U.S. Treasury Secretary would fly over to Tokyo and tell the Japanese, 'You ought to do things the way we did in the Savings and Loan crisis, because it worked really well. Instead you're covering up the bank losses, because you know, you say you need confidence. And so, we have to lie to the people to create confidence. And it doesn't work. You will cause your recession to continue and continue.' And the Japanese call it the 'lost decade'. That was the result. So, now we get in trouble, and what do we do? We adopt the Japanese approach of lying about the assets. And you know what? It's working just as well as it did in Japan.

BILL MOYERS: Yeah. Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong?

WILLIAM K. BLACK: Absolutely.

BILL MOYERS: You are.

WILLIAM K. BLACK: Absolutely, because they are scared to death. All right? They're scared to death of a collapse. They're afraid that if they admit the truth, that many of the large banks are insolvent. They think Americans are a bunch of cowards, and that we'll run screaming to the exits. And we won't rely on deposit insurance. And, by the way, you can rely on deposit insurance. And it's foolishness. All right? Now, it may be worse than that. You can impute more cynical motives. But I think they are sincerely just panicked about, 'We just can't let the big banks fail.' That's wrong.

BILL MOYERS: But what might happen, at this point, if in fact they keep from us the true health of the banks?

WILLIAM K. BLACK: Well, then the banks will, as they did in Japan, either stay enormously weak, or Treasury will be forced to increasingly absurd giveaways of taxpayer money. We've seen how horrific AIG -- and remember, they kept secrets from everyone.

Geithner Looks to Make Banks Lend and What Else

Update: Do read William K. Black on The Prompt Corrective Action Law, and Black's interview on the Bill Moyers show.

Geithner: We Won't Hesitate to Change Management at Banks; banks will lend or the bankers will be out of a job.

An increasing number of Americans will judge the policy addressing the banking crisis on the basis of how Americans are affected. Odd.

See Noam Chomsky on the economy and democracy. Plan is recycled Bush/Paulson. We need nationalization and steps towards democratization.

"When the Associated Press sent journalists to interview bank managers, investment firm managers, and asked them what they'd done with the TARP money [Troubled Asset Relief Program (TARP)], they just laughed. They said 'it's none of your business, we're private enterprises. Your task, the public, is to fund us, but not to know what we're doing. But the government could find out.'"

Much of the American public, veering into populism aka democracy, sees the financial managers as the incarnation of the voracious mafia chief, Fausti 'the Fist' Dellacava, in Jimmy Breslin's I Don't Want to Go to Jail.

The Fist often simplified questions over the allocation of resources by decreeing, "Give me all the money."