Team Obama’s Summers & Geithner’s “White” Wash of Bailout Banks to Avoid Bankruptcy Proceedings

While President Obama is jetting throughout Europe, more bad economic news have hit the fan.  Joblessness continue to be on the rise with sign of slowing, services provided by states such as unemployment benefits previously extended are quickly depleting, state and local taxes on the rise with fiscal budget deficits, and retirement and pensions plans are under pressure due to drop in value and the lack of contributions.

Critics continue to berate the Team Obama economic plan and its ability to solve the crisis as home prices continue to fall and there is lack of marketability of toxic assets to investors other than the banks themselves.  In the latest critical comments offered by experts, the supposed bank stress test move is nothing more than a “scam”, a white wash placebo to calm the American people.  This critique comes quickly on the heels of the news that FASB will relax and make changes to their “mark to market” accounting rules.

How long will American voters and taxpayers wait for results despite trillions of their money are going out the door to failed private corporations?  Take this poll.

The bank stress tests currently underway are “a complete sham,” says William Black, a former senior bank regulator and S&L prosecutor, and currently an Associate Professor of Economics and Law at the University of Missouri – Kansas City. “It’s a Potemkin model. Built to fool people.” Like many others, Black believes the “worst case scenario” used in the stress test don’t go far enough.

He detailed these and related concerns in a recent interview with Naked Capitalism. But Black, who was counsel to the Federal Home Loan Bank Board during the S&L Crisis, says the program’s failings go way beyond such technical issues. “There is no real purpose [of the stress test] other than to fool us. To make us chumps,” Black says. Noting policymakers have long stated the problem is a lack of confidence, Black says Treasury Secretary Tim Geithner is now essentially saying: “’If we lie and they believe us, all will be well.’ It’s Orwellian.”

The former regulator is extremely critical of Geithner, calling him a “failed regulator” now “adding to failed policy” by not allowing “banks that really need desperately to be closed” to fail. (On Saturday, Geithner said on Face the Nation, if banks need “exceptional assistance” in the future “then we’ll make sure that assistance comes with conditions,” including potentially changing management and the board, but did not say they’d be shut down.)

Black says the stress test must also be viewed in the context of Geithner’s toxic debt plan, which he calls “an enormous taxpayer subsidy for people who caused the problem.” The fact bank stocks have been rising since Geithner unveiled his plan is “bad news for taxpayers,” he says. “It’s the subsidy of all history.”

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