Daily Archives: May 21, 2014

Credit Suisse’s Guilty Plea: The WSJ Uses the Right Adjective to Modify the Wrong Noun

By William K. Black

The Wall Street Journal has editorialized about Credit Suisse’s guilty plea in a piece entitled “If Credit Suisse really is a criminal, why protect it from regulators?”  More precisely, and confusingly, the full title is:

“Holder Convicts Switzerland

If Credit Suisse really is a criminal, why protect it from regulators?”

The U.S. Saved Switzerland and Its Banks

I’ll begin by responding to the WSJ’s weird claims about Switzerland.  Far from “convict[ing] Switzerland,” the U.S. Fed bailed out the Swiss Central Bank at the acute phase of the crisis (by making large unsecured loans to it in dollars) so that it in turn could provide dollars to its two massive, insolvent, and fraudulent banks (UBS and Credit Suisse).  The Treasury, with the support of Secretaries Paulson and Geithner, used AIG to secretly bail out not only Goldman Sachs but also UBS (to the tune of $5 billion).  The unconscionable deal was so toxic that the heads of each of the three U.S. financial regulatory agencies involved (Treasury, the Fed, and the NY Fed) deny that they had any involvement in the decision – it’s the Virgin Bailout.

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Geithner: As Wrong about Soccer as Regulation

By William K. Black

Timothy Geithner is usually smart enough to say as little as possible about his disastrous leadership of the Federal Reserve Bank of New York (NY Fed). Geithner was supposed to regulate most of the largest banking holding companies. The NY Fed was singled out by its peers and the Financial Crisis Inquiry Commission (FCIC) for its terrible regulation, e.g., of Citicorp. One of the best signs that someone is reinventing history is that they keep changing their excuses for their failures and Geithner is a good example of that practice. He infamously began his original defense by testifying to Congress that he was never a regulator. That had the virtue of (unintentional) truth. His duty as head of the NY Fed, of course, was to regulate so the fact that he refused to regulate is an admission rather than a defense.

Geithner’s book wisely tries to make it appear that life began with Lehman’s failure (where he also performed miserably, but that is a story for another column). But Geithner lacked the discipline to avoid throwing in a few efforts to defend his role as a failed regulator. His defense efforts are now disingenuous, but they continue to serve as admissions rather than defenses. The fact that his attempts to construct a defense of his monumental regulatory failures actually end up being admissions demonstrates that he remains clueless even today about what he would have done if he had been a competent regulator of integrity and courage.

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A Proposal for Eliminating Youth Unemployment

Pavlina R. Tcherneva presents her proposal for a Youth Employment Safety-net (YES!) at the Interdisciplinary Conference on Youth Unemployment in Times of Crisis “¡No Mas! Strategies and Alternatives”. Middlebury College, VT (starts at 38min 45secs)

Essay Contest for Congress

By J.D. Alt

alt-ryanI’d like to propose an Essay Contest that might inform us better than any news talk show or presidential debate what we’re up against with our National Budget—and what might be the best course of action we should consider. Everyone in Congress should be required to participate, governors and state legislators who might become future congressional leaders should be encouraged to join in, and op-ed economic analysts invited to submit. The essays would be posted on a Congressional website established specifically to enable the public to vote on the best explanation of the topic. The topic I propose is this:

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