Bankers are the Elephants in the Room

Comments on Levitin Addresses Elephant in the Room

The Bankers are the real Elephants in the room.

Dayen writes: "And Levitin in particular singled out the Treasury Department. “The prime directive coming out of Treasury is ‘protect the banks’ and don’t force them to recognize their losses.” That says it in a nutshell, and it was said in open testimony in Congress."

I asked my students the other day why these bankers aren't in jail for selling fraudulent securities? This is the questions William Black asks as well. ( William K. Black on PBS Bill Moyers Journal | The Big Picture). My answer, although a little too simplistic, was that putting these bankers in jail would undermine the public's confidence in the banks, the financial system, and the government. This could cause another run on the banks and an even greater financial collapse. So we're protecting the bankers because our financial institutions are too big to fail (TBTF). But what is the cost of protecting those who by committing fraud helped bring down our entire financial system?

As the Congressional Research Service noted:

"A far greater threat to the broader financial system is the possibility that investors will force financial institutions to buy back hundreds of billions of dollars in soured mortgages, according to a Congressional Research Service report prepared for Thursday’s hearing and obtained by The New York Times.Loan buybacks could shift $425 billion in losses on mortgage-backed securities from the investors that owned them to the banks that helped originate or assemble the securities, according to the report, far more than most estimates floated on Wall Street."

Yes, that's right, by helping the bankers the Treasury is complicit in the same fraud that brought the financial system down. But what about the "poor investors"? But that is not the real question anyway. Why not ask this: But what about the public whose taxes are being used to bail out these banks and protect them in their fraud  -- their criminal conspiracy to defraud investors by selling fraudulent CDOs.


In her testimony before Congress, Julian Gordon argued:


here it is:
"That the foreclosure crisis could cost the public more than $2 trillion dollars in lost value to their homes. Of course, that doesn't include homeowners who have lost their homes due to foreclosure. So the real question is what about the public? If we pay the taxes and we run the government, why, then, is the Treasury screwing investors and undermining our housing wealth? The answer is all too simple: The Bankers are the real Masters of the Universe. The public doesn't count at all.


The Bankers are the Elephants in the room and the Public be Damned. This is a crisis that has filled the public with anger and disbelief. The public is the mouse under the giant foot of the  Elephant, and the government is worried that the Elephant will hurt itself stepping on the mouse.


This situation isn't long sustainable. It is time to start arresting the Bankers for Fraud. Only then can we begin to fix this system. If we can't tame the Elephant, we are doomed to be squashed by the Bankers and the Treasury.


So who is the real Elephant in the room? Only time will tell.


Chris H. Lewis, Ph.D.