Matt Taibbi & Bill Black: Obama's New Treasury Secretary a 'Failure of Epic Proportions'

Continued from previous page

AMY GOODMAN: That’s Jack Lew responding to Bernie Sanders, who, when President Obama announced his nomination of treasury secretary—to treasury secretary of Jack Lew, Senator Sanders said, "We don’t need a treasury secretary who thinks that Wall Street deregulation was not responsible for the financial crisis." Professor Black?

WILLIAM BLACK: Well, I mean, we can agree that he lacks expertise in the area, but he was supposed to have expertise. This was supposed to be his area of expertise, both in his role as OMB head under Clinton, and then, of course, as being in the industry and actually implementing the fruits of this deregulation.

So—and he has the history, in one sense, correct. He says the problem arose before deregulation. That’s true that derivatives were already a problem before deregulation. And so, Brooksley Born proposes to deal with the problem by having a regulation to deal with credit default swaps. And then the Clinton administration, in league with Greenspan, in league with Phil Gramm, and with one of the important architects of all of this being Jack Lew, squashes Brooksley Born to destroy the proposed regulation and to pass something, the Commodity Futures Modernization Act—talk about a dishonest phrase—that not only said, "You, Brooksley Born, cannot go forward with this particular regulation," the statute actually said, "We hereby withdraw all regulatory powers to protect the nation, period. From the federal government, from the state and local governments, we exempt you from the gambling laws. We exempt you from the boiler room laws to prevent fraudulent operations." It’s one of the most extraordinary abusive things in the world, heavily involved with AIG’s ability to produce not just the disaster atAIG, but the disaster of credit—of the CDOs that blew up a larger portion of the world. And those CDOs would not have been possible without these credit default swaps.

So, this is a guy who designed the disaster, participated in the disaster on Wall Street, was made rich by it. We haven’t talked about the fact that he got a huge bonus for destroying—helping to destroy the world at Citicorp. And he got it through the bailout of Citicorp by the U.S. government. So he produces disaster, profits from the disaster, we pay him bonuses for causing the disaster, and then we have the absurdity of the president of the United States saying that this is a man with a track record of unmitigated success. It is exactly the opposite, in terms of finance. He is a worthy successor to Tim Geithner, in that he has screwed up everything substantively he has ever touched.

JUAN GONZÁLEZ: William Black, I’d like to ask you about another aspect of Lew’s portfolio: his stance on austerity. You have raised questions in terms of his continued support of austerity measures, as opposed to efforts by the government to stimulate the economy. Could you talk about that?

WILLIAM BLACK: Yeah, and this is an irony, as well, in terms of the political aspects and Obama. So, under Lew, in his new incarnation a while back as OMBhead of—for Obama, I have a  piece that talks about how OMB under Obama sounds almost exactly like the tea party. So, it adopts all of their rubric about, you know, these terrible social programs, this terrible safety net and how it’s going to imperil our nation, and what we need to do is be balancing the budget—in other words, austerity.

Now, had Obama succeeded in following Lew’s recommendation in July 2011, when they were trying to negotiate the so-called "grand bargain," which is really the grand betrayal of the safety net—unemployment in July 2011 was 9.1 percent. Austerity in the United States would have done just what it did in Europe. Unemployment would have surged. So, all through 2012, the election year, unemployment would have been going up well above 10 percent, quite possibly into the 11 and 12 percent range, which is where it is in Europe. Obama would have been toast; would have been no chance. He would have been crushed in the election. The Democrats would have lost control of the Senate, and such. And these folks, even today, are claiming that the failure to achieve the grand betrayal and to cut the safety net is their great disappointment. So, they not only tried to destroy themselves and the country, they are continuing to do that, and indeed, but for Harry Reid literally throwing the Obama administration’s suggestion that they do cuts to the safety net in the fireplace and burning it up, they would have gotten it as part of this interim austerity deal that was just done about eight days ago.