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Matt Taibbi on Just How Screwed Americans Were By the Bailout

In a new article, Taibbi argues the government did not just bail out Wall Street, but also lied on the financial sector’s behalf.

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But one of the things he says in this—his lawsuit is that the bailout of AIG was not really a bailout of AIG, it was a bailout of the companies that were owed money by AIG, because they gave 100 cents on the dollar to all the companies—the counterparties of AIG, like Goldman Sachs and Deutsche Bank and Barclays, and that if he were in that position, he would have negotiated a much tougher deal. That’s probably true. I mean, there’s actually some validity to that point, that there’s no way, under any rational circumstances, that those companies should have gotten 100 cents on the dollar for the money they were owed by AIG.

JUAN GONZÁLEZ: William Black, I’d like to ask you about this whole issue of the mortgage settlement that was announced. It is really, to me, amazingly scandalous that, years later, justice has not been forthcoming for all of these homeowners who lost their homes. I think the settlement calls for about $3.5 billion in cash to some three million homeowners; that works out to maybe about $1,000 a homeowner. And here we had instances of banks, with the massive robo-signings, evicting people from homes that they didn’t even legally own at the time. And the thing became such a mess that the government review ended up wasting about a billion dollars just on the consultants hired to review all the bank foreclosures. What do you make of this settlement?

WILLIAM BLACK: So, the first thing is, this is more of what Matt and people like me have been writing about for years: the complete immunity of the elite Wall Street folks who caused this crisis through fraud, who became wealthy because of those frauds, and were then bailed out as a result of their frauds. None of them are being prosecuted. So we have admissions—and, by the way, this would have continued but for the discovery of this fraud. In other words, the banks weren’t stopping it on their own.

The robo-signing, that means what they were doing was lying systematically to the tune, typically, of the large places, of 10,000 times a month, so over 100,000 times a year, committing felonies that would lead to people being made homeless in America, in many cases. It’s just an astonishing aspect that nobody has gone to prison for all of this and that they gave them one of the largest grants of immunity you’ll ever see.

Second thing, as you say, the money in the press reports is grossly inflated. There’s only about $3 billion in cash. You’re quite correct, that works out to less than $1,000 per victim. So it is exactly what Barofsky quotes Geithner as saying, that these housing programs were not designed for the victims; they were designed to, quote, "foam the runways" for the banks to reduce their loss exposure. So the rest of the supposed $5 billion in settlement is really just what in the commercial world we call "troubled debt restructurings," which are the things you would do anyway if the government didn’t exist, because in most cases it’s better for the bank not to have the default, to instead reduce the principal slightly. So, none of that is actually a bailout. None of it is actually a settlement. It’s just the banks doing that which will profit maximize for the banks anyway.

AMY GOODMAN: ...June, when JPMorgan Chase’s Jamie Dimon testified on Capitol Hill. This is Oregon Democratic Senator Jeff Merkley questioning Dimon.

SEN. JEFF MERKLEY: In 2008, 2009, your company benefited from half-a-trillion dollars in low-cost federal loans, $25 billion in TARP loans, of TARP funds, untold billions indirectly through the bailout of AIG that helped address your massive exposure in repurchase agreements and derivatives. With all of that in mind, wouldn’t JPMorgan have gone down without the massive federal intervention, both directly and indirectly, in 2008 or 2009?

 
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