Wall St's 10 Biggest Lies of 2010
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What a great year for Wall Street: profits up, bonuses up and, best of all, criticism down, especially from Washington. Somehow Wall Street has much of America believing its lies and rationalizations. We're even beginning to forget that Wall Street is largely responsible for the economic mess we're in.
So before we're completely overtaken by financial Alzheimer's, let's revisit Wall Street's greatest fabrications for 2010. (For the full story, please see The Looting of America.)
1."Honest, we didn't do it!"
Two years ago Wall Street's colossal greed crashed our economy. Our financial elites created and spewed highly leveraged toxic assets around the globe. These poisonous "innovations" pumped up the housing bubble and Wall Street grew insanely rich in the process. When it all burst, we learned that the big Wall Street institutions that had caused the crash were far too big to fail -- and too connected. High government officials came to their rescue with trillions in cash and guarantees -- underwritten, of course, by we taxpayers. Everyone knew this at the time. But if you asked just about anyone on "The Street" they denied all culpability and pointed the finger everywhere else: Fannie, Freddie, the Fed, the Community Reinvestment Act, tax deductions for home buying, bad regulations, not enough regulations, too many regulations, too much consumer debt, the rating agencies, the Chinese -- and on and on. Sadly, their blame-shifting strategy worked, bamboozling the media and people across the political spectrum. The GOP members of the Financial Crisis Commission are so drunk with this Kool-Aid that in their minority report, they refuse even to use the words "Wall Street" or "speculation" in assessing the causes of the crash. Hypocrites? Crooks? Morons? Take your pick.
2."The overall costs will be incredibly small in comparison to almost any experience we can look at in the United States or around the world."
Ever since Treasury Secretary Timothy Geithner screwed up his tax returns we knew he was numerically challenged. But his statement to Congress on December 16, 2010, on the cost of the bailout shows a willful inability to count. Yes, Wall Street has paid back most of our bailout funds. Whoopee! Our economy is in shambles, and millions of people are suffering. With his offensive "no big deal" analysis, Geithner glosses over all this human misery, and sidesteps the hidden costs of the bailout, including the financial insurance we taxpayers provided to every giant financial company in the country via the Fed. On the open market, that insurance -- which guarantees trillions of dollars in toxic assets -- would come at a very steep price. We coughed it up for free. But that's still chump change compared to the human costs of the worst employment crisis since the Great Depression -- the lost income, the depleted savings, the ravaged neighborhoods. Then there's the capsized state and local budgets, the public service reductions, the laid off teachers, firefighters and police officers -- all resulting from a plunge in public revenues caused by Wall Street's crash. Why aren't these costs on Geithner's balance sheet? A cynic might think Tim was priming us to accept the latest round of Wall Street bonuses. Hey -- they paid us back, so why should we care how much they earn?
3. "It's a war. It's like when Hitler invaded Poland in 1939."
Steven Schwarzman is supposed to be brilliant. After all, he made billions as head of the Blackstone Group, a private equity company and hedge fund. But last August, as some members of Congress mulled about eliminating a very lucrative tax loophole, he suffered a mental meltdown and saw an impending Nazi invasion. But the awful attack never happened. Schwartzman and his fellow hedge fund honchos all held onto their unbelievable tax break: Hedge fund and private equity income is still only taxed at 15 percent rather than at the top income tax rate of 35 percent. (That's because, inexplicably, it's considered "capital gains," not income.) Taxing Schwartzman's income as income would cost him hundreds of millions of dollars -- and the prospect of this apparently triggered a shock spasm that catapulted his foot into his mouth. I'm sure my IQ isn't high enough to keep up with the genius logic behind Steve's analogy. But just who is Hitler and who is Poland in his scenario? Maybe in his grandiose conceit, his firm is as big as Poland? Or it would require a Blitzkrieg to wipe out his tax loophole? In reality, even if Schwarzman had to pay a 90 percent tax rate (as he would have under Eisenhower), it would hardly have been a hardship -- let alone World War 3. He'd still have more money than he could ever spend in his lifetime. Schwarzman should be proud though: He gets 2010's Dumbest Wall Street Quote of the Year Award. Bravo! (In 2009 the honor went to Lloyd Blankfein, CEO of Goldman Sachs, who claimed he was "doing God's work."