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Paulson, Bernanke Caught Lying
Analysis of recent comments from Treasury secretary, Fed chairman shows they purposefully hid truth
By Mick Youther
I must not have kept up with the news for a couple of days, so I was pretty surprised when I woke up Sunday morning and discovered that the U.S. economy was in free fall and the American way of life was teetering on the brink of disaster.
I thought the American economy was strong. How could I be so wrong?
“The economic stimulus package that I signed earlier this year is having its intended effect. Many Americans who received tax rebates are spending them. Businesses are taking advantage of tax incentives to purchase new equipment this year. And there are signs that the stimulus package will continue to have a beneficial impact on the economy in the second half of the year.”—GeorgeW. Bush, August 30, 2008
Okay—that was Bush, and we all know he’s a cockeyed optimist (and pathological liar), so we can’t really believe what he says about the economy . . . or the war . . . or the environment . . . or torture . . . or the time of day. But straight-talking maverick war hero John McCain has also said that our economy was “strong” at least 18 times this year.
Was that just political happy talk in an election year?
What did America’s top economic experts have to say? FEDERAL RESERVE CHAIRMAN BEN BERNANKE SAID:
“[T]he agencies have made clear that no bank is too big too fail, so that bank management, shareholders, and uninsured debt holders understand that they will not escape the consequences of excessive risk-taking”—
11/15/05.
“The risk of moral hazard must be considered in designing government-backed programs; such programs should not bail out failed investors, as doing so would only encourage excessive risk-taking.”— Committee on Financial Services, House of Representatives, 9/20/07.
It is not the responsibility of the Federal Reserve— nor would it be appropriate—to protect lenders and investors from the consequences of their financial decisions”— speech at the Economic Club of New York,
11/15/07.
“I don’t anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system.”—, 2/29/08.
“[Freddie Mac] . . . no danger of failing. [Fannie Mae] . . . adequately capitalized”—7/16/08.
U.S. TREASURY SECRETARY HENRY PAULSON SAID:
“This is far and away the strongest global economy I’ve seen in my business lifetime.”— 6/12/07.
“I don’t see [subprime mortgage market troubles] imposing a serious problem. I think it’s going to be largely contained.—4/20/07
“We’ve got strong financial institutions. . . . Our markets are the envy of the world. They’re resilient, they’re . . . innovative, they’re flexible. I think we move very quickly to address situations in this country, and, as I said, our financial institutions are strong.”— 3/16/08.
“In my judgment, we are closer to the end of the market turmoil than the beginning.”—5/16/08.
[I]t’s a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation.”—7/20/08.
“Moral hazard is something I don’t take lightly. I never once considered that it was appropriate to put taxpayer money on the line in resolving Lehman Brothers.”—9/15/08.
Now these same economic experts say the economy is 
Bernanke called the current problems the “most severe financial crisis” in the post-World War II era. Investment banks are seeing “tremendous runs on their cash,” Bernanke said. “Without action, they will fail soon.”—11/19/08.
Comedy Central’s Colbert Report put it a little more eloquently: “Oh my God society is collapsing and we will soon be devouring each other in the streets like dogs and a crippled one-eyed boy will be king if we don’t fix this by next week.”—9/23/08.
There is no need to worry, though. The same economic experts who failed to recognize the problem (or lied about it for months) now have a plan to save the day. All we have to do is hand over at least $700 billion to Treasury Secretary Paulson, along with unprecedented dictatorial powers to do whatever he wants, with no oversight and no review:
“Decisions by the [treasury] secretary pursuant to the authority of this act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”—Section 8 of the administration’s Wall Street bailout plan.
But this time the Bush administration made a tactical error. The so-called Democratically controlled Congress has been so gutless and easy to manipulate that the White House got careless. Instead of burying the more odious and unconstitutional parts of their bailout plan in the usual 300-page snow job, their proposal was only three pages long. This allowed some senators and representatives to take the highly unusual step of actually reading the proposal before signing off on it. More importantly, the Internet allowed Americans to read the proposal and plainly see the administration’s plan to bail out the companies who caused the problem.
In response, constituents have bombarded congressional offices with calls, faxes and Internet petitions condemning the Wall Street bailout. Spontaneous protest demonstrations have taken to the streets in towns and cities across the nation and on Wall Street.
When Congress didn’t immediately rubberstamp the Wall Street bailout plan, Bush went on television and threatened Americans with the economic equivalent of a “mushroom cloud.”
John McCain dramatically “suspended” his presidential campaign, so he could devote his full attention to grandstanding during the economic “crisis.” He also suggested canceling the scheduled presidential debate, claiming the dog ate his homework.
President Bush convened a one-hour economic summit, inviting congressional leaders and presidential candidates Obama and McCain. Once this ill-timed interruption was over, everyone went back to doing important things.
It doesn’t take an economist to know that loaning money to people who cannot possibly pay it back is good business——if you have a sucker to bail you out in the end. In this case, the sucker is the same one who ends up paying for the administration’s mistakes—the American taxpayer.
Americans can only hope that Congress will take the advice David Kay Johnson of the New York Times sent in a memo to the media: “In covering the proposed $700 billion bailout of Wall Street don’t repeat the failed lapdog practices that so damaged our reputations in the rush to war in Iraq and the adoption of the Patriot Act. Don’t assume that Congress must act instantly, as so many news stories state as if it was an immutable fact. Don’t assume there is a case just because officials say there is.”
MICK YOUTHER is a retired Southern Illinois Univ. professor.
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(Issue # 41, October 13, 2008)
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