The Government Lied When It Said It Only Bailed Out Healthy Banks … 12 of the 13 Big Banks Were Going Bust

The Government’s Entire Strategy Was to Cover Up the Truth

We noted in 2011 that the Geithner, Bernanke and Paulson lied about the health of the big banks in pitching bailouts to Congress and the American people:

The big banks were all insolvent during the 1980s.

And they all became insolvent again in 2008. See this and this.

The bailouts were certainly rammed down our throats under false pretenses.

But here’s the more important point. Paulson and Bernanke falsely stated that the big banks receiving Tarp money were healthy, when they were not. They were insolvent.

Tim Geithner falsely stated that the banks passed some time of an objective stress test but they did not. They were insolvent.

We explained:

[All of the big banks were] insolvent in the 1980s, but the government made a concerted decision to cover that up.

Financial writers such as Mish and Reggie Middleton pointed out in late 2007 and early 2008 that B of A was again insolvent.

Nouriel Roubini noted in January 2009 that the entire U.S. banking system is “bankrupt” and “effectively insolvent”:

“I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,” Roubini said at a conference in Dubai today. “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion.”

***

“The problems of Citi, Bank of America and others suggest the system is bankrupt,” Roubini said. “In Europe, it’s the same thing.”

We noted earlier this year:

The American government’s zero interest rate policy is very much like the British Libor manipulation scandal … it’s nothing but an attempt to breathe life back into the insolvent banks, at the expense of the taxpayer.  And see this.

And the “financial reform” laws passed in the wake of the crisis have, in some ways, actually weakened regulations of the financial markets, allowed the big banks to get a lot bigger, and have intentionally allowed fraudulent accounting (and see this).

Likewise, the “stress tests” in both Europe and America have been a total scam … a naked attempt to put lipstick on a pig to cover up the fact that the big banks are insolvent.

Matt Taibbi adds details to the bailout scam:

The main reason banks didn’t lend out bailout funds is actually pretty simple: Many of them needed the money just to survive. Which leads to another of the bailout’s broken promises – that taxpayer money would only be handed out to “viable” banks.

Soon after TARP passed, Paulson and other officials announced the guidelines for their unilaterally changed bailout plan. Congress had approved $700 billion to buy up toxic mortgages, but $250 billion of the money was now shifted to direct capital injections for banks. (Although Paulson claimed at the time that handing money directly to the banks was a faster way to restore market confidence than lending it to homeowners, he later confessed that he had been contemplating the direct-cash-injection plan even before the vote.) This new let’s-just-fork-over-cash portion of the bailout was called the Capital Purchase Program. Under the CPP, nine of America’s largest banks – including Citi, Wells Fargo, Goldman, Morgan Stanley, Bank of America, State Street and Bank of New York Mellon – received $125 billion, or half of the funds being doled out. Since those nine firms accounted for 75 percent of all assets held in America’s banks – $11 trillion – it made sense they would get the lion’s share of the money. But in announcing the CPP, Paulson and Co. promised that they would only be stuffing cash into “healthy and viable” banks. This, at the core, was the entire justification for the bailout: That the huge infusion of taxpayer cash would not be used to rescue individual banks, but to kick-start the economy as a whole by helping healthy banks start lending again.

This announcement marked the beginning of the legend that certain Wall Street banks only took the bailout money because they were forced to – they didn’t need all those billions, you understand, they just did it for the good of the country. “We did not, at that point, need TARP,” Chase chief Jamie Dimon later claimed, insisting that he only took the money “because we were asked to by the secretary of Treasury.” Goldman chief Lloyd Blankfein similarly claimed that his bank never needed the money, and that he wouldn’t have taken it if he’d known it was “this pregnant with potential for backlash.” A joint statement by Paulson, Bernanke and FDIC chief Sheila Bair praised the nine leading banks as “healthy institutions” that were taking the cash only to “enhance the overall performance of the U.S. economy.”

But right after the bailouts began, soon-to-be Treasury Secretary Tim Geithner admitted to Barofsky, the inspector general, that he and his cohorts had picked the first nine bailout recipients because of their size, without bothering to assess their health and viability. Paulson, meanwhile, later admitted that he had serious concerns about at least one of the nine firms he had publicly pronounced healthy. And in November 2009, Bernanke gave a closed-door interview to the Financial Crisis Inquiry Commission, the body charged with investigating the causes of the economic meltdown, in which he admitted that 12 of the 13 most prominent financial companies in America were on the brink of failure during the time of the initial bailouts.

On the inside, at least, almost everyone connected with the bailout knew that the top banks were in deep trouble. “It became obvious pretty much as soon as I took the job that these companies weren’t really healthy and viable,” says Barofsky, who stepped down as TARP inspector in 2011.

***

A month or so after the bailout team called the top nine banks “healthy,” it became clear that the biggest recipient, Citigroup, had actually flat-lined on the ER table. Only weeks after Paulson and Co. gave the firm $25 billion in TARP funds, Citi – which was in the midst of posting a quarterly loss of more than $17 billion – came back begging for more. In November 2008, Citi received another $20 billion in cash and more than $300 billion in guarantees.

We’ve repeatedly noted that the government’s whole strategy in dealing with the financial crisis is to cover up the fraud, and Taibbi notes:

Now, instead of using the bailouts as a clear-the-air moment, the government decided to double down on such fraud, awarding healthy ratings to these failing banks and even twisting its numerical audits and assessments to fit the cooked-up narrative.

***

A key feature of the bailout: the government’s decision to use lies as a form of monetary aid. State hands over taxpayer money to functionally insolvent bank; state gives regulatory thumbs up to said bank; bank uses that thumbs up to sell stock; bank pays cash back to state. What’s critical here is not that investors actually buy the Fed’s bullshit accounting – all they have to do is believe the government will backstop Regions [bank, as one example] either way, healthy or not. “Clearly, the Fed wanted it to attract new investors,” observed Bloomberg, “and those who put fresh capital into Regions this week believe the government won’t let it die.”

Through behavior like this, the government has turned the entire financial system into a kind of vast confidence game – a Ponzi-like scam in which the value of just about everything in the system is inflated because of the widespread belief that the government will step in to prevent losses. [Exactly.] Clearly, a government that’s already in debt over its eyes for the next million years does not have enough capital on hand to rescue every Citigroup or Regions Bank in the land should they all go bust tomorrow. But the market is behaving as if Daddy will step in to once again pay the rent the next time any or all of these kids sets the couch on fire and skips out on his security deposit. Just like an actual Ponzi scheme, it works only as long as they don’t have to make good on all the promises they’ve made. They’re building an economy based not on real accounting and real numbers, but on belief.

And see this.

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  • Warren Celli

    Regarding your title; “The Government Lied When It Said It Only Bailed Out Healthy Banks … 12 of the 13 Big Banks Were Going Bust”

    The government didn’t lie, the big banks lied. The big banks own and control the government lock stock and barrel.

    The sociopaths afflicted with Xtrevilism are masters of the Noble Lie and deception. The ‘good’ guys are really the bad guys.

    http://www.boxthefox.com/articles/premiere%20article.html

    Deception is the strongest political force on the planet.

  • Roberta Kelly

    MAKE BELIEVE. The “Belief System” via “House of Rothschild” sold to the ignoramuses US of A, is and always was about the cannibals MAKE BELIEVE. Cannibals never their their own species that they MAKE BELIEVE “MONEY” so their own species pay to get eaten down to the bone marrow and then the mother suckers don’t quit till there’s no more sucking sounds.

    http://www.theartof12.blogspot.com

    WE ARE JUST GETTING STARTED AGAIN AFTER HIDING FROM THE CANNIBALS, not exactly successfully as what could of, should of, but then would have been better to commit suicide so the face eating zombies can no longer eat our souls?

    Thank you for all you do Washington’s Blog, now let us paper trail these cannibals into the toilet and flush them where the universe recycles the dense, coarse, gross vile evil energies.

  • Roberta Kelly

    …Cannibals never tell their own species that MAKE BELIEVE “MONEY” pays for the flesh eaters to slave trade in the COURTS “government” PUBLIC RETIREMENT PORTFOLIOS [PERS].

    TRANSPARENCY IS BEST IN LIGHT OF INVISIBLE CANNIBALS RUNNING AMOK.

  • gozounlimited

    When corporate/government bailouts aren’t enough …. Suck the blood of Stupified New Yorkers

    Government
    Idea: Let’s Ruin The Weather Then Soak People For It …. to save the
    banksters…..
    http://aircrap.org/government-idea-lets-ruin-the-weather-then-soak-people-for-it/336296/

    Lets
    see how many are left in NY after geoengineered Sandy ….
    http://www.project.nsearch.com/video/hurricane-sandy-is-a-geoengineered-assault-on-humanity
    ……and manufactured pandemics……..
    http://tv.naturalnews.com/v.asp?v=a46fbd767d4336dc314f325168b05481

    ‘Severe’
    Strain Of Flu Reaches Epidemic Proportions In New York City …
    http://www.prisonplanet.com/farley-%E2%80%98severe%E2%80%99-strain-of-flu-reaches-epidemic-proportions-in-new-york-city.html

    Government
    lies, and soon to be (allot of dead people in NY)….. why we in Cali
    protect ourselves from that shit by miffin vinegar …. but then I guess
    NYers are too sophisticated to even begin to think about protecting
    themselves and fighting back.

    • gozounlimited

      For personal safety from corporate/government death….. add a few drops of oregano oil in a mister or spray bottle full of water … spray in air and on surfaces around you. Doesn’t hurt anybody …. but sure does kill the pathogens.

      • gozounlimited

        Now the question is Carl….. is this the truth or PSYOP? You can do the research ….. or if you prefer ….. I can do it for you.

    • gozounlimited

      Oh …. and here comes the criminal government’s spokesmen …. Pierce Morgan ….. who feels perfectly comfortable standing on the graves of dead children to argue his BS, as Ben Shapiro points out, while trotting out another victim of government violence to defend his position.

      Piers Morgan Gets OWNED By Ben Shapiro ……… http://www.prisonplanet.com/piers-morgan-gets-owned-by-ben-shapiro.html

      Gabby Giffords Gun Control Hoax- Tucson Shooting False Flag …….. http://www.youtube.com/watch?v=5A84KQ0msos

      • gozounlimited

        Now ….. Piers Morgan and Guests Call for Shooting Alex Jones…. your government in action ….
        http://www.youtube.com/watch?feature=player_embedded&v=IbV2eYla_b8 ….. SICKO’s

        • gozounlimited

          Looks like Pierce avoided the Taft Union H.S. shooting because procedure was the issue not guns. Lackadaisical law enforcement and poor IEP planning, or outright stupidity, brought this child back into the bullying environment without thought of replacing the officer, even after holding a security drill that very morning. Where are the parents of the shooter? To allow your child to enter a hostile environment (where bullying was occurring screams of child endangerment) and if the parents were coerced in any way by the school….the school is going to get their ass sued. That’s the way it goes down in Cali …… Pierce ….. but then Pierce can’t wrap his head around reality…..apparently.

          • gozounlimited

            Pierce also, didn’t mention this ….. Madera California pharmacy owner shoots, kills suspect on 1-8-13

            Police say that two suspects entered the pharmacy from the back
            door. Investigators say at least one of the suspects started shooting.

            The owner of the pharmacy and his mother were inside the business at
            the time. The owner’s mother was shot in the leg. She was taken to the
            hospital but is expected to be okay.

            The pharmacy owner returned fire on the suspects, killing one of them. The other suspect got away.

            read more: http://abclocal.go.com/kfsn/story?section=news/local&id=8946888

    • gozounlimited

      Some research …..

      Global Weather Modification Assault Causing Climate Chaos And Environmental Catastrophe
      http://www.activistpost.com/2013/01/global-weather-modification-assault.html

      Belgian Environmental Study Corroborates Existence and Effects of Weather Modification
      http://www.activistpost.com/2013/01/belgian-environmental-study.html

      THE SKY THAT TELLS A DIFFERENT STORY.

  • Hugh

    So it’s all about trying to maintain confidence in the financial system. But how does Govt bailing out companies which commit fraud inspire confidence?

    Also, I’m curious whether TARP recipients have paid the money back? If so, where did they get the money?

  • amerikagulag

    The government lied???? I’m shocked I tell you! SHOCKED.
    To my way of thinking I can count on one hand the number of times the government has told the truth in the last decade.
    Ummmm…..can you say, “nine-eleven”.

  • http://twitter.com/SwitchYourBank SwitchYourBank.org

    I posted a comment that was deleted (perhaps automatically? I see that others have mentioned this happening).

    I’ve added Washington’s Blog to our site’s blog roll because it’s consistently well researched. Also, I’m making memes that focus on Wall Street corruption. Feel free to use them if you think any would resonate with your audience.

 

 

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