Lessons for Next US Financial Crisis From Bernanke, Geithner & Paulson

Lessons for Next US Financial Crisis From 3 Key Ex-Officials

WASHINGTON — Three officials who played vital roles in combating the 2008 financial crisis say they worry that the painful lessons from the banking system’s near-collapse a decade ago may be forgotten.

“It is important that people focus on the lessons,” said former Treasury Secretary Henry Paulson. “We are not sure people remember everything they need to remember.”

Paulson, who was at the Treasury’s helm when the crisis erupted in the fall of 2008, and Timothy Geithner, who succeeded him in 2009, joined Ben Bernanke, the former Federal Reserve chairman, at a round-table discussion last week in advance of the 10th anniversary of the crisis.

The turbulent period, in which key financial institutions, including Lehman Brothers, Bear Stearns, Fannie Mae, Freddie Mac and American International Group either failed or nearly did, marked America’s worst financial crisis since the Great Depression.

On Sept. 11, former officials from the Fed, the Treasury and other agencies will meet at the Brookings Institution in Washington to discuss what worked and what didn’t and what should be done to prepare for the next crisis.

“We hope to provide some useful guidance — perhaps more than the three of us had,” Bernanke said.

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3 Responses to “Lessons for Next US Financial Crisis From Bernanke, Geithner & Paulson”
  1. lms53 says:

    yes one big scam it is from the top of the food chain right down to the bottom feeders( your local courts)

  2. William Peterson says:

    “‘The public was angry; they wanted to see us, if not punish the banks, (then) put limits on bonuses,’ Paulson said. ‘I was totally ineffective at having the American people understand that what we were doing was for them and not for Wall Street.'”

    There is so very much that is inaccurate in Paulson’s statement above I don’t know where to begin. Further, any attempt to offer a complete rebuttal would be … overly lengthy.

    I’ll make a couple of attempts at some brief general comments.

    First, 12 USC 1831o establishes two things simultaneously; 1) what courses of action are permissible when an insured depository institution gets into trouble, and 2) what courses of action are not permissible when an insured depository institution gets into trouble. The shortest version is that bailouts are not permissible, and putting the institution into receivership is/was the statutorily required action (hat tip William K. Black). Following this law, this course, wouldn’t have solved, fixed, or resolved, all of the issues, as it applies only to FDIC covered institutions (for example, problems/issues with AIG would not have been covered by 12 USC 1831o). However, in a country that purports to operate in accordance with the rule of law it was the only acceptable course. Further, allowing the failing institutions to actually fail, as opposed to propping them up through bailouts, would have been in line with principles of free market capitalism.

    Second, the largest effect of the bailouts was to “privatize the profits, and socialize the losses.” This dynamic is not new in the US. Those who tout, and espouse, the most and loudest support for capitalism and the free market, and simultaneously express a loathing and disdain for socialism, often overlook this fact. They aren’t really “anti-socialism.” What they are is pro socialism that benefits the few, and anti-socialism that benefits the many.

    Third, courts across the country have been complicit in the consistent, and near complete, abandonment of the rule of law. The outcome of foreclosure cases are predetermined, facts, rules, and law be damned. One need only review a typical trial level foreclosure case to see evidence of this. Rules of evidence, and procedure, and not followed, the judgment of the court is unsupported by facts, and the proceedings are rife with denials of due process and equal protection. Occasionally a homeowner is able to muster for an appeal and obtain a reversal. However, even appellate courts are frequently ruling incorrectly on the most basic, and fundamental, aspects of the law. The new body of law that is being created to protect the banks will eventually be extended to other areas of the law.

    • michele says:

      You are entirely correct. And the same behavior continues. In my mind these three gentlemen should be in prison. Glass Stegall should be reenacted immediately and the banks that are too big to fail, should be allowed to slide into the abyss. There will be NO “recovery” when the next created crisis occurs. The Politicians who have looked the other way while the debauchery continues should be stripped of their pensions. In our state, many judges who over see foreclosures are purchasing the foreclosed properties and flipping them. What have we become as a Nation?

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