It may have begun with Lehman Brothers, the investment bank that failed weeks ahead of the presidential election in 2008. Treasury Secretary Hank Paulson (formerly of Goldman Sachs) and Federal Reserve Chairman Ben Bernanke (future hedge-fund adviser) then called Ohio Senator Sherrod Brown, according to Rolling Stone, saying “We need $700 billion, and we need it in three days.”
The bank bailout of 2008 was sold as relief for both banks and homeowners, whose mortgages, without their knowledge, propped up an opaque network of bets on their ability to repay them. Many assumed that regulation would follow, to prevent such a crisis in the future. Upon his inauguration, however, President Barack Obama appointed the reliably bank-friendly Tim Geithner as Treasury Secretary. Geithner had helped choose which banks would be propped up with public money, including Citi, which was bailed out three times. In the end, financial institutions like Citi, Bank of America, JP Morgan Chase, Wells Fargo, and Goldman Sachs walked away with, by some accounts, trillions. Two years later, foreclosures hit a record high. The bailout program's inspector general, Neil Barofsky, resigned in March 2011, declaring the program had left homeowners “in a far worse place than they would have been had this program not existed.”
Read Full Article »