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TPM: Bush Administration Kept Congress in the Dark Before 2008 Collapse

by: Jennifer Daler

Mon May 03, 2010 at 16:08:28 PM EDT
Talking Points Memo is reporting that according to US House Speaker Nancy Pelosi, the Bush administration did not allow top officials dealing with financial matters, including then Treasury Secretary Henry Paulson, to report the impending economic collapse to Congress.

If accurate, the allegation could constitute a major indictment of the Bush administration, which may have worsened the crisis and resulting economic fallout by delaying the call for congressional action. Pelosi says the admissions from Bush administration officials that they had kept Congress in the dark came in private conversations between her and those officials in person and by phone.

It turns out that after the collapse of Lehman Brothers and the Federal Reserve's giving the New York Fed permission to lend $85 billion to AIG, it was Pelosi who called Paulson to ask for a briefing the following morning.

"They said, 'That will be too late. That will be too late. Tomorrow morning, 9 o'clock will be too late,'" Pelosi recalled.

In a meeting that evening with Congressional leaders and staff, Paulson, Fed Chairman Ben Bernanke, and others offered a dire assessment, and made an appeal for intervention that ultimately resulted in TARP. Bernanke and Paulson beseeched the legislators to act quickly, warning that, the entire U.S. economy might collapse in days without rapid intervention. But Pelosi had a question. "I asked them, and said, 'Why am I calling you - why didn't you call me?," Pelosi said. (bold mine)

TPM reporter Brian Beutler writes that Pelosi told him to ask Paulson what his answer was. But Paulson did not respond to requests for an interview, so Beutler went back to Pelosi.

This time she [Pelosi] agreed to elaborate: "Here's what they said. They said, 'We were not allowed to tell Congress, but since you called, we're going to answer your questions.'"

This is huge. It turns out the economic collapse, which cost countless people their jobs, health care and homes and the imperfect TARP bail-out, was abetted by the Bush administration with malice aforethought.  
Jennifer Daler :: TPM: Bush Administration Kept Congress in the Dark Before 2008 Collapse
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TPM: Bush Administration Kept Congress in the Dark Before 2008 Collapse | 1 comments
Bad timing. (0.00 / 0)
I think that's what we can conclude.  The economic disaster was supposed to prompt the argument and conclusion that it's a bad idea to change horses mid-stream.  Lehman was a sacrifice and a win.

When I first learned that cousin George (George Herbert Walker, IV), who used to be head of foreign capital trading at Goldman Sachs, had recently been lured to Lehman Brothers just before the collapse, I thought to myself "what bad luck."  Since George, IV is the son of George,III, the former head of Stifel Financial Corp., and finance was the family business, George, IV going from Goldman to Lehman probably couldn't be charged to the Peter Principle.  One could presume that George IV was/is qualified.  And, indeed, that seems to be demonstrated by the fact that George, IV has landed on his feet, so to speak.  Because, the Lehman bankruptcy led to a number of subsidiaries being sold off to raise cash, at a significant discount, enabling George and some of his associates to purchase Neuberger Berman and convert it into an employee owned financial services firm.  ("employee owned" seems to have the same status as "family owned" or "closely held" or "private equity"--all categories of enterprise which have little or no reporting requirements to any public agency)

It seems that one of the big holes in the financial regulatory reform effort, which has been pointed out by Alan Grayson and Bernie Sanders, among others, is that private equity firms are going to remain exempt.  Moreover, the big money people seem to have figured out that tapping the money pot via banks turned out to be a big mistake because of the reporting requirements banks face, if only when they fail.  Bank failures looked attractive because the federal insurance covered all risks, but then it turned out the regulators could figure out how the failure came about by looking at the books and the workings of the "market" suddenly became a lot less mysterious.  Cyclical downturns and contractions were suddenly revealed as the consequence of fraud.  Now it's being argued that, if investors know they may lose their shirts, it's not fraud when they do.  That was Goldman story and they're sticking to it.

TPM: Bush Administration Kept Congress in the Dark Before 2008 Collapse | 1 comments

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