The Fraud Started At the Very Top: With Government Leaders → Washingtons Blog
The Fraud Started At the Very Top: With Government Leaders - Washingtons Blog

Tuesday, November 2, 2010

The Fraud Started At the Very Top: With Government Leaders

The government's entire strategy now - as during the S&L crisis - is to cover up how bad things are.

But it is not only a matter of covering up fraud that has already happened. The government also created an environment which greatly encouraged fraud.

Here are just a few of many potential examples:

  • Business Week wrote on May 23, 2006:
"President George W. Bush has bestowed on his intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations."
  • Tim Geithner was complicit in Lehman's accounting fraud, (and see this), and pushed to pay AIG's CDS counterparties at full value, and then to keep the deal secret. And as Robert Reich notes, Geithner was "very much in the center of the action" regarding the secret bail out of Bear Stearns without Congressional approval. William Black points out: "Mr. Geithner, as President of the Federal Reserve Bank of New York since October 2003, was one of those senior regulators who failed to take any effective regulatory action to prevent the crisis, but instead covered up its depth"
  • The former chief accountant for the SEC says that Bernanke and Paulson broke the law and should be prosecuted
  • The government knew about mortgage fraud a long time ago. For example, the FBI warned of an "epidemic" of mortgage fraud in 2004. However, the FBI, DOJ and other government agencies then stood down and did nothing. See this and this. For example, the Federal Reserve turned its cheek and allowed massive fraud, and the SEC has repeatedly ignored accounting fraud. Indeed, Alan Greenspan took the position that fraud could never happen
  • Bernanke might have broken the law by letting unemployment rise in order to keep inflation low
  • Paulson and Bernanke falsely stated that the big banks receiving Tarp money were healthy, when they were not
  • Of course, deregulation by Larry Summers, Robert Rubin, Phil Gramm and many other high-level politicians and regulators also helped to grease the skids for fraud
Economist James K. Galbraith wrote in the introduction to his father, John Kenneth Galbraith's, definitive study of the Great Depression, The Great Crash, 1929:

The main relevance of The Great Crash, 1929 to the great crisis of 2008 is surely here. In both cases, the government knew what it should do. Both times, it declined to do it. In the summer of 1929 a few stern words from on high, a rise in the discount rate, a tough investigation into the pyramid schemes of the day, and the house of cards on Wall Street would have tumbled before its fall destroyed the whole economy. In 2004, the FBI warned publicly of "an epidemic of mortgage fraud." But the government did nothing, and less than nothing, delivering instead low interest rates, deregulation and clear signals that laws would not be enforced. The signals were not subtle: on one occasion the director of the Office of Thrift Supervision came to a conference with copies of the Federal Register and a chainsaw. There followed every manner of scheme to fleece the unsuspecting ....

This was fraud, perpetrated in the first instance by the government on the population, and by the rich on the poor.


The government that permits this to happen is complicit in a vast crime.

In other words, the fraud started at the very top with Greenspan, Bush, Paulson, Negraponte, Bernanke, Geithner, Rubin, Summers and all of the rest of the boys.

As William Black told me today:
In criminology jargon: they created an intensely criminogenic environment. I have no knowledge whether the national security aspects played any role, but the anti-regulatory dogma was devastating.


  1. Can anyone doubt that this climate change from the rule of law to the rule of fraud is a monumental shift?

    The nation is suffering from social dementia and the demographics show that in our near future more people will be losing their minds than losing jobs, homes, and health care.

    Elections are not going to cure that.

  2. Unlike the 'trickle down' theory of wealth, greed and corruption really do trickle down.

  3. The government that allowed private banking to control our money at all is responsible. The original nit wits who squeaked it in and the endless parade of babbling idiots who promote genocidal usury. Let's just all cheat!

    Mathematically Perfected Economy(TM)

  4. GeoWa - thank you for keeping on top of these stories. Hope for Change. Unfortunately, I'm fresh out of hope.

    OT, but I am in Portland, OR, and was going to order shrimp and grits from a local restaurant. I passed when I found out they source Gulf shrimp. I couldn't believe it. But the Halibut was lovely.

    Keep it up.

  5. Sure there is fraud but even if perfect people were in charge, our money system is still fundamentally dishonest.

    Sure, throw em all in jail but the system itself still needs fundamental reform.

  6. Only the big corporations play to gain by war.
    They sell weapons, machinery and food to allies and enemies. Antony Sutton criticized and denounced big corporations and Wall Street that helped fund Hitler and Stalin

    See here

  7. From first commenter: "Elections are not going to cure that." Indeed, the last elections have not only NOT cured that, but decisively proven on the financial front that matters will get much worse as tea partiers as much or more than the blue dog democrats they replaced will be shacking up with and supporting corporate fraud as a matter of "principal principle". If it makes a profit for corporations, it must be good for the country, the mindless mantra goes, no matter the basis of the profit is fraud and middle class extortion.

  8. "Can anyone doubt that this climate change from the rule of law to the rule of fraud is a monumental shift?"

    No, I think it's just the revelation and, perhaps, acceleration of a long-term trend. Even extremely wealthy banana republics like the US reveal their massive levels of underlying corruption when the tide of easy money recedes.

  9. I am beginning to think that our nation is in such distress that we will never find our way out of this mess. Fraud, Corruption, Greed, Extortion, Theft, Unbelievable Debt, Corrupt Politicians, Corrupt CEO's & Corporate Leaders, Corrupt Bankers & Investment Firms, Greedy Attorneys, Unregulated Lobbyists, the list goes on.

    We just had an elections with billions being spent...I can assure you that all will want a return on investment...Our kids and grandkids do not have a prayer!!! We have gone from the greatest nation on earth to something that is unrecognizable.


→ Thank you for contributing to the conversation by commenting. We try to read all of the comments (but don't always have the time).

→ If you write a long comment, please use paragraph breaks. Otherwise, no one will read it. Many people still won't read it, so shorter is usually better (but it's your choice).

→ The following types of comments will be deleted if we happen to see them:

-- Comments that criticize any class of people as a whole, especially when based on an attribute they don't have control over

-- Comments that explicitly call for violence

→ Because we do not read all of the comments, I am not responsible for any unlawful or distasteful comments.