Since I am not as intrepid as ToqueDeVille or Cenk Uygur, I will just pose my questions here in this diary.
The problem I've seen so far in the interviews of I've seen so far (the diarists' referred to above and Bill Moyers's) is that the questioners, while obviously intelligent, did not appear to have the depth of understanding of the issues required to challenge Black's assertions. Instead, they all sort of ended up carrying his jock strap for him while he took a bunch of shots at Timothy Geithner.
So far, I have not heard anything from him that adequately justifies the serious accusations he has made against Timothy Geithner. Nor has he adequately addressed the points raised by Geekesque in his recent diary.
If I had the opportunity to question Prof. Black, I would ask him the following questions:
- Is it your position that it is a legal impossibility for an insolvent Bank Holding Company ("BHC") to own an FDIC insured bank that is not severely undercapitalized? If so, please provide the statutory authority for your claim.
- Is it your position that it would be impossible for BHC's to need $2 Trillion dollars worth of bail out money if the FDIC banks that they own were not severely undercapitalized. If so, please explain.
- Is it your position that it is illegal for the Treasury Department to use taxpayer money to bail out BHC's? If so, please provide the statutory basis.
- If the BHC's were simply allowed to go into bankruptcy, what do you think the impact would be on the global economy?
- What evidence do you have that Secretary Geithner is pursuing the bail out plan to cover up for his personal failings as a regulator rather than a sincere belief that his plan is the best way to avoid a global economic meltdown?
Without good answers to these core questions, Black simply has not offered real support for his accusations. I am not enough of an expert in this area to know the correct answer to these questions, but if it is possible for a BHC to be insolvent while the FDIC insured bank it owns remains solvent and it is legal for the Treasury Secretary to use taxpayer money to bail out BHC's, then Black's allegation that Geithner has not followed the law (delivered with an air of 100% certitude on Bill Moyers) is supposition at best and flat wrong at worst.
Obviously, whether Geithner's plan is the best designed for getting us out of this financial mess is debatable, but Black implies that allowing the BHC's to go bankrupt is no big deal (quote: "banks are the issue. U.S. banks have FDIC insurance and are subject to the PCA law, regardless of whether they are owned by a BHC. Deposit insurance covers only insured banks, not BHCs, so the FDIC, the Treasury and the taxpayers do not owe any obligation to pay their creditors. If the commentator is worried that BHCs will escape receivership, s(he) need not fear. BHCs and insurance companies such as AIG are subject to the bankruptcy laws, which can be used to block and even "claw back" excessive and fraudulent executive compensation.") This is unbelievably glib. Obviously allowing the BHC's to go into bankruptcy is legal possibility and Black knows damn well that the commentator (Geekesque) knows that.
But what would the consequences be? Would it be possible that if we allowed these BHC's to go into bankruptcy that we would have a global financial meltdown that would make the Great Depression look like an Evening at the Improv? Black practically makes it sound like a cost free option and implies that Geithner has devised this plan solely to cover up his own failures as a regulator. But what makes him so damn sure that Geithner (correctly or not) believes that his plan is necessary to avoid econo-geddon?
These questions need to be answered fully and honestly before Geekesque or anyone else need consider tendering an apology to Professor Black.