Let me acknowledge at the outset that I recognize that the topic I'm about to take on is extremely complicated, and that there is the possibility (or likelihood) that I may be missing many pieces of the puzzle (as it were), when it comes down to understanding the current state of the banking system in the U.S., and its implications for the country.
So after that caveat, I'd like for the reader to understand that this is a theory I've developed based on my interpretation of events related to the financial crisis that led to the current economic downturn.
By now the understanding that what led to the late 2000's recession, and real estate and financial sectors crises was a massive fraud perpetrated by Wall Street banks, and enabled by regulators, government officials, and credit rating agencies, among other actors. Many of the details about the wrongdoing were documented in the United States Senate
PERMANENT SUBCOMMITTEE ON INVESTIGATIONS (pdf) report: WALL STREET AND THE FINANCIAL CRISIS: Anatomy of a Financial Collapse. The report was released on April 13th, 2011.
Here's my theory: I think that the extent of the fraud and criminality runs much more deeper than what has been reported. I think that because of this (if true) all major financial institutions may be insolvent, and are currently operating as some sort of "zombie" banks. If so, this may explain why even after the massive bailout of all these institutions, including the $16 trillion in secret loans the Federal Reserve made available to U.S. and foreign banks, there has been no improvement in lending.
What may be happening is that even this extraordinary amount of money used to basically bail out the world financial system to cover the loses stemming from a massive looting of trillions of dollars, may not be enough to stabilize the system. Actually, it may be tantamount to using a bucket to pour water out of sinking ship.
Also, there is the possibility that the use of the very complicated financial instruments deliberately created as ponzi schemes, including credit default swaps, collateralized mortgage obligations, and similar securities, may have created a situation whereas the consequences may have gotten so complicated, that the financial criminals may have lost their ability to fully understand them. This would be akin to a "Financial Frankenstein." Some experts have said that the actual liabilities could be $60 trillion, or more.
I think Obama is an extremely intelligent person. In fact, I believe he is easily one of the top five smarter presidents that have led the country. For years people have been perplexed as to why he would surround himself with Goldman Sachs and Citigroup people. Many theorize (I'm guilty of it also) that he may be in the pockets of Wall Street; that he's currying favor with them in exchange for campaign contributions. In other words, that he's just being a politician; doing what they all do. And that could be a very plausible explanation... And if so, then as a voter I got fooled. But again, that's usually what happens in politics.
But another possibility (and I know I'm on thin ice here) is that being as smart as he is, once he took office, he came to understand how dire (and fragile) the situation really was. That even after releasing almost $20 trillion dollars to these financial institutions, the financial abyss looked bottomless.
And yes, maybe there has been some manipulation by the criminal banksters whereas they may have admitted that things got out of hand, and that because of it the entire economy plunged into the Great Recession, but that things were so out of hand that the entire world financial system could collapse if regulators pushed too hard with investigations of wrongdoing. Aggressive investigations could expose some massive problems, which could push institutions over the cliff, and then cause a domino effect, and bring down the entire world economy.
If so, it may explain why the Obama administration is working so hard to help cover up or whitewash financial crimes committed by Wall Street criminal bankers.
If one does a cursory study of what led to the 1980's Savings & Loans crisis, one could see the similarities: Influence peddling by lobbyist led politicians to deregulate the financial sector, which then allowed Wall Street and Savings & Loans executive to devise ponzi schemes ("sophisticated" financial instruments) to steal tens of billions of dollars. The similarities are uncanny.
Now, if one considers this situation, against the backdrop of the current gangster and thuggish Republican opposition, Obama may be actually in the midst of one of the most difficult challenges any president have ever confronted.
I've been a strong critic of the president on many issues, including his apparent coziness with Wall Street banksters, and the appointment of baking executives to his economic team, and his unwillingness to push the Justice Department to investigate what is clearly criminal wrongdoing by large financial institutions. But I'm willing to consider the possibility that he may be dealing with nothing less than trying to prevent a huge financial global meltdown.
Now, and getting into even thinner ice here, my take is that the financial system is indeed insolvent. I think that it may unravel and create another major financial shock, and this in turn may be the issue that's going to take precedence during the 2012 election season.
If so, I think the big mistake was trying to keep afloat a financial system that had been basically taken over by a criminal cartel and is totally corrupt. It would have been a better option to launch full investigations, and if those investigations led to the conclusions that the banks were insolvent (due to the massive looting), then the banks should have been liquidated, the criminals should have been prosecuted (and this would have strengthen the social fabric of the country), and the banking system should have been nationalized.
We'll see what happens. Again, I think that we're in for more "big news" when it comes to the banking sector.