Taxpayers are out of $2.3 billion because of the incompetent and outrageous deal Treasury Secretary Timothy Geithner made with CIT Group (NYSE: CIT) for receiving its bailout funds, according to William Black, professor at the University of Missouri-Kansas City School of Law, and former leading federal banking regulator.
Black stated in an interview: “We put ourselves on the hook in a completely inept way where we lose first. We lose entirely as the taxpayers.”
Black also wondered out loud in the interview what Geithner is still doing in the Treasury Secretary position after such an outrageous and inept performance.
The consequences of his incompetence is taxpayers have now completely lost all the $2.3 billion lent to the massive bank, while senior debt holders are able to recoup 70 percent of their investment loans to the bank.
In an interview Black stated that not only was the “feeding of good money in – good after bad” always a horrible and losing practice, but not taking a senior position on the debt was in reality “throwing money down the drain.” Black adds that this is similar to the initial response to the Savings & Loan crisis, where the response to “accounting fraud was more accounting fraud.” Black concludes that across the board, as far as U.S. regulators like Timothy Geithner and FDIC Chairman Sheila Bair are concerned, they’re in the midst of a full cover-up at this time.
Even Sheila Bair recently empowered financial institutions to keep failing commercial loans on their books while treating them as if they’re good loans.
The faulty reasoning behind hiding the insolvency of banks, according to Black, is the illusion that capitalism is always one step away from self-destruction, which would destroy the economy through its collapse by creating a domino effect which would bring the entire financial sector down.
