Home Looting America: Treasury Secretary Paulson Threatened Senators with Martial Law

Looting America: Treasury Secretary Paulson Threatened Senators with Martial Law

The User's Profile Chris Martenson December 2, 2008
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Some people think of Hank Paulson as our Treasury Secretary.  I think of him as a 19 year veteran of Wall Street banking.

At every turn of this entire bailout he has specifically advantaged banks over taxpayers, banks over industry, banks over homeowners, and banks over the future health and prosperity of this country.

Is this surprising for a banking veteran?  No, not really.

But the tactics he used certainly are.  Consider this:

Sen. James Inhofe (R-Ok.) said yesterday that it was Treasury Secretary Henry Paulson who personally told Congressmen that there would be martial law in America if they did not pass the bailout of the banks as demanded by the Bush Administration.

On Oct. 2, Rep. Brad Sherman (D-Calif.) said on the House floor that "Many of us were told in private conversations that if we voted against this bill on Monday the sky would fall, the market would drop two or three thousand points the first day, another couple of thousand the second day, and a few members were even told that there would be martial law in America if we voted no."

Now, Senator Inhofe, speaking on KFAQ radio station in Tulsa, has confirmed who it was that issued this threat.

The interview host Pat Campbell asked Infhofe, "Somebody in D.C. was feeding you guys quite a story prior to the bailout, a story that if we didn’t do this we were going to see something on the scale of the depression, there were people talking about martial law being instituted, civil unrest. Who was feeding you guys this stuff?"

Inhofe replied, "That’s Henry Paulson. We had a conference call early on, it was on a Friday I think–a week and half before the vote on Oct. 1. So it would have been … the 19th of September, we had a conference call. In this conference call and I guess there’s no reason for me not to repeat what he said, but he said, he painted this picture you just described. He said, This is serious. This is the most serious thing that we faced."

I want you to consider that these threats of martial law were being bandied about in the final weeks before a national election.  So the implied threat was that the elections themselves could have been jeopardized as a result.  This is exceptionally serious.  Paulson deserves to be brought up on charges of some sort.

Even leaving aside the implied election threats, such tactics were heavy-handed and unnecessary.This level of arm-twisting speaks of a certain desperation and I think the one hundred-to-one public opposition against the bailout was the impetus for raising the rhetorical stakes to such hysterical levels.

I’m just disappointed that our representatives were swayed by an administration that has proved itself over the years to be willing to use any and all methods to achieve its political aims, including lying and violating the public trust.

Speaking of which, yesterday Bush said this:

As he leaves office, Bush said he felt responsible for the economic downturn because it’s occurring on his watch, but he added: "I think when the history of this period is written, people will realize a lot of the decisions that were made on Wall Street took place over a decade or so" before he became president.

But, of course and as always, reality is a different beast.  This next bit is also from an article printed yesterday:

WASHINGTON – The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents.

“Expect fallout, expect foreclosures, expect horror stories,” California mortgage lender Paris Welch wrote to U.S. regulators in January 2006, about one year before the housing implosion cost her a job.

Bowing to aggressive lobbying — along with assurances from banks that the troubled mortgages were OK — regulators delayed action for nearly one year. By the time new rules were released late in 2006, the toughest of the proposed provisions were gone and the meltdown was under way.

In 2005, faced with ominous signs the housing market was in jeopardy, bank regulators proposed new guidelines for banks writing risky loans. Today, in the midst of the worst housing recession in a generation, the proposal reads like a list of what-ifs:

  • Regulators told bankers exotic mortgages were often inappropriate for buyers with bad credit.
  • Banks would have been required to increase efforts to verify that buyers actually had jobs and could afford houses.
  • Regulators proposed a cap on risky mortgages so a string of defaults wouldn’t be crippling.
  • Banks that bundled and sold mortgages were told to be sure investors knew exactly what they were buying.
  • Regulators urged banks to help buyers make responsible decisions and clearly advise them that interest rates might skyrocket and huge payments might be due sooner than expected.

Those proposals all were stripped from the final rules. None required congressional approval or the president’s signature.

What we are experiencing now was not some random accident.  Plenty of people, myself included, could clearly see where this was all headed.  But the entrenched interests, primarily bankers and their bought and paid for representatives, did not want any limits on their obscene profits and they got everything they desired.

We can draw two conclusions:

  1. Banks have way too much power over our legislative process and have abused that power. Badly.
  2. If it looks like, smells like and acts like a looting operation, it is a looting operation.

Folks, there’s really no kind way to put this.  Not only have we been subjected to the greatest theft of our wealth ever seen, but that looting operation is continuing today.

What can be done about a banking industry that has so thoroughly violated and abused the public trust?

  1. Have banks return all profits from the period in question including claw-backs on all bonuses and dividends paid. 
  2. Eliminate all funding and lobbying money from financial institutions.  Make it a felony with automatic, mandatory jail time for any person or organization found in violation of this stricture.
  3. Immediately nationalize enough banks to allow our society to carry on and let the rest go under.  We can no longer afford for 40% of all corporate profits to be earned by the essentially non-productive industry that is finance.
  4. Begin directly issuing non-interest bearing money from the Treasury.  Why pay the Federal Reserve interest on our own money?
  5. Allow competing currencies to exist in parallel with Federal Reserve Notes.  If the Fed wants to ruin its balance sheet by supporting its broken network of morally and economically ruined banks, we the people should be allowed to choose whether we prefer to conduct our affairs using promise notes from the Fed or some other currency.  Competition is the only known way to assure that businesses remain honest and fair.  Why should the business of money be any different? 
  6. Return accountability to our landscape.  Obama needs to immediately distance himself from the Wall Street led looting operation and do so by announcing that mistakes were made and laws were broken and that accountability will be part of his solution set.  We the people need to see that laws are not just for us.  If our system operates on trust (and it does) then we need to trust that the system is capable of policing itself.  Right now there is zero evidence of that and its absence is rapidly eroding our social contract.