I UNDERSTAND GEITHNER'S THINKING

(h/t Atrios)

The banks were in such bad shape that Geither thought forcing them to eat some of their greedy mistakes would push them over the edge:

Obama’s efforts to aid homeowners, boost housing market fall far short of goals
By Zachary A. Goldfarb, Published: October 23
Washington Post

Geithner, who was also the point man for stabilizing the financial markets, worried that some steps to help homeowners could pose risks to the financial system, causing more harm than good.

What Geithner doesn't seem to understand is that the banksters as a group have done more harm than good. About 10 days ago, Geithner seemed to promise that some of the banksters would be going to jail:

Liesman pointed out that some Occupy Wall Street demonstrators had voiced frustration that none of the individuals whose actions contributed to the economic downfall and recession in the U.S. had been charged criminally.

“That’s not true,” Geithner said, but did not give details on any criminal charges that had been filed. “And you’ve seen very, very dramatic enforcement actions already by the enforcement authorities across the U.S. government. And I’m sure you’re gonna see more to come, you should stay tuned for that. But we are taking– we moved very quickly to put in place a much stronger set of rules of the game across the financial sector.”

According to William Black, we shouldn't put much trust in Geithner's claim:

WILLIAM BLACK: It all starts with the regulators, which is why it’s all not started here, because we have, of course, the wrecking crew, Bush’s wrecking crew, what Tom Frank called them, in charge, and they stopped making criminal referrals. So our agency, in the savings and loan crisis, made over 10,000 criminal referrals to the FBI. That same agency, in this crisis, made zero criminal referrals. If you don’t get people pointing the way and pointing to the top of the organization, you don’t get effective prosecutions. So, in the peak of the savings and loan crisis, we had a thousand FBI agents. This crisis has losses 70 times larger than the savings and loan crisis. And the savings and loan crisis, when it happened, was considered the largest financial scandal in U.S. history. So we’re now 70 times worse. And as recently as 2007, we had 120 FBI agents—one-eighth as many FBI agents for a crisis 70 times larger. And they looked not at the big folks, but almost exclusively at the little folks.