With all the hype against socialized (a.k.a. single payer) universal health coverage, Wall Street is more than happy to socialize the costs of bad loans on behalf of the largest lenders without corresponding relief from foreclosure (e.g. option to refinance defaulted loans at current market prices), see foreclosure activity increases 9 percent.
The major lenders (e.g. Citibank, Wells Fargo, Bank of America) received bailouts on the order of $8.5 Trillion in government discount loans, loan guarantees and cash infusions obtained so far with Geitner claiming more bailouts might be needed.
With 138 million taxpayers in 2007, this amounts to $61,594 in debt and loan guarantees per taxpayer!
Clearly the banks were at some point insolvent or bankrupt. However at no point in time did the major banks (Citibank Wells Fargo Bank of America) admit to being insolvent in public disclosures.
William K. Black and others claim this is fraud. Black and James Galbraith both claim there is a mandatory law (Prompt Corrective Action Law) that requires FDIC receivership for insolvent banks. They both assert the benefits of prompt corrective action and a beneficial resulting change in management, for example WAMU to Chase in Q4 2008.
From the list of FDIC receiverships, you will find Washington Mutual but not the biggest lenders mentioned above who received bailout funds.
Black also points out that NINJA [No Income verification (i.e. stated income), No Job or Asset verification] mortgages are essentially liar loans.
Over the past decade, these sub-prime loans artificially inflated purchase demand, home prices and home equity and created a market for loan guarantees mainly managed by AIG. Black says the rating agencies fraudulently rated the loan guarantees on liars loans as "Triple-A".
Many economists including a famous Reganomics person, Paul Craig Roberts, believe that the AIG bailouts were also not needed. Roberts believes that declaring most credit swap agreements to be fraudulent will cancel the AIG obligations and would have avoided the AIG bailout.
However none of the mainstream press reported that there was an alternative to giving TRILLIONS to the banks (e.g. FDIC receivership) or an alternative to bailing out AIG prior to the bailout legislations.
Although most banks have voluntarily stopped lending based on "stated income" and low credit scores, the banks remain less regulated than at any time in recent history. For a complete history of the systematic de-regulation over the years, see 4. Review the ideas for regulating the financial markets provided by YES magazine and you will find none have been implemented by the Obama administration.
The Obama administration also does not appear to be interested in prosecuting any of the rating agencies or banks for fraud.
Champions of de-regulation such as "The Economist" and the "Wall Street Journal" repeatedly reject de-regulation as the culprit and instead point to "a lack of understanding" and "errors" made in the grand (and mostly secret) experiment of packaging and selling mortgage and other credit risks.
Obama and Geitner's plan of continued bankster bailouts are failing to address the economic collapse including unemployment, falling home valuations, falling creditworthiness and rising foreclosures, see Bernanke, Senate Report, Whitney and WSWS.
Detailed warnings of exactly the US financial crisis we face were routinely broadcast on CBC national news in Canada during 2007, well before the collapse of Lehman Brothers in the fall of 2008.
Other countries such as Japan have gone through similar banking crises and President Obama cited the 10 years of recession in Japan as a possibility for the US.