New Economic Perspectives has the article Geithner: “The End of Capitalism as We Know It” by William K. Black. Black makes a couple of important points.
First he talks about an item in David Axelrod’s new book.
… the finance guys argued that retroactive steps to claw back the money would have violated existing contracts.
Notice that there is a contradiction in the description of the issue. Preventing banks that received bailouts from paying future bonuses is not “clawing back” bonuses. Clawing back bonuses means recovering bonuses that were improperly paid based on false accounting statements that massively overstated bank income. Neither of the practices I have described would have “violated existing contracts.” The people that “violated existing contracts” were the bankers who massively inflated reported net income in order to collect massive bonuses while the bank suffered huge losses and the bankers that made massive bonuses by leading frauds that ripped off customers. Both forms of fraud invalidate any contractual claim by the managers to bonuses. Bankers should not get paid in full under normal bankruptcy provisions when they run the bank into insolvency (including a liquidity crisis).
Second is his comment about capitalism as we know it.
Anyone that wants to save “capitalism” must destroy the current corrupt system “we know” that is posing as “capitalism.” To sum it up, there was no greater service that the Obama administration could have done for (real) capitalism than to produce “the end of capitalism as we know it.” Geithner was absolutely right in his diagnosis and absolutely wrong in his response. Wall Street hates “capitalism” – Geithner and Summers acted to save, rather than exorcize, its corrupt doppelgänger.
The supporters in Congress of the oligarchs claim to be supporters of capitalism and free markets, when, in truth, they support no such things. They actually support oligarchy and controlled markets as long as the oligarchs are in control of the markets.