William Black, professor at the University of Missouri-Kansas City School of Law, says he's dumbfounded by the loss of taxpayer dollars in the failure of CIT:
"We put ourselves on the hook in a completely inept way where we lose first. We lose entirely as the taxpayers," he tells Yahoo Finance Tech Ticker, which also has a video interview.
Black, a former top federal banking regulator, blames Treasury Secretary Timothy Geithner for negotiating such a bad deal on behalf of the American public.
His argument goes as follows:
The government was in no way obligated to lend the struggling CIT money and, in fact, initially refused to provide it bailout funds. More importantly, being the lender of last resort, the government should have guaranteed we'd be the first to get paid if CIT eventually filed Chapter 11. By failing to do so, "it's like he [Geithner] burned billions of dollars again in government money, our money, gratuitously," says Black.
Black believes the problem stems from regulators' fears that if the banks recognize a loss on the bad assets it will create a domino effect that will wipe out the entire financial system.
"If that's true we've got to get rid of capitalism," he warns, "because if we can't recognize losses in a capitalist system we have no future."
Mr. William K Black is as straight a shooter as they come in the economic field. His presentations of not only what happened in the savings & loan fiasco, but how it was recently repeated in a second wave of bank failures, show how little folks know about how to protect their own financial interest. As Balzac said in the 1800s, "Behind every great fortune is a great crime." There is no bigger crime than stealthly stealing from your own countrymen, while in positions of high authority. Disgusting, to say the least.