With the debt ceiling crisis about to reach the point of no return on Monday, May 16th, Treasury Secretary Timothy Geithner attempted to pressure Congress through fear of a doomsday scenario for the government and the economy in a letter of desperation he sent to legislators on May 13th.
In the letter, Secretary Geithner unfolds a picture of catastrophic and irrevocable damage to both the economy, and the solvency of the entire financial system.
“A default would inflict catastrophic far-reaching damage on our nation’s economy, significantly reducing growth and increasing unemployment…Even a short-term default could cause irrevocable damage to the economy. A default on Treasury debt could lead to concerns about the solvency of the investment and financial institutions that hold Treasury securities in their portfolios, which could cause a run on money market mutual funds and the broader financial system. – Daily Bail
If this sounds familiar to anyone, then all the public needs to do is go back to the 2008 credit crisis that shocked the countries financial system, and recall the similar rhetoric that then Treasury Secretary Hank Paulson used to coerce Congress into bailing out the banks.
Remember when Congressman Brad Sherman of California gave a speech on the House Floor claiming that “a few members were even told that there would be martial law in America if we voted no” on the $700 billion bailout bill as first proposed? The revelation was shocking, and the video of the speech quickly shot around the web.
Now Jim Inhofe, a Senator from Oklahoma (and one of that body’s most conservative members) in an interview on Tulsa 1170 KFAQ points to Treasury Secretary Henry Paulsen as the source of the threats about an economic collapse, civil unrest, and the imposition of martial law if the bailout bill was not passed quickly. – Western Standard
What each of these scenarios painted by the current and former Treasury Secretaries indicate is a failure by the top goverment financial official in recognizing, and dealing with the problems on Wall Street in advance, rather than waiting until the crisis was upon them. Secretary Geithner knew about the upcoming debt ceiling issue going back to January when the new Congress came to power, but instead of working with them to find ways to curb government borrowing, he exacerbated the problem by borrowing more money, and selling more Treasury debt.
What this letter to Congress also intimates is that without government infusion of money, the entire economic system will collapse and fail. This means that the so-called economic recovery has simply been a house of cards that has been stimulated and propped up by government debt with no real job creation, natural business growth, or private industrial production.
As the debt ceiling enters crisis territory starting today, the last desperate move by Treasury Secretary Tim Geithner is to attempt to scare Congress into falling for the same lies that Hank Paulson spun to lawmakers in 2008, and to force Congress into raising the debt ceiling under the auspices of a catastrophic collapse.