Often also called an activist, Mr. Keiser created quite a stir a few days ago when, on an Al Jazeera program, he claimed that Greece, for the past decade, has fallen victim to the “economic
terrorists” of the Wall Street banking systems and the IMF. In the
interview which followed, he claimed “if the Greeks want to be protected
from the IMF, then they should nationalize their banks thus
establishing government owned institutions so as to revive the banking
system”, while at the same time “ceasing to pay back the loans which
were issued illegally” via “cooking the books” of the Greek economy by
Goldman Sachs. He proposed the expulsion from the country of American
banks as well as the IMF. The consequence will be “two or three years of
heavy recession”, during which time Greece will be able “to rebuild its
economy”, ensuring its economic independence.

via The IMF Flag Reads: ECONOMIC SLAVERY.

Since I started covering the financial crisis a year and a half ago, I’ve been getting a lot of letters that say things like, “This all sucks. But what should we do about it? If you don’t have any answers,
what’s the point?”

I don’t want to get into this too much since I have more on this coming out in my book, but I would like to point out some of the answers other people are providing to this question. One is this above plan
from the hilariously blunt Max Keiser, whose “Goldman
Sachs are scum” interview was one of the comedy highlights of 2009.

Keiser in an interview basically says that the debts countries like Greece owe to banks like Goldman, Sachs for loans and rate swaps are illegitimate since they were criminal deals, made with the intent to
cook Greece’s books and defraud the citizens of Greece out of their tax
money. He therefore proposes that Greece should simply stiff Goldman for
those obligations and that, furthermore, American banks should be
expelled from the country while the government temporarily nationalizes
its banking system and establishes its independence from the financial
services industry.

I’m not sure I know enough about what the consequences of a plan like that would be to say whether this is feasible or not. But I think Keiser’s idea does underline an important point about the situation,
which is that as powerful as these Wall Street banks may seem, they are
also exquisitely vulnerable. Right now virtually all of them are
dependent upon the government keeping accounting standards lax enough
for all of them to claim to be functional businesses. It is generally
accepted that if the major banks on Wall Street were forced to mark all
of their assets to market tomorrow, they would all be either insolvent
or close to it.

Thus their “healthy” financial status is already illusory. So imagine what would happen if large numbers of those dubious loans on their balance sheets that they have marked down as “performing” were suddenly
pushed ahead of time into the default column. What if Greece, and the Pennsylvania
school system, and Jefferson County, Alabama, and the countless
other municipalities and states that are wrapped up in these corrupt
deals just decided to declare their debts illegitimate and back out?

I think it’s an interesting question and would like to hear what knowledgeable people in the field have to say about it. But the big picture, to me, is that these companies are almost totally dependent not
only upon the continued good faith of aggrieved debtors, but upon the
government recognizing the (sometimes fraudulent) loans made to those
debtors as fully performing. I’m waiting for some canny politician to
use those two facts as a hammer to make them all get in line. Thoughts?