Simon Johnson: Big Banks Are Blackmailing the Country

Treasury Secretary Timothy Geithner says "it's not fair. It's deeply unfair," that Wall Street has recovered so strongly from the financial crisis while millions of Americans are still struggling.

As we all know, when America’s banking system nearly imploded in 2008, our entire economy was nearly destroyed. Eight million jobs were lost, trillions of dollars in personal wealth evaporated, and bailouts turned our growing deficit into a black hole we may never be able to escape.

Simon Johnson, professor at MIT’s Sloan School of Business and author of 13 Bankers, says it's not only unfair, but that the bailouts Geithner and others engineered for the nation's biggest banks are dangerous. "They (the banks) really feel they're completely invulnerable," he tells Aaron and Henry in the accompanying clip.  The prevailing thought on Wall Street is, "if things go badly it’s not your problem," he says.

Geithner, interviewed on the Today Show, went on to say that "what happened in our country should never happen again … people were paid for taking enormous risks. It was a crazy way to run a financial system."

What's even crazier is those conditions have gotten even worse thanks to the Too Big to Fail policy, which Johnson says bankers use as "a form of blackmail" on the nation; any mention of reform, and you'll hear the banks respond, "'oh my goodness, there maybe a double-dip recession.'"

But, isn't Geithner right that the economy would be in a depression if it were not for the bailouts? Plus, isn't the government actually going to make money on TARP?

To that, Johnson says nonsense. The cost of the bailouts are far greater than TARP.

Johnson, who is also a member of the CBO’s Panel of Economic Advisers, estimates the debt-to-GDP levels have gone from 40% pre-crisis to 80% post-crisis. "We've doubled our government debt for what?,” he asks. “Because the financial sector screwed up in such a massive, enormous and stupid way."