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Fed's Bank Aid is 'Same Scam Continuing': Spitzer

We won’t know if these bank stress tests are real until we see how the government measures them, said Eliot Spitzer, former governor of New York.

Former New York Governor Eliot Spitzer on Squawk Box.
Oliver Quillia for CNBC.com
Former New York Governor Eliot Spitzer on Squawk Box.

"What we have seen is a breakdown of capitalism," Spitzer said in a live interview on CNBC. "We have seen a libertarianism driven by Alan Greenspan's worldview that was absolutely destructive to the life-savings of middle-class Americans. The Fed has been sliding [money] into these banks through hidden mechanisms, lowering interest rates, this notion of converting the common stock…It is the same scam continuing—and this should not continue."

Spitzer criticized the bank stress tests and said the middle class will suffer the most as a result. He said that without any change in bank behaviors, the banking crisis would only continue to persist and grow.

“Regulators were supposed to have been asking the same question years ago," he said. “What we have done is shift the obligation from the backs of corporations to shareholders. I’m not even sure we’re seeing cosmetic changes at this point. We still have the same banking system in place that got us into this mess. I have not seen any changes in behavior."

In the meantime, Spitzer said private sector jobs are crucial to a long-term stability in the job markets.

“I don’t see jobs coming in the middle class sector over the long haul,” he said. “Where I see them coming are in sectors that are quasi-public: education, health care and government…[But] you cannot sustain an economy based on growth in those sectors because they are directly and indirectly supported by tax dollars. What we need are private sector jobs that permit real-value, real-savings and that will confront over the long haul balance of payment deficits we have.”