tagged w/ geithner
By Nathan Tankus, a student and research assistant at the University of Ottawa. You can follow him on Twitter at @NathanTankus
I can’t emphasize enough how satisfying it is to see Timothy Geithner finally leave government. True, it would have been more enjoyable to see him leave in handcuffs, but I take my satisfaction where I can get it.
The unfortunate part about high level government officials who are utter failures leaving government is that when they leave, journalists still fawn over them. Timmy got plenty of interviews from major media outlets but the longest, and thus most nauseating, came from the Wall Street Journal. Reading it is like watching a horror movie where everyone knows what’s about to happen to the character and are trying to warn him/her through the screen. Except in this horror movie I’m throwing my hands in the air and saying “that lie was debunked years ago!” I don’t have the patience to go through each and every lie told in this interview, but I’d like to hit on the major ones.
Crisis as “Exogenous Shock”
To repeat a theme on Naked Capitalism, this crisis wasn’t, and most crisis aren’t, are exogenous shocks. They come from variables endogenous (internal) to the system at hand. It’s easy however, for policymakers to frame their responses to crises as responses to external trauma. First, it removes the agency of important players from within the private sector and the public sector. Second, it portrays whatever society is experiencing as inevitable, like sand castles washing away in the beach. Tim “I’ve never been a regulator ” Geithner evokes this blatantly false conception here:
Of course, in a severe crisis — the once in a century event, or hopefully it’s a once-in-a-century event — then the system will inevitably come under much, much more pressure. And even the strongest firms come under pressure then. And in that context, our successors are going to have to do exceptional things again if they want to protect the economy from a failing financial system. That’s inevitable.
After all, every century or so humans just happen to be giving out “liar’s loans”, pushing them on unsuspecting investors around the world, and then because they couldn’t find enough real economy risky borrowers, they had to use credit default swaps to create synthetics versions of them, and they did all that so big that they blew up the casino. Don’t you remember the liar loan and derivative trading scandal of 1908, 1808, 1708, 1608 etc? It’s just natural, so please look away.
This is what criminals and deviants tell themselves about their behavior. They just can’t “help” it and it will happen inevitably. In reality, the financial system is a social institution and its malfunctioning is the result of purposeful human action, not the law of gravity. Individual people and institutions were central to setting the stage and developing this crisis to maturity. The entire U.S. regulatory community and large swaths of are banking system were involved. Those loans don’t just pour out like an overfilled cup. Someone chooses to make them. Someone chooses to lie to a borrower until he buys the con. Real people defended this decrepit behavior and real professionals were pushed out of their jobs for not being slimy and criminal enough.
Incidentally, if you know a flood happens once every century, why wouldn’t you spend your time PREPARING for it? What, is this a Ricardian equivalence thing where any attempt to prepare for floods just makes the flood worse? With the exception of the rotting American state, most places prepare for flood season.
In reality, the financial system is a social institution and its malfunctioning is the result of purposeful human action, not the law of gravity.
“The enforcement response… is still unfolding”
This is an incredible one. According to Geithner, it’s not that bankers haven’t gone to jail, it’s that they haven’t gone to jail yet. In the fantasy world Geithner is selling to the public, all the bankers that deserve jail are going to be put in jail… at some future date. See the full quote below:
MR. WESSEL: And other side is, there were repeated accusations about not enough of them were punished to pay for what they did. You never were comfortable with that.
MR. GEITHNER: No, I felt from the beginning and I think this was always a great strength of our system that you had to have an overwhelmingly strong, powerful, credible enforcement response for the rules that they had to live with. And two things happened. One is that the enforcement response, which is still unfolding, took a lot of time to get traction because these things are very complicated. And the public saw a long lag. And of course, the other thing is that a huge part of what happened across the system was just a mixture of ignorance and greed, or hope over experience, and not illegal. Most financial crises are not caused by fraud or abuse. They’re caused by people taking on risks they don’t understand, too much risk. when the tide turns, it can have catastrophic damage.
When exactly are these “enforcement actions” supposed to take effect? The statute of limitations is running out. In addition, the cases the SEC and Department of Justice have pursued they’ve been quick to settle without an admission of guilt and with liability waivers. The most infamous was the much-ballyhooed mortgage settlement in early 2012, which amounted to a few billion dollars in cash, “billions more” in “writedowns” on various mortgage debts of questionable meaning. Perhaps they will pass a special law allowing convictions well past the statute of limitations, as long as the subject is already dead.
Suddenly though, Geithner jumps into a completely different lie that contradicts the lie he was just telling. How can the investigations into criminal behavior be “complicated”, have “a long lag” while he’s completely sure that “a huge part of what happened… was not illegal”? Put aside the fact that we have piles of evidence that contradicts that drivel. It doesn’t even internally make sense to that paragraph. It’s like detectives showing up to a crime scene, taking one glance at the dead body and going “this is going to be a long investigation but I can say right now the subject wasn’t murdered”.
“We were worried”
Geithner then goes on to muddy the waters about his role in the boom. He says things like“My colleagues and I at the Fed….were worried about the risks you saw building up across the system”. He does know that we have meeting transcripts right now that show as late as 2007 he was playing down concerns about the mortgage market and financial institutions like Bear sterns. Yet we’re supposed to believe that in 2004 he and the rest of the Fed were fighting to rein in risk taking but didn’t have the regulatory authority (which is clearly a lie)? Even if they did believe this, why weren’t they in front of Congress asking for more regulatory powers? This is all rather damning whichever way you look at it.
Goodbye Timmy, or so I can Dream
Good riddance. Unfortunately Geithner’s history as a complete and utter failure will probably guarantee him a place as “wise sage” for decades to come. I can at least hope to see and hear of him much less. I must confess to not having the stomach to unpack all the lies and the depth of them in this interview nor the other hagiographies floating around. Feel free to do so in the comments! There are still plenty of juicy lies in there just waiting to be untangled. He even begs for a history lesson about Mexico in 1995, which I may provide in another post.
Somehow I think Jack Lew won’t live up to Timmy’s vileness. But perhaps that’s just wishful thinking.By Nathan Tankus, a student and research assistant at the University of Ottawa. You... more
Yes, perhaps as early as August 2007, at a time when our very own "Tiny Tim" Geitner was head of the NY Fed, it now appears that there were already signs that Libor was being fiddled.
How much did Timmy know? Reuters reports:
"According to the calendar of then New York Fed President, Timothy Geithner, who is now U.S. Treasury Secretary, it even held a "Fixing LIBOR" meeting between 2:30-3:00 pm on April 28, 2008. At least eight senior Fed staffers were invited."
And why did you not tell us about this Timmy me boy? We love you Timmy; but this is not looking good ...Yes, perhaps as early as August 2007, at a time when our very own "Tiny Tim"... more
Very interesting story!
by Robert Scheer
What was Timothy Geithner thinking back in 2008 when, as president of the New York Fed, he decided to give Goldman Sachs a $30 billion interest-free loan as part of an $80 billion secret float to favored banks? The sordid details of that program were finally made public this week in response to a court order for a Freedom of Information Act release, thanks to a Bloomberg News lawsuit. Sorry, my bad: It wasn’t an interest-free loan; make that .01 percent that Goldman paid to borrow taxpayer money when ordinary folks who missed a few credit card payments in order to finance their mortgages were being slapped with interest rates of more than 25 percent.
One wonders if Barack Obama was fully aware of Geithner’s deceitful performance at the New York Fed when he appointed him treasury secretary in the incoming administration. The president was probably ignorant of this particular giveaway, as were key members of Congress. “I wasn’t aware of this program until now,” Barney Frank, D-Mass., who at the time chaired the House Financial Services Committee, admitted in referring to Geithner’s “single-tranche open-market operations” program. And there was no language in the Dodd-Frank law supposedly reining in the banks that compelled the Fed to reveal the existence of this program.
It was merely one small part of that reckless policy of throwing mad money at the banks while ignoring the plight of homeowners whom the banks had swindled, a plan pursued by both the Bush and the Obama administrations that set the stage for the current slide into a double-dip recession. On Tuesday it was reported that home values have continued an eight-month decline back to their lowest point since the recession began. With housing in deep trouble there can be no rebound of consumer confidence or job creation, and the first-quarter growth rate was an anemic 1.8 percent even as Wall Street profits and bonuses flourished. Wages are stagnant, unemployment claims have recently risen and, as The Wall Street Journal headlined on Tuesday, “Economists Downgrade Prospects for Growth.” That same edition of the Journal reported that 44.6 million Americans now survive on food stamps, an 11 percent increase in that misery index over the past year, while Geithner’s friends at Goldman are doing quite well.
Actually, Goldman wasn’t even a bank and was therefore ineligible for those massive government handouts until Geithner helped gain approval for the instant conversion of Goldman from an investment house to a commercial bank. Goldman was granted that status, and with it access to the Fed’s lending, soon after the privilege had been denied to the fellow investment bank Lehman Brothers (the $30 billion mentioned above was in addition to the $43.5 billion Goldman borrowed from other Fed programs). Although Lehman was allowed to go belly up, Geithner engineered the massive bailout of AIG, a move that turned out to be a cover for passing money to AIG’s clients, including the aforementioned Goldman Sachs. The man’s intentions were clear, even if all the secret details were not, when Obama picked him to be his point man in salvaging an economy that Geithner had done much to wreck.
For the rest of the story go to the link provided:Very interesting story!
by Robert Scheer
What was Timothy Geithner thinking back... more
The Treasury announced today:
As US Reaches Debt Limit, Geithner Implements Additional Extraordinary Measures to Allow Continued Funding of Government Obligations
Some of those "extraordinary measures" include raiding federal pensions.
Many pundits claim that governments cannot default on their debt. But as I've previously noted:
One of the world's leading economic historians - Niall Ferguson - has previously pointed out that too much debt can drive countries into default:
There are economic professors in American universities who think they are masters of the universe, but they don't have any historical knowledge. I have never believed that markets are self correcting. No historian could...
"The idea that countries don't go bust is a joke... The debt trap may be about to spring ... for countries that have created large stimulus packages in order to stimulate their economies."
And as I've previously shown, we can't just print our way of our debt crisis.http://www.washingtonsblog.com/
The Treasury announced today:
As US Reaches... more
El billete verde estadounidense ignora los comentarios de Geithner y Bernanke y espera a que el Banco Central Europeo mueva ficha.El billete verde estadounidense ignora los comentarios de Geithner y Bernanke y espera... more
“I don’t have any enthusiasm for ... trying to shrink the relative importance of the financial system in our economy"
-Timothy F. Geithner
According to the man running U.S. economic policy, American banks need to be even bigger in order to take advantage of the 'financial deepening' that is anticipated in emerging markets. So, no, Geithner says, don't shrink the big banks. Make them even bigger.
The problem with this view is that it ignores recent history and all available economic research on bank size. Take the latest study from VoxEU economists for example:(at link)“I don’t have any enthusiasm for ... trying to shrink the relative... more
It’s no secret the role of government-controlled mortgage finance companies Fannie Mae and Freddie Mac has grown out of control.
Reuters says Fannie and Freddie now back 85 percent of new mortgages.
According to Bloomberg, between the two companies and the Federal Housing Administration the three groups own or insure almost 97 percent of all mortgage bonds.
The fate of the mortgage giants has been discussed for a while now, but today action has been proposed.
Treasury Secretary Timothy Geithner announced his recommendation for the future of Fannie Mae and Freddie Mac, and it involves a lot less involvement for the government-controlled mortgage finance companies.
The Obama administration supports this proposal to “wind down" the market share currently held by the government mortgage buyers, but says we should continue to count on Fannie and Freddie as a “backstop” in times of crisis.
The proposal offers three long-term options to reduce the government role and a few short-term steps to raise the cost of government-backed mortgages.
When they were created the two companies insured bond buyers against losses, with an implied promise that the U.S. government would make investors whole if the system failed.
Today, taxpayers have been supporting Fannie Mae and Freddie Mac to the tune of $150 billion since September 2008. All three of the options proposed today would end taxpayer support.
The Three Options
1. Extreme Change
Involves a “privatized” system of housing finance and little help from the government. In this options the government's only role is to help “narrowly targeted” low-income and veteran buyers.
2. Middle Ground
This option would replace Fannie and Freddie with a system aimed at helping low-income and veteran buyers (FHA's traditional target) in normal times and also provide a backup in a crisis. According to the Treasury Department this option is possible through the use of high-priced guarantee fees and restricted amounts of public insurance.
3. Big Government Role
The third option most closely mirrors the current system for the GSEs. Option three would impose even more regulation on Fannie Mae and Freddie Mac and carve out the government's role as “catastrophic reinsurance behind significant private capital.”
* Increase the monthly insurance premiums, or guarantee fees, now charged by Fannie Mae and Freddie Mac. Higher premiums would in theory give other companies incentive to compete for lending.
* Increase Federal Housing Administration premiums by .25 percent/lower the ceiling for loans that Fannie Mae and Freddie Mac can insure. Jumbo loans are currently capped at $729,750 but are scheduled to fall to $625,500 on Oct. 1 if Congress doesn’t act.
* The administration also endorsed an existing law that forces the GSEs to shed loans in their $1.5 trillion portfolios by 10 percent a year as a way to reduce government exposure to failing mortgages.
* Phasing in higher pricing for Fannie, Freddie to a level even with private sector. This move would take place over several years.
Read the full article here: http://www.thinkglink.com/blog/2011/02/11/obama-administration-calls-for-housing-overhaul-winding-down-of-fannie-mae-and-freddie-mac
or read the Industry Reaction to Obama Admin Proposal to Phase Out Fannie Mae and Freddie Mac here: http://www.thinkglink.com/blog/2011/02/11/industry-reaction-to-obama-admin-proposal-to-phase-out-fannie-mae-and-freddie-macIt’s no secret the role of government-controlled mortgage finance companies... more
Newsweek publishes an excerpt of Capital Offense, by Michael Hirsh, who claims the President has not "acted much like FDR," but has "instead...faithfully channeled" NEC director Larry Summers and Treasury Secretary Geithner's "conservative approach to stimulus and reform. Early on, Obama's two key economic officials had argued down Christina Romer, the new chairwoman of the Council of Economic Advisers, when she suggested a massive $1.2 trillion stimulus to make up for the collapse of private demand." According to Hirsh, Summers and Geithner "didn't want to tamper too much with what they still saw as the economy's engine room: Wall Street."
http://www.newsweek.com/2010/08/29/how-obama-got-rolled-by-wall-street.htmlNewsweek publishes an excerpt of Capital Offense, by Michael Hirsh, who claims the... more
Electronic Frontier Foundation, EFF Posts Documents Detailing Law Enforcement Collection of Data From Social Media Sites:
EFF has posted documents shedding light on how law enforcement agencies use social networking sites to gather information in investigations. The records, obtained from the IRS and DOJ Criminal Division, are the first in a series of documents that will be released through a FOIA case that EFF filed with the help of the UC Berkeley Samuelson Clinic.
One of the most interesting files is a 2009 training course that describes how IRS employees may use various Internet tools -- including social networking sites and Google Street View -- to investigate taxpayers.
The IRS should be commended for its detailed training that clearly prohibits employees from using deception or fake social networking accounts to obtain information. Its policies generally limit employees to using publicly available information. ...
The documents released by the IRS also include excerpts from the Internal Revenue Manual explaining that employees aren't allowed to use government computers to access social networking sites for personal communication, and cautioning them to be careful to avoid any appearance that they're speaking on behalf of the IRS when making personal use of social media.
Computer World, IRS, DOJ Use Social Media Sites to Track Deadbeats, Criminal Activity
PC Magazine, EFF Describes How Govt. Gets Info From Social Sites
PC World, Your Next Facebook 'Friend' Could be a Federal Agent
Web CPA, IRS Uses Social Networks for Tax Probes
Wired News, Undercover Feds on Social Networking Sites Raises Questions
ZDNet, The IRS and FBI Are Looking for You on Facebook
more at article...including links to articles.
End the Fed; its a private banking cartel that runs this country for the NWO by creating a monopoly on currency. The income tax is illegal and unconstitutional and so is the IRS. Prior to the US being taken over by a parasitic mafia, we had a budget surplus and no income tax b/c we had tariffs on imports. Free trade is piracy.Electronic Frontier Foundation, EFF Posts Documents Detailing Law Enforcement... more
If this doesn’t convince you that the Timothy Geithner knew about the securities shenanigans that were going on at Lehman, than I don’t know what will.
Keep in mind, that Geithner ran Lehman through 3 “stress tests” prior to bankruptcy; all of which Lehman failed, and yet, nothing was done. Anton R. Valukas–the examiner who wrote the 2,200 page investigative-report which was released on Thursday– has provided plenty of information detailing Lehman’s “materially misleading” accounting and “actionable balance sheet manipulation.”
In other words, they cooked the books.
more at link...
End the Fed.If this doesn’t convince you that the Timothy Geithner knew about the securities... more
"Rep. Ron Paul (R-Texas) made "absolutely bizarre" allegations about the Federal Reserve's involvement in Iraqi weapons deals and the Watergate scandal, chairman Ben Bernanke said Wednesday.
Bernanke appeared before the House Financial Services Committee earlier in the day to deliver testimony.
Paul, a libertarian Republican who opposes the Fed, said that the Fed issued a $5.5 billion loan to Saddam Hussein's regime to buy U.S. weapons during the Iran-Iraq War.
"It has been reported in the past that in the 1980s, the Fed facilitated a $5.5 billion to Saddam Hussein and he then bought weapons from our military industrial complex," he said.
He also said that cash used in the Watergate scandal "came through" the Fed.
Paul made his remarks in support of his effort to audit the Fed's monetary activity.
"Well, congressman, these specific allegations you've made, I think are absolutely bizarre and I have absolutely no knowledge of anything like what you've just described," Bernanke replied."
The Creature from Jekyll Island strikes again. Maybe you too should take a second look at the Federal Reserve. Check out G. Edward Griffin."Rep. Ron Paul (R-Texas) made "absolutely bizarre" allegations about... more
Congressman Ron Paul appeared on Neil Cavuto's Fox Business show last night to discuss the news that Obama intends to enact a spending freeze, a policy the president previously admitted would amount to a "hatchet job".
Paul made a number of salient points, including the fact that a spending freeze flies in the face of the government's actions over the past year and goes against what they would like to see happen - more spending.
"I think they are responding to what they're hearing but they still don't quite understand it, and I would say Congress as well as the president." Paul said.
"They know there's something going on but they're lost as to what to do because they can't change the philosophy of government, they can't change the welfare state or the warfare state. So they have to talk about this."
"This talk of freezing a few of the expenditures, it doesn't start 'til 2011, and it won't happen. That proposal of Obama's actually would allow foreign aid to go up, but the air traffic controllers would be frozen, could you imagine that passing the Congress? This is just talk." Paul added.
The Congressman explained that freeze on spending, akin to a crash course diet for the government after months of pigging out, would be in direct conflict to the preponderate view on Capitol Hill.
"The philosophy that is prevailing here in Washington is that when you're in a slump, you need the government to spend more money, and some of us believe the government should spend less money and that the people should get their money back with lower taxes, then they should spend the money and make the decisions."
"We're going to slip and slide, we may have another major crisis. The way we're going, since we think that spending money and borrowing money and printing money works, we will end up with a dollar crisis and then all these number won't have any meaning whatsoever." the Congressman urged.
"If you go into an inflationary period and you have a slump, something worse than the stagflation of the 70s, revenues crash and inflation costs go up."
"The natural market forces want people to back off and not spend and save and pay down their debt. The government does exactly the opposite. They want you to spend and borrow, and inflate. The government wants inflation because they can never pay this debt, so they look for a devalued currency because you pay back ten cents on the dollar it's not as big a difficulty in paying off the debt."
"They are frustrated because they don't have the inflation that they are looking for, because they equate inflation with a healthy economy, and that is not the case at all." Paul concluded.Congressman Ron Paul appeared on Neil Cavuto's Fox Business show last night to... more