Category Archives: economy

Geithner and Dodd Oppose Fed Audit Which Could Reveal Billions in Toxic Assets

23 Tuesday Mar 2010

Posted by in bailout, economy, Financial Crisis, financial reform, financial regulation, Politics, Wall Street

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How much more of these “junk loans” are bring “warehoused” on the books at the Fed? A question to which we may never know the answer if Treasury Secretary Geithner and Senator Chris Dodd have anything to say about it:

“As Lehman Brothers careened toward bankruptcy in 2008, the New York Federal Reserve Bank came to its rescue, sopping up junk loans that the investment bank couldn’t sell in the market, according to a report from court-appointed examiner Anton R. Valukas.

Without an audit, the Fed is able to conceal the specifics of what it holds on its balance sheet. If the Lehman deal is any indication, the Fed is hiding billions of dollars in toxic loans on its books.”

The New York Fed, under the direction of now-Treasury Secretary Tim Geithner, knowingly allowed itself to be used as a “warehouse” for junk loans, the report says, even though Fed guidelines say it can only accept investment grade bonds.

Meanwhile, the Fed and Geithner both strongly oppose a congressional measure to authorize an independent audit of the central bank and its lending facilities. The provision passed the House but is under attack in the Senate, where Banking Committee Chairman Chris Dodd (D-Conn.) says he hopes to stop it.

I suspect this has a lot to do with Secretary Geithner’s strong opposition:

“The Valukas report found clear evidence that the New York Fed  knew that Lehman was sending it garbage that it had no intention to market. In other words, the baskets of assets were created for the specific purpose of selling to the Fed for far more than they were worth.

Lehman knew it too: “No intention to market” was scrawled on one of the internal presentations about the assets…Geithner himself was aware that there was a gap between what Lehman claimed the assets were worth and what they were really worth.”

What else don’t we know? The stonewall is on:

“The Fed won’t say how much more toxic “garbage” is in the Fed’s “warehouse”…The Treasury didn’t immediately respond to a request for comment.”

Sounds an awful lot like fraud and obstruction of justice to me.

Treasury Department “Vigorously Opposed” To Fed Audit

09 Tuesday Mar 2010

Posted by in bailout, economy, Financial Crisis, Obama, Politics, Wall Street

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What is this man hiding?

“The Treasury Department is vigorously opposed to a House-passed measure that would open the Federal Reserve to an audit by the Government Accountability Office (GAO), a senior Treasury official said Monday.”

And how’s this for openness, transparency, and accountability?

“Secretary Tim Geithner, Assistant Treasury Secretary Alan Krueger and Gene Sperling, a counselor to the secretary, held a briefing Monday with new media reporters and financial bloggers during which they discussed the Fed audit and other topics. Under the briefing’s ground rules, the officials could be paraphrased but not quoted, and the paraphrase could not be connected to a specific official.”

Alan Grayson isn’t buying it:

“Rep. Grayson said he finds Treasury’s opposition to the audit troubling. “There is a growing feeling on the part of real Democrats that the president is getting bad advice from people who have sold out to Wall Street,” said Grayson.”

I’ll go one step further. The president is among those who have sold out to Wall Street, in my opinion.

Washington Still Fiddling

09 Tuesday Mar 2010

Posted by in Congress, economy, health care, Obama, Politics

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Bob Herbert’s op-ed in yesterday’s New York Times echos what I’ve been thinking lately—it’s time for Congress and President Obama to get past health care reform and move on to jobs. Please.

“The Obama administration and Democrats in general are in trouble because they are not urgently and effectively addressing the issue that most Americans want them to: the frightening economic insecurity that has put a chokehold on millions of American families.

The economy shed 36,000 jobs last month, and that was trumpeted in the press as good news. Well, after your house has burned down I suppose it’s good news that the flames may finally be flickering out. But once you realize that it will take 11 million or more new jobs to get us back to where we were when the recession began, you begin to understand that we’re not really making any headway at all.

…Instead of focusing with unwavering intensity on this increasingly tragic situation, making it their top domestic priority, President Obama and the Democrats on Capitol Hill have spent astonishing amounts of time and energy, and most of their political capital, on an obsessive quest to pass a health care bill.”

“Obsessive quest” is right. But sadly I don’t see it ending any time soon. Now the talk is to have health care done by Easter. Anybody who believes that believes in the Easter bunny. But never mind, Congress. Take your time. The good economic news is that another million people stopped looking for work last month and no longer count in the unemployment statistics. Hooray.

By the way, what happened to “jobs must be our number one focus in 2010″ from the State of the Union speech in January? Just curious.

Another Financial Crisis “More Than Predictable, It’s Inevitable”

04 Thursday Mar 2010

Posted by in bailout, Congress, economy, Financial Crisis, Goldman Sachs, Obama, Politics, Wall Street

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Remember the economy and that little thing we had not too long ago called…what was it…oh yeah, the financial crisis. While Congress and the White House spend “the next few weeks” mired in the never-ending saga of health care reform, there are some potential problems which could affect us a lot sooner than 2014. If legislators have some spare time they might want to give it a glance:

“Even as many Americans still struggle to recover from the country’s worst economic downturn since the Great Depression, another crisis – one that will be even worse than the current one – is looming, according to a new report from a group of leading economists, financiers, and former federal regulators.

…Without more stringent reforms, “another crisis – a bigger crisis that weakens both our financial sector and our larger economy – is more than predictable, it is inevitable,” Johnson says in the report, commissioned by the nonpartisan Roosevelt Institute.”

In the report, the panel, which includes Rob Johnson of the United Nations Commission of Experts on Finance and bailout watchdog Elizabeth Warren, warns that financial regulatory reform measures proposed by the Obama administration and Congress must be beefed up to prevent banks from continuing to engage in high-risk investing that precipitated the near-collapse of the U.S. economy in 2008.

But in typical Congressional fashion, “beefing up” financial regulations and “stringent reforms” aren’t on the agenda:

“The proposal” [that would ban the banks receiving federally insured deposits from engaging in trading which benefits the banks and not their customers] “faces strong resistance in Congress, where lawmakers have shown little appetite for adding to the prolonged debate on overhauling financial regulations.”

The reason for Congress’ “little appetite” should come as no great surprise:

“Goldman Sachs and Morgan Stanley would probably be the Wall Street firms most affected by the ban, known informally as the Volcker Rule…”

Goldman most affected? We can’t have any of that. Chris Dodd needs a job starting in January.

A Little Perspective on the National Debt

03 Wednesday Mar 2010

Posted by in budget, Congress, economy, Politics

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Any time the discussion turns to the national debt, a popular tactic among Democrats is to go back to the origin of exploding debt numbers under President Reagan. They like to point out that when Reagan took office in 1981 the debt was $998 billion and when he left in 1989 it was $2.9 trillion, due mostly to tax cuts and spending increases over that time. That is true, but here’s the rest of the story.

Spending and revenue bills originate in the House of Representatives, and at no time during Reagan’s 8 years did Republicans control the House. In the 4 Congresses during Reagan’s 2 terms, the 97th thru the 100th, the average spread in the House of Representatives was 257 Democrats to 178 Republicans. The Kemp-Roth tax cuts of 1981, for example, passed 323-107 and there were only 191 Republicans in the House at that time. Likewise with spending. Democrats had the numbers to stop any of those proposals but didn’t.

Let’s be honest, when parceling out blame for our massive national debt there’s plenty of blame to go around, and plenty of fingers to be pointed in both directions.

Those Who Profit from Foreclosures In Charge of Anti-Foreclosure Program

27 Saturday Feb 2010

Posted by in bailout, economy, Financial Crisis, Wall Street

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From the Washington Independent (emphasis added):

“One year after the Obama administration launched its $75 billion anti-foreclosure program the housing market remains volatile, loan modifications have been scant, foreclosures are still sky-high — and more and more lawmakers are wondering why the White House hasn’t been more aggressive in tackling the crisis.”

White House? Aggressive? Surely you jest.

“Administration efforts to stabilize the troubled housing market have prioritized lenders above struggling homeowners, a number of House Democrats charged Thursday, leading to thousands of foreclosures that might otherwise have been prevented — and threatening thousands more in the months to come.

Although the Obama White House has offered billions of dollars to banks that successfully alter loans to make them more affordable, only 116,00 of those modifications have been made permanent, the Treasury Department reported The reason for the discrepancy, some Democrats contend, is clear: The decision to modify loans, under Obama’s programs, has been left in the hands of the same mortgage servicing companies that often stand to profit more from foreclosures. That conflict of interest, critics say, all but ensures that the administration’s voluntary modification program will fail.”

But why would the administration want to see the program fail?

“Despite the fact that the free-falling housing market was at the root of the global economic collapse, Washington policymakers have dedicated more attention — not to mention dollars — to the bankers of Wall Street than the homeowners of Main Street.”

Yep, that explains it. The Golden Rule: Those who have the gold buy those who make the rules.

Rubin May Testify Before Financial Crisis Commission

27 Saturday Feb 2010

Posted by in economy, Financial Crisis, Obama, Politics, Wall Street

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One of the architects of the financial meltdown, and the Godfather of the Obama economic team, might have some ‘splainin’ to do. From Bloomberg:

“Robert Rubin, the former U.S. Treasury secretary who later advised Citigroup Inc. as the bank piled up subprime-mortgage losses, may soon face his first public grilling on the 2008 financial crisis.

The Financial Crisis Inquiry Commission investigating the worst economic slump since the Great Depression, plans to ask Rubin to testify in April, said two people with knowledge of the commission’s decisions.

Ask? How about subpoena?

“Rubin’s reputation dimmed  after the U.S. bailed out New York-based Citigroup with $45 billion and AIG had to be propped up because of losses on derivatives. When Rubin was President Bill Clinton’s Treasury secretary, he fought efforts to regulate derivatives.”

His reputation dimmed? Barack Obama didn’t get that memo:

“[Obama] named Rubin to be an economic adviser during the 2008 presidential campaign, and two Treasury protégés, Lawrence Summers and Timothy Geithner are top officials in the White House. Summers, 55, is chief economic adviser and Geithner, 48, is Treasury secretary.”

And that’s not all:

“Just below Summers is Jason Furman, who worked for Rubin in the Clinton White House and was one of the first directors of Rubin’s Hamilton Project.

And as head of the powerful Office of Management and Budget, Obama named Peter Orszag, who served as the first director of Rubin’s Hamilton Project.”

…to serve alongside Furman at the NEC [Obama hired] management consultant Diana Farrell, who worked under Rubin at Goldman Sachs. In 2003, Farrell was the author of an infamous paper in which she argued that sending American jobs overseas might be “as beneficial to the U.S. as to the destination country, probably more so.”

…Over at the Commodity Futures Trading Commission, which is supposed to regulate derivatives trading, Obama appointed Gary Gensler, a former Goldman banker who worked under Rubin in the Clinton White House. Gensler had been instrumental in helping to pass the infamous Commodity Futures Modernization Act of 2000, which prevented regulation of derivative instruments like CDOs and credit-default swaps that played such a big role in cratering the economy last year.

White Collar Contracts MUST Be Honored—Blue Collar Contracts? Toss ‘Em

23 Tuesday Feb 2010

Posted by in AIG, economy, Goldman Sachs, Wall Street

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The bonuses at AIG keep on coming:

“… AIG, the fallen insurer, paid out an additional $100 million this month, much of it to the very financial products division whose rampant risk-taking took the firm to the brink. And there’s another $75 million coming…[Treasury Secretary Tim] Geithner, and pay czar Kenneth Feinberg, say that while lamentable, the AIG payments must legally be honored.”

But yet last May during the General Motors–United Auto Workers negotiations, which the government insisted be a part of a GM bailout:

“People familiar with the UAW agreement said it largely mirrors concessions the UAW granted Chrysler LLC last month, including a suspension of cost-of-living allowances, bonuses and some holidays.

…The deal is the latest concession by the UAW after several years of cutbacks. Unlike past negotiations, which often dragged on for months and went past deadlines, the parties — under pressure from the Treasury, which has lent GM $15.4 billion — moved quickly to revise a contract approved in 2007.”

Compare that $15.4 billion for GM, which came with “pressure from the Treasury” to re-negotiate existing contracts, with the $182 billion given to AIG, no strings attached, and contracts that must be “legally honored.”

Sure sounds like a double-standard to me. White collar contracts? Sacred. Blue collar contracts? Toss ‘em in the garbage. But then again, Geithner wasn’t laundering money through GM to pay off his buds at Goldman Sachs, like he did through AIG (allegedly).

The Roaring Oughts

21 Sunday Feb 2010

Posted by in economy, Financial Crisis, Wall Street

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From Seeking Alpha:

“What a time to be an oligarch! Folks, there is no way we can have economic prosperity in this country when the top 1% has all of the money. The middle class is basically being destroyed right in front of our very eyes. Consumption economies die when the consumers have no money to consume!

…All the government has done is bail out Wall St. continuosly since 2008. My guess is the disparity of wealth in this chart would look even worse if it included 2009…Just about ALL of the steps that have been taken by the government to help fix this crisis have involved throwing more and more money to the financial elites of this country.

…Here is the reality that America has realized: If you are not part of the 1% club in this country you are nothing but a victimized pawn as the elite continue to line their pockets with our nations income…I don’t have all the answers but I know where we can start. We can start by putting an end to the bailouts of the financial elite. Washington needs to start listening to Main St. instead of top 1%’ers on Wall St. If this creates an economic crisis so be it. At least it will keep this country solvent.

…Can you say Great Depression? Remember, the only way an economy can thrive is when the majority of people involved in it are prospering. We are about to drive off the same cliff that we did in the 1920’s as the middle class is turned into a group of SERFS. Be prepared.”

Bi-Partisan Commissions: A Hiding Place for Gutless Politicians

18 Thursday Feb 2010

Posted by in Congress, economy, Obama, Politics, Uncategorized

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Generally speaking, bi-partisan commissions are a bad idea, with just a few exceptions. Those being when something is being investigated–such as the 9/11 Commission or the current Financial Crisis Inquiry Commission. The debt reduction commission, set to be unveiled today by President Obama, falls into the bad idea category, and for the usual reason.

Bi-partisan commissions are nothing more than a refuge for gutless politicians who are more concerned with the next election than the next generation, and who don’t want to go on the record with votes on controversial issues which might hurt their re-election chances. And there are no issues more controversial than what must be done if we hope to make any serious attempt at reducing the national debt. And I don’t mean re-arranging deck chairs on the Titanic with so-called “spending freezes” on areas of the budget which amount to less than 20% of all spending.

Serious debt reduction has to take on Social Security, Medicare, and Medicaid, which together make up about 40% of the budget. And for the two biggest expenditures–Social Security and Medicare– there are only 3 options–raise taxes, reduce benefits, or raise the eligibility age.

Serious debt reduction has to cut spending across the board, no exceptions and no exclusions, including the Pentagon. The 2009 budget for the Department of Defense was north of $700 billion, which is roughly equivalent to the rest of the world’s military spending combined.

Serious debt reduction has to include tax increases. We, as a country, have been living on a credit card for the last 30 years–it’s time to start paying the bill.

Tough decisions all, and decisions we pay members of Congress to make, not shove off on “bi-partisan commissions” with no authority to do anything other than make recommendations.