Tag Archives: Geithner

President Obama to Meet With Corporate CEOs

13 Monday Dec 2010

Posted by in budget, economy, Foreclosures, Obama, Politics, Social Security, special interests, Unemployment

≈ Leave a comment

Tags

, , , , , , , , , , , , , , , ,

*Sigh*

“President Obama will host a roundtable with about 20 corporate chiefs on Wednesday, according to the White House, part of an attempt to ease strained relations with business.

Expected for the session at the Blair House, across the street from the White House, are executives from a range of industries, including American Express, Cisco Systems, Dow Chemical, Google, Motorola, Intel, UPS and PepsiCo, according to people involved in the planning. But the White House said it would not divulge attendees until the meeting.

With the mood for the meeting already lightened by his recent announcements of a trade deal with South Korea and a compromise on tax cuts with Congressional Republicans, Mr. Obama and the executives will discuss a variety of issues, said Jen Psaki, the White House deputy director of communications. Among the topics will be deficit reduction, an overhaul of the tax code, government regulation, export promotion, public-private investments in areas like technology and clean energy, and efforts to improve education and job skills, Ms. Psaki said.”

How about this “roundtable” Mr. President. How about meeting with the long-term unemployed—the 99ers—asking them how they intend to get by on the big, fat zero your “compromise” did for them? What about meeting with the firefighters and police who have been laid off due to state budget cuts, like in Camden, NJ where half of the police and a third of the firefighters are headed out the door.

What about meeting with the Social Security recipients who haven’t had a COLA increase in two years, and the federal workers whose pay you propose to freeze? Ask them how they’re going to handle rising gasoline prices, which could reach $3.50 a gallon by spring, and home heating oil prices, which are 13% more than last winter, brought on by Fed Chairman Bernanke’s “quantitative easing.” I guess they’ll have frozen homes to go along with their frozen pay. Ask the victims of foreclosure fraud how they feel about being denied legal aid by Treasury Secretary Geithner.

What about “easing strained relations” with these people? Or don’t they matter? Probably not. The unemployed, the laid off firefighters and police, Social Security recipients, and those facing foreclosure don’t write the checks with enough zeroes on them to finance that billion dollar re-election campaign like the CEOs do.

William Black: “Fire Holder, Fire Geithner, Fire Bernanke”

26 Tuesday Oct 2010

Posted by in AIG, bailout, Financial Crisis, Foreclosures, Justice Department, Obama administration, too big to fail, Wall Street

≈ Leave a comment

Tags

, , , , , , , , , ,

Lisa Epstein and William Black on Dylan Ratigan’s show yesterday:

Speaking of Geithner telling “one lie after another”:

“The United States Treasury concealed $40 billion in likely taxpayer losses on the bailout of the American International Group earlier this month, when it abandoned its usual method for valuing investments, according to a report by the special inspector general for the Troubled Asset Relief Program.

“In our view, this is a significant failure in their transparency,” said Neil M. Barofsky, the inspector general, in an interview on Monday.”

Zero Hedge has more of Mr. Barofsky’s report:

“This conduct has left the Treasury vulnerable to charges it has manipulated its methodology for calculating losses to present two different numbers depending on its audience: one designed for release in early October as part of a multifaceted publicity campaign touting the positive aspects of TARP and emphasizing the reduction in anticipated losses, and one, audited by the GAO for release in November as part of a larger audited financial statement. Here again, Treasury’s unfortunate insensitivity to the values of transparency has led it to engage in conduct that risks further damaging public trust in the Government.”

‘Manipulated its methodology for calculating losses?” Didn’t Jeff Skilling and Andy Fastow go to prison for that?

“Risks further damaging public trust in the Government?” Is that even possible?

Alan Greenspan and the “Everybody Missed It” Myth

05 Monday Apr 2010

Posted by in bailout, economy, Financial Crisis, financial reform, financial regulation, Politics, too big to fail, Wall Street

≈ Leave a comment

Tags

, , , , , , , , , , ,

On ABC’s This Week yesterday former Fed Chairman Alan Greenspan once again pulled out the “nobody saw it coming” excuse for missing the conditions which led to the financial meltdown in 2008:

“…the reason it was missed is we have had no experience of the type of risks that arose following the default of Lehman Brothers in September 2008.That’s the critical mistake. And I made it. Everybody that I know who works in this business made it.”

False on many fronts. First, the “no experience” myth. The collapse of Lehman Brothers in 2008 was predictable, or should have been, by the failure of Long Term Capital Management in 1998 because both were brought about by similar business practices. Both had debt that far exceeded their assets and both were major players in the mortgage backed securities “shadow market.”

The other thing that “everyone” missed, according to Greenspan and his fellow revisionists anyway, and what was driving the mortgage backed securities explosion, was the housing bubble. Again false. Economists from Paul Krugman on the left to Reagan administration Treasury Department official Bruce Bartlett on the right were warning of the impending disaster in the housing market.

But putting aside economists for a minute, it shouldn’t have taken a Nobel Prize in economics to see that a 50% increase in home prices from 1995-2005 was unsustainable. Or that giving a $500,000 loan to someone with no documented income was not a good idea. Or that adjustable rate mortgages, 100% financing, interest-only loans, and all the other exotic mortgage variations were an accident looking for a time to happen. What was Greenspan saying at the time?

“Federal Reserve Chairman Alan Greenspan said Monday that Americans’ preference for long-term, fixed-rate mortgages means many are paying more than necessary for their homes and suggested consumers would benefit if lenders offered more alternatives…He said a Fed study suggested many homeowners could have saved tens of thousands of dollars in the last decade if they had ARMs.”

No, Mr. Greenspan, not “everybody” missed it. YOU missed it. You and the disciples of the group-think mentality in Washington who were afraid to buck you because of your position as the alleged “Maestro” and “Wizard” who was responsible for the supposedly booming economy which was in reality a house of cards. Unfortunately two of those disciples, Ben Bernanke and Timothy Geithner, are still in decision-making positions.

Just as a side note, there could be some fireworks at the Financial Crisis Commission hearings this week. Greenspan is set to testify on Wednesday and Don Robert Rubin-leone is up on Thursday.

Too Big To Fail is Too Big–Break ‘Em Up

30 Tuesday Mar 2010

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

≈ Leave a comment

Tags

, , , , , , , , , , ,

The chorus of those calling for breaking up the big banks is growing larger and louder by the day. Senator Ted Kaufman (D-DE) in a speech on the floor of the Senate last Friday:

“These mega-banks are too big to manage, too big to regulate, too big to fail and too interconnected to resolve when the next crisis hits.  We must break up these banks and separate again those commercial banking activities that are guaranteed by the government from those investment banking activities that are speculative and reflect greater risk.”

Richard Fisher, President of the Federal Reserve Bank of Dallas, March 3:

“A truly effective restructuring of our regulatory regime will have to neutralize what I consider to be the greatest threat to our financial system’s stability—the so-called too-big-to-fail, or TBTF, banks. In the past two decades, the biggest banks have grown significantly bigger. In 1990, the 10 largest U.S. banks had almost 25 percent of the industry’s assets. Their share grew to 44 percent in 2000 and almost 60 percent in 2009.

…Given the danger these institutions pose to spreading debilitating viruses throughout the financial world, my preference is for a more prophylactic approach: an international accord to break up these institutions into ones of more manageable size—more manageable for both the executives of these institutions and their regulatory supervisors.”

Senator Kaufman and Mr. Fisher are just the latest additions to the list that includes former Fed chairman Paul Volcker, Nobel prize-winning economist Joseph Stiglitz, FDIC head Sheila Bair, Sen. Cantwell, and Sen. McCain, among many others. Unfortunately, two names not on the list are Treasury Secretary Geithner and Chairman of the Senate Banking Committee, Chris Dodd.

And as if on cue, Citigroup gives us a prime example of why these financial behemoths need to be dissolved, and have what was once the “boring” business of commercial banking–taking deposits and making loans–separated from the risky business in which the banksters love to engage (with OPM of course) and why Wall Street cannot be left to its own devices:

“It appears that the pain of the recession is not deep enough to teach Citigroup Inc. what it needs to learn. The bank..is now readying a new unregulated insurance credit derivative, the CLX…The company is heading back into familiar territory where they’re putting taxpayer money into play on another risky bet. Simply put the instrument will enable it to gamble on future events by issuing complex financial instruments which attempt to quantify risk. This is very similar to the original business that Citigroup was heavily involved with that precipitated their fall from glory.”

Leopards and banksters never change their spots.

Dodd’s Toothless Consumer Protection “Watchdog”

17 Wednesday Mar 2010

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

≈ Leave a comment

Tags

, , , , , , , , , , ,

Sen. Chris Dodd’s so-called “sweeping overhaul of the U.S. financial system” creates a Bureau of Consumer Financial Protection, which is supposed to be “a new, independent consumer watchdog.” You just know there’s a “but” coming here, right? Right:

“…the legislation would impose significant limits on the autonomy of the new watchdog. It would establish a Financial Stability Oversight Council [with veto power over the bureau] of nine members, all but one of whom would be existing financial regulators such as the Treasury Secretary and Comptroller of the Currency, which oversees national banks.”

In just one example, let’s take a look at what those “existing regulators” and the now-Treasury Secretary were doing in the case of Lehman Brothers, as revealed in the report by the examiner of Lehman’s bankruptcy. While management at Lehman was engaging in Enron-stlye accounting, where were the federal regulators? Looking on:

“One crucial move was to shift assets off its books at the end of each quarter in exchange for cash through a clever accounting maneuver…to make its leverage [debt] levels look lower than they were. Then they would bring the assets back onto its balance sheet days after issuing its earnings report.

And where was the government while all this “materially misleading” accounting was going on? In the vernacular of teenage instant messaging, let’s just say they had a vantage point as good as POS (parent over shoulder).”

What’s worse is that “there is no evidence that Lehman kept two sets of books or tried to hide what it was doing from regulators.” Among the spectators:

“The NY Fed, the regulatory agency led by then FRBNY President Geithner [which] stood by while Lehman deceived the public through a scheme that FRBNY officials likened to a “three card monte routine.”

The FRBNY knew that Lehman was engaged in smoke and mirrors designed to overstate its liquidity and, therefore, was unwilling to lend as much money to Lehman. The FRBNY did not, however, inform the SEC, the public, or the OTS (which regulated an S&L that Lehman owned) of what should have been viewed by all as ongoing misrepresentations.”

So much for the “watchdog” capabilities of existing regulators and the Treasury Secretary. What about the other named mentioned, the Comptroller of the Currency. That would be John Dugan, a name not many are familiar with, but who was called in an article in The Nation last December, “one of the earliest architects of the too big to fail economy”:

“Too big to fail banks were a ticking time bomb, but they might not have ravaged the global economy in 2008 without major shortcomings in consumer protection over the previous five years. As head of the Office of the Comptroller of the Currency, Dugan played a leading role in gutting the consumer protection system, allowing big banks to take outrageous risks on the predatory mortgages that led to millions of foreclosures.

“For years, the OCC has had the power and the responsibility to protect both banks and consumers, and it has consistently thrown the consumer under the bus,” says Harvard University Law School professor Elizabeth Warren, chair of the Congressional Oversight Panel for the Troubled Asset Relief Program.”

Consumer Financial Protection? Sounds more like Wall Street Financial Protection to me.

Geithner and the Lehman “Stress Tests”

13 Saturday Mar 2010

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

≈ Leave a comment

Tags

, , , , ,

Timmy’s got more trouble. In a newly-released examiner’s report about the bankruptcy at Lehman Brothers, the New York Federal Reserve Bank (NYFRB), which was headed at the time by Treasury Secretary Geithner, is implicated as being in collusion with Lehman management’s efforts to keep their true financial condition hidden.

Here’s just one area of, shall we say, questionable behavior. The so-called “stress tests”:

“After March 2008 when the SEC and FRBNY began onsite daily monitoring of Lehman, the SEC deferred to the FRBNY to devise more rigorous stress-testing scenarios to test Lehman’s ability to withstand a run or potential run on the bank. The FRBNY developed two new stress scenarios: “Bear Stearns” and “Bear Stearns Light.” Lehman failed both tests. The FRBNY then developed a new set of assumptions for an additional round of stress tests, which Lehman also failed. However, Lehman ran stress tests of its own, modeled on similar assumptions, and passed. It does not appear that any agency required any action of Lehman in response to the results of the stress testing.”

Karl Denninger at Market Ticker:

“So let’s see what we got here.  They ran two sets of stress tests and the firm failed both.  Not satisfied with the results they then designed a third set, which the firm also failed (we can reasonably presume the third had less stringent requirements than the other two!)

Instead of applying any of these three, FRBNY, which was run by one Mr. Timothy Geithner… instead took Lehman’s word that all was ok and did nothing.

Wait a minute. In the spring of 2009 we were told that all the big banks ran “Stress Tests” of Geithner’s design.  But Treasury didn’t actually run them and didn’t actually get and process the data – they told the banks to do so.

Uh, that’s exactly what Lehman did, right?  And Lehman passed its own “internally computed” stress test but failed all three of the externally-computed ones.

Do you still accept that all these other banks are solvent?”

Yves Smith at naked capitalism has the solution:

“It is time for Geithner to go. He is not fit to serve as Treasury secretary.”

The Rubin Influence Runs Deep in the Obama Administration

09 Tuesday Feb 2010

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

≈ 1 Comment

Tags

, , , , , , , , , , , , , , ,

Senator Maria Cantwell (D-WA) is one the lone voices in Washington D.C. calling for meaningful financial reform, and calling out the White House for its lack of leadership on that issue:

“To hear Sen. Maria Cantwell talk, another economic bubble is building as Wall Street banks — backed by taxpayer bailouts — continue to play the high-risk derivatives markets rather than extend credit to struggling businesses on Main Street.

Cantwell says that Congress and the Obama administration are just watching it happen. The Washington state Democrat is among the most outspoken members of the Senate when it comes to calling for tough new regulations to rein in Wall Street.”

Not just “watching it happen,” Sen. Cantwell. There are no innocent bystanders among the president and his team of economic advisers–enablers and co-conspirators are more accurate terms. More on that later. Back to Sen. Cantwell:

“She’s not looking to pick a fight with the White House, the Federal Reserve or powerful congressional committee chairmen. She was, however, one of 30 senators to vote against the confirmation of Ben Bernanke to a second term as Fed chairman; she temporarily blocked the appointment of the White House nominee to head the Commodity Futures Trading Commission; and she’s been highly critical of Treasury Secretary Timothy Geithner and Larry Summers, the top White House economic adviser.”

Geithner and Summers–see enablers and co-conspirators. But to see the whole picture in focus, it takes a few steps backwards get the proper perspective.

In 1985, following Ronald Reagan’s landslide defeat of Walter Mondale in ‘84, the Democratic Leadership Council (DLC)  was formed with the aim of moving the Democratic party away from its “liberal” leanings toward a more “centrist” (read corporate-friendly) position. Bill Clinton chaired the DLC from 1990-1991 before running for, and being elected, president in 1992 as a so-called “New Democrat.”

President Clinton’s director of the newly-created National Economic Council from 1993 to 1995, and his Treasury Secretary from 1995-1999, was Robert Rubin, who spent 26 years at Goldman Sachs prior to joining the Clinton administration.

Matt Taibbi in Obama’s Big Sellout:

“As Treasury secretary under Clinton, Rubin was the driving force behind two monstrous deregulatory actions that would be primary causes of last year’s financial crisis: the repeal of the Glass-Steagall Act.. and the deregulation of the derivatives market.”

Fast forward to April 2006 and the founding of a DLC offshoot, The Alexander Hamilton Project, whose first director was….Robert Rubin. Back to Taibbi:

“There are four main ways to be connected to Bob Rubin: through Goldman Sachs, the Clinton administration, Citigroup and, finally, the Hamilton Project, a think tank Rubin spearheaded under the auspices of the Brookings Institute to promote his philosophy of balanced budgets, free trade and financial deregulation.”

At the founding meeting of the Hamilton Project, one of the featured speakers, and the only United States senator in attendance, was the junior senator from the state of Illinois, Barack Obama.”

Now take a look at President Obama’s economic team:

“At Treasury, there is Geithner, who worked under Rubin in the Clinton years. Serving as Geithner’s “counselor” — a made-up post not subject to Senate confirmation — is Lewis Alexander, the former chief economist of Citigroup, who advised Citi back in 2007 that the upcoming housing crash was nothing to worry about. Two other top Geithner “counselors” — Gene Sperling and Lael Brainard — worked under Rubin at the National Economic Council, the key group that coordinates all economic policymaking for the White House.

As director of the NEC, meanwhile, Obama installed economic czar Larry Summers, who had served as Rubin’s protégé at Treasury. 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.

Now, considering that tangled web, do you think we’re going to get lip service or meaningful, substantive reform of Wall Street? My money says lots of talk, very little, if any, action.

Fannie and Freddie Get a Blank Check for Christmas

29 Tuesday Dec 2009

Posted by in economy, Obama, Politics

≈ Leave a comment

Tags

, , , , , , ,

I hope everyone had a great Christmas and that Santa brought you everything you wanted. He certainly was very good to Fannie and Freddie. Only in their case, Santa is the American taxpayer, you and me. One thing is clear, the plutocracy never sleeps, or takes a holiday. How about this for a Christmas Eve news dump?

“The Obama administration pledged on Thursday to back beleaguered mortgage finance giants Fannie Mae and Freddie Mac no matter how big their losses may be in the next three years.”

This brought to you courtesy of the accounting firm of Change, Openness, and Transparency:

“Under a law put in place before the government seized the two mortgage agencies in September 2008, Treasury Secretary Timothy Geithner had until the end of this year to increase the limit without asking Congress for approval…The administration waited until financial markets had closed on Christmas Eve to make the announcement…”

The previous cap on money poured down the Fannie and Freddie black hole was a combined $400 billion, $200 billion each, of which only(?) $111 billion has been used so far. So why change it to “unlimited?” Here’s an explanation:

“If the Treasury is removing the cap, they obviously expect the losses to skyrocket (even though they deny this publicly). This could be happening because the Treasury already knows how much Fannie and Freddie are going to declare as losses this quarter.”

Santa (again, that’s you and me) was also very good to Fannie and Freddie executives:

“But even as the administration was making this open-ended financial commitment, Fannie Mae and Freddie Mac disclosed that they had received approval from their federal regulator to pay $42 million in Wall Street-style compensation packages to 12 top executives for 2009…The compensation packages, including up to $6 million each to Fannie Mae and Freddie Mac’s chief executives, come amid an ongoing public debate about lavish payments to executives at banks and other financial firms that have received taxpayer aid. But while many firms on Wall Street have repaid the assistance, there is no prospect that Fannie Mae and Freddie Mac will do so.”

That’s $6 million each for CEOs whose companies have lost a combined $200 billion. Nice work if you can get it, and you can get it if you happen to have the Treasury Secretary on speed dial.

The Agonist sums up the entire cluster____ about as well as I’ve seen it:

“We are getting very used to watching the federal government operate with only the sketchiest information on what it is doing. Most everything seems to be done behind doors and in secrecy. That’s what makes this brief announcement about Fannie Mae and Freddie Mac so troublesome. When the federal government starts talking about unlimited guaranties to cover future losses, our biggest worry ought to be that whatever large number we can contemplate is included under the word “unlimited”, the government has an even larger number in mind.”

Government of the wealthy and powerful, by the wealthy and powerful, and for the wealthy and powerful. Some things never “change.”