Tag Archives: subprime mortgages

The Geithner Solution to Regulatory Failure: More Authority for Regulators

08 Saturday May 2010

Posted by in bailout, economy, Financial Crisis, Politics, too big to fail, Uncategorized, Wall Street

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Sure, federal regulators (like the former head of the New York Federal Reserve pictured at left) were inept, incompetent, and inadequate when it came to their ability to first foresee and then to take proper pre-emptive action based on all the red flags that were waving leading up to the financial crisis.

Sure, they may have overlooked the dangers of subprime mortgages, of major financial institutions being leveraged 30 to 1, and of those financial institutions becoming so interconnected through the packaging, re-packaging, and re-re-packaging of toxic securities and selling them back and forth that the failure of one could lead to the failure of all.

Hey, just minor oversights. No need to think they don’t deserve to keep their jobs, or better yet, be given more authority. Treasury Secretary Geithner seems to think so:

“During an appearance on Capitol Hill, Geithner acknowledged failures in the Federal Reserve Bank of New York’s supervision of Citigroup and other large banks, said regulators were “not conservative enough” when it came to overseeing banks’ leverage ratios and criticized capital requirements as not having done a “good enough job” as a buffer against risk.

He also said that regulators like himself could have done more to prevent the worst financial crisis since the Great Depression…To ensure these kinds of failures are avoided in the future…Geithner wants to leave it up to federal regulators — the same ones that presided over the housing bubble, oversaw extreme risk-taking by banks and other financial firms, and tried (yet failed) to contain a subprime crisis from mushrooming into a financial meltdown.

[…]

In short, Geithner said he wants to give regulators more authority, leaving it up to them to exercise their best judgment.”

No thanks, Tim. We’ve seen what leaving crucial decisions up to the “best judgment” of federal regulators leads to, from Wall Street to the Gulf of Mexico.

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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.