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View Diary: Geithner and his pseudo liberal critics (231 comments)

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  •  well it is true (5+ / 0-)

    but for the rest of your questions.:

    1) Congress passes laws, not the Sec. Treasury. But the new rules in Dodd-Frank will do a lot to limit derivatives trading. Do you know about those?

    2) When Geithner was at FRB, Bernanke was his boss, not the other way around. The $16T number is bogus, constructed by summing many sequential smaller loans and in any case, it was all paid back. That is what the Feb was created to do.

    3)The homeowner program was not a great success, but a lot of that was due to successful GOP block of appointments to agencies.

    4) Glass-Stern has nothing to do with it. AIG, Gear, Lehman were never covered.

    5) Barofsky is a shameless self-promoter and ally of Darryl Issa.

    self-appointed intellectual cop

    by citizen k on Sun Feb 03, 2013 at 01:52:44 PM PST

    [ Parent ]

    •  I know nothing about the de-bunking of (4+ / 0-)
      Recommended by:
      TheMomCat, JesseCW, cassandraX, MPociask

      the Sixteen trillion. Although recently Taibbi used a smaller number (somewhere in the 7 to 9 trillion dollars range, but then, what is a trillion dollars here or there?) here are some citations that may interest you:

      There is a fascinating new study coming out of the Levy Economics Institute of Bard College.  Its titled “$29,000,000,000,000: A Detailed Look at the Fed’s Bail-out by Funding Facility and Recipient” by James Felkerson. The study looks at the lending, guarantees, facilities and spending of the Federal Reserve.

      The researchers took all of the individual transactions across all facilities created to deal with the crisis, to figure out how much the Fed committed as a response to the crisis. This includes direct lending, asset purchases and all other assistance. (It does not include indirect costs such as rising price of goods due to inflation, weak dollar, etc.)

      The net total? As of November 10, 2011, it was $29,616.4 billion dollars — (or 29 and a half trillion, if you prefer that nomenclature). Three facilities—CBLS, PDCF, and TAF— are responsible for the lion’s share — 71.1% of all Federal Reserve assistance ($22,826.8 billion).

      One comment about some of the folks pushing back against this massive total: Yes, there is a big difference between a $100 lent for 3 days, and a $100 lent overnight rolled over 2 more times. And there is an enormous difference when temporary overnight lending lasts for three years.

      Overnight lending, by its definition, is temporary, short term, lower risk, modest impact. It exists to allow slightly over-extended banks to meet their reserve requirements. But rolling overnight lending repeatedly for 3 years is none of those things. And it makes a mockery of these same reserve requirements, and the protective
      purposes they are supposed to serve.

      Now over on Bill Moyers website, you can still watch and hear Matt Taibbi and Yves Smith and what they have to say.
      Granted this show was recorded last summer, and again, although Taibbi takes more conservative figure than I do, he continues to do so, with his recent Dec 2012 and January 2013 articles continuing to talk about these monies and how they are missing in action, so these "de-bunking" arguments have not swayed his opinion of the matter any.

      Circa late Autumn, 2008, Both Darryl Issa and Dennis Kucinich had a far better understanding of the absolute necessity of taking certain steps in order to avoid transferring the money of Main street and middle Class America over to Wall Street than Paulson, Kashkari and Geithner were exhibiting. As both Issa and Kucinich tried to explain numerous times till they were sick with repeating it - all that needed to happen in terms of "averting a financial crisis and melt down" was to re-institute the exact same step s that had been taken as reaction to the S & L crisis of the 1980's.

      In fact those laws were still on the books. Specifically what needed to have happen was to see to it that state chartered banks in every region of the nation receive various tranches of money, with requirements that those funds get loaned out. Instead the Big Banks have sat ton the money, and gone and spent huge amounts of money on bonuses. Quite a while ago, the bonus money was at higher levels than the amounts that the states in serious trouble deficit-wise had to trim. And this was OUR DAMN MONEY that paid for those bonuses!

      Offer your heart some Joy every day of your life, and spread it along to others.

      by Truedelphi on Sun Feb 03, 2013 at 07:42:15 PM PST

      [ Parent ]

      •  it's grossly misleading (0+ / 0-)

        to treat a series of 50, overnight loans of  $100M, each repaid on time with interest, as a $5B loan.  If one applied this methodology to the Fed any year pre-crisis you'd get a stupendous sum by adding up all the discount window loans. The normal operation of the Fed is to provide loans to banks - in huge amounts.

        You write:
        "But rolling overnight lending repeatedly for 3 years is none of those things. "

        That is the normal thing the Fed does. BoA borrows $5B (against collateral) on the overnight window on Monday night, pays it back Tuesday, borrow again Tuesday night - that's not a $10B loan or unusual. The purpose of the Fed is to let banks rapidly get cash for collateral.

        You might as well say that when someone refinances their $50K mortgage at $50K, they have borrowed $100K.

        In the paper you cite there is a hilarious footnote:

        "It needs to be noted that the Fed routinely engages in overnight lending of Treasury securities. Following the Fed's  lead, we include transaction undertaken as part of the TSLF as part of the Fed's crisis response."
        So they adding ordinary transactions into other ones.

        The paper notes that one of the biggest money flows, at a cumulative $10T was in central bank liquidity swaps where, for example, the central bank of switzerland would swap xbillion in Swiss Francs to the FRB for an equivalent in dollars.  Obviously those exchanges, which kept the world currency markets from collapsing were not loans to banks in the normal sense.  These are things the Fed is supposed to do and they are not scandalous in any way.

        Further: many of the transaction are non-bank loans- for example to Harley Davidson and to auto dealers. That's not a bank bailout - it's a bank replacement.

        Many people present this data as if the Fed gave $16T or $29T to banks when, in reality, the Fed LENT against collateral a much smaller amount to banks and industrial companies and got it all back with interest.

        This hysteria over the $16T/29T whatever gives precisely the wrong lesson. The actual lesson is that when private banking failed, the government was able to step in and keep finance moving. The question then is why we depend on a volatile private banking system to do things that the government could do more cheaply.

        self-appointed intellectual cop

        by citizen k on Mon Feb 04, 2013 at 06:54:22 AM PST

        [ Parent ]

    •  A medal for your bravery. (1+ / 0-)
      Recommended by:
      citizen k

      Whenever I see the infamous $16 trillion invoked I just accept that not everyone exists on the same plane of reality.

      Good luck.

      "Democracy is a life; and involves continual struggle." ---'Fighting Bob' LaFollette

      by leftreborn on Mon Feb 04, 2013 at 03:36:12 AM PST

      [ Parent ]

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