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Originally praised as some sort of wunderkind for his financial brilliance and insider's knowledge, Geithner is proving less than competent in his role as Treasury Secretary. Part of the reason is mindset, part of the reason is cowardice.

Geithner has no good choices in front of him.  That much was made evident by recent articles in various papers.  But the greatest disappointment is the roll-over-and-lay-down approach he has taken with respect to financiers.  This is the Wall Street mindset at its worst: the utter conviction that lack of transparency is good for business and that Wall Street could not survive without it; and that we mustn't do too much to upset the geniuses who screwed up everything in the first place.  

The AIG bonuses--well-known in advance by the Treasury Department--was left a secret rather than aired so we could duke out its problems in the marketplace of ideas right away.  The assumption of Geithner and Summers and their ilk was the usual presumption that they know best because this is how it's always done on Wall Street, with little regard for the PR debacle it has rightly become for the administration because there wasn't even an effort to note this problem in public early on.  

Sadly the Administration is getting a black eye from this. Unfortunately, they've earned it--and then some.  To think that Andrew Cuomo has to do the work of the administration to make transparent the hubris of this bonus arrangement--from the payment of retention bonuses to 11 individuals who left anyway to the placement of 100% bonus guarantees from one year to the next.

To Geithner and Summers, they think this pitchfork and firebrand-waving response of us folks in the ditches is just populism run amok.  How remarkably stupid is that!  This is the financier mentality in its bubble universe at its worst.  What the hell did they think would happen?  There wasn't even an effort to lawyer up on this, compel release of the contracts for wider scrutiny, and prepare--as so many legal professionals have commented--on negotiating better terms for the shareholders. No effort at all!  None, just an "oh, well, this is how we've always done it on Wall Street" attitude.  Instead of taking a stand as our shareholder representatives to AIG, they just rolled over.

This is of a piece with the additional outrage everyone here should be feeling about the fact that the collateral payments that AIG is making to all of its counterparties is dollar-for-dollar!  Not the least bit of negotiating better terms and obligating banks to take some write-downs along the way.

I see an attitude problem here: a refusal to get tougher with the institutions that--like a scene more bizarre than Cleavon Little's brilliant performance in Blazing Saddles--basically hold a gun to their own heads and then make us pay them f--king bonuses to take the gun away so they can defuse the time bomb that they put in our house in the first place.  This is the scenario we've inherited from AIG--that we should pay big money to its financial derivatives department staff so they'll stick around long enough to "unwind" the f--king mess they made in the first place.  

I generally admire Obama for his competence and his toughness, but he's getting blindsided by his economic advisers on a repeated basis--Geithner, Summers, and I ain't got much faith in the SEC head either.  He better light a fire under someone's ass there and get a bit more progressively populist himself or he may discover that the hot water he finds himself in with his progressive supporters may lead to less than lukewarm defenses of his policies in the face of criticism.

Originally posted to ThinkTank on Tue Mar 17, 2009 at 07:05 PM PDT.

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Comment Preferences

  •  Treasury knew only on Tuesday (2+ / 0-)
    Recommended by:
    Midwest Meg, slaney black

    Geithner knew on Tuesday of this specific bonus plan.  

  •  Take Geithner out of the equation (4+ / 0-)
    Recommended by:
    slinkerwink, Tork, ppl can fly, polar bear

    Eric Holder, can you spell Antitrust?  Restraint of trade?  Monopoly?  Since these companies are too big to fail, let's make them smaller and THEN let them fail

  •  Anyone in this position is a "fall guy" (1+ / 0-)
    Recommended by:
    jamtown

    for years of financial mismanagement. I would look for him to be replaced after all the bad news comes out.

  •  Excellent piece -- worth every word. (3+ / 0-)
    Recommended by:
    John Driscoll, frandor55, polar bear

    thanks for expressing my sentiments.

  •  Blaming Geithner is easy, convinient, and (6+ / 0-)
    Recommended by:
    askew, Nellcote, wader, stanjz, raf, jmadlc55

    completely ignorant of the loaded gun he walked into the barrel of...Sorry his first 50 days hasn't made the drastic changes some seem to think happen overnight

    •  Agreed (5+ / 0-)
      Recommended by:
      askew, wader, Irixsh, stanjz, raf

      Let's give Tim a chance.

      And everybody else on the team, for that matter, before we start calling for their heads.

      It's under two months, people!

      Hispano Progresivo coming soon to a computer screen near you.

      by jmadlc55 on Tue Mar 17, 2009 at 07:32:03 PM PDT

      [ Parent ]

    •  The guy is (3+ / 0-)
      Recommended by:
      slinkerwink, slaney black, polar bear

      from Wallstreet for crying out loud.

      Of course they guy knows what's going on and what went on.

      Bush's presidency is now inextricably yoked to the policies of aggression and subjugation. Mike Whitney

      by dfarrah on Tue Mar 17, 2009 at 07:34:41 PM PDT

      [ Parent ]

      •  Yeah, lets bring in a guy who had no clue (2+ / 0-)
        Recommended by:
        askew, Nellcote

        who may have owed what to whom, or where things were set up...Do people really believe this would be the best course...Do you really believe an outsider would have gotten anything done at all the first 50 days or stopped these payments?? If people do, I would appreciate some explanation to how this would have worked

        •  I don't think anyone (2+ / 0-)
          Recommended by:
          slinkerwink, frandor55

          could conclude that Geithner has the general public's welfare in mind.

          What, are you related to him or something?

          Bush's presidency is now inextricably yoked to the policies of aggression and subjugation. Mike Whitney

          by dfarrah on Tue Mar 17, 2009 at 07:40:16 PM PDT

          [ Parent ]

          •  Not at all, and to be honest, he didn't need this (2+ / 0-)
            Recommended by:
            askew, Nellcote

            job...I think attacking a person who really hasn't done as much to deserve scorn for things he really had no control over is a valid critique...I find it kind of sad...I'm still awating someone's evidence that he could have immediately stopped these bonus's with a flick of the wrist...I find people asking for the impossible to be ill informed...

            •  I tend to (0+ / 0-)

              think in the world of possibilities, not the hand-thrower-uppers who shrug and say "what can we do?"

              Apparently, the decision makers involved in this mess knew about the bonuses; and it would only take some due diligence to find out about such things had the decision makers been interested in finding these things out.

              So, I think it's easy to conclude that Geithner was convinced he could pull a fast one and get away with it.

              Bush's presidency is now inextricably yoked to the policies of aggression and subjugation. Mike Whitney

              by dfarrah on Wed Mar 18, 2009 at 10:44:13 AM PDT

              [ Parent ]

      •  Is he the Cramer of the administration? (0+ / 0-)

        Did he knew what was going on when it was going on, but never said a word, he just allowed it to keep going on, because perhaps he too was benefiting from it like CNBC's Cramer.

  •  The bonuses have ignited (3+ / 0-)
    Recommended by:
    John Driscoll, RBinDLH, polar bear

    the bonfire but the scandal is the underlying instruments. AIG is funneling our money (thinktank says at dollar for dollar but I haven't heard that yet) to the counterparties on the CDS contracts. One of the themes today has been that we need these guys to "unwind" the contracts. 3d graders can do that. The Credit Default Swaps that AIG sold to the world in amounts that may exceed the total of all money, are very simple; if the respondent on this derivative defaults on it, then AIG makes the loss good. So here's what happens, big bank, or school board or whoever holds this CDO. They ask the originator to buy it back and are refused. Then they call their CDS dealer at AIG with the amount and he calls Geithner who ships them the money. The "toxic assets" are worthless, at least for the moment, and as long as AIG exists it is a money vacuum. Shut them down. Responsible depository institutions who have highly leveraged derivatives on their books, need to call the FDIC and declare bankruptcy while we still have some borrowing power as a country. The alternative is a long and painful deflationary depression.

    "If I pay a man enough money to buy my car, he'll buy my car." Henry Ford

    by johnmorris on Tue Mar 17, 2009 at 07:31:38 PM PDT

    •  That is what frightens me the most. (0+ / 0-)

      We can all understand this bonus thing, and it is outrageous. What we can not all understand is even more outrageous. How did this all happen? Things like this don't happen without a whole lot of folks being complict in these deals. I wonder if Bernie Madoff knew all this was going on, and knew someday the shit would hit the fan, and what he did was small pototoes. I bet he thought it would all blow up before he got caught and his bad deeds would get lost in the suffle.

  •  US Treasury to reclaim AIG cash (1+ / 0-)
    Recommended by:
    polar bear

    By (BBC)
    02:05 GMT, Wednesday, 18 March 2009

    Huge bonuses paid out by ailing insurer AIG will be deducted from the firm's next bail-out payment, the US treasury secretary says.

    In a letter to congressmen, Timothy Geithner said $165m (£116m) would be taken from $30bn the firm is due to get as part of its government bail-out.

    The plan comes after Mr Geithner faced heavy criticism for his handling of the increasingly controversial issue.

    Republicans said he should have done more to stop the bonuses being paid.

    "So, please stay where you are. Don't move and don't panic. Don't take off your shoes! Jobs is on the way."

    by wader on Tue Mar 17, 2009 at 07:33:02 PM PDT

  •  To tell you the truth (2+ / 0-)
    Recommended by:
    askew, jmadlc55

    I can care less if it's Progressive Policy or Regressive Policy that gets us out of this recession. Right now it really doesn't matter. What does matter is coming out of this recession as quickly as possible.

    Geithner shouldn't resign, unless you have someone to offer up who you think would do a better job. The moment you fire Geithner and aren't replacing him immediately you're just killing the Financial market. Remember how long it took Geithner to get confrimed? How long would it take to get a Progressive confirmed to Treasury given that spineless Reid thinks every vote needs 60 to pass.

  •  Geithner should get the boot and Obama .... (4+ / 0-)
    Recommended by:
    JillR, FG, Justanothernyer, jmadlc55

    ... Obama should resign, too, goddammit. I'm sick and tired of this incompetence in the White House. And while we're at it, Joe Biden should take a hike because of his improper relationship with Nancy Pelosi. And, and Harry Reid should increase his dose of Viagra. This whole mess just makes me long for the good old days when Bush and Cheney were in charge.

    Last Stand? Not quite ready for that, SIR!

    by Stonewall Custer on Tue Mar 17, 2009 at 07:40:02 PM PDT

  •  The Clintonites in the cabinet (5+ / 0-)

    need to go, Summers chief amongst them. He's the puppet master, Geithner is just his stooge. They need to go before they completely derail Obama's presidency.

    •  You know what, I think you are absolutly right (0+ / 0-)

      How could Obama run such a successful campaign, and get into the White House and not have things go as well as the campaign. I am extremly suspicious of all things Clinton, and Obama should be too.

  •  Geithner is all about corporate power and banks. (5+ / 0-)

    He's not an advocate for Americans who actually work and PAY TAXES.  

  •  The Cycle Of DOOOOOOM> (2+ / 0-)
    Recommended by:
    Herticalt, jmadlc55

    Someone writes a newspaper article or msm reports

    " Obama may want to eat green fingers sometime maybe according to some reports by somebody maybe sometime."

    Dailykos blogger reads said article or watches msm report. Dk blogger enjoys the negative news report, because it feeds a already negative established view of Obama going back to 2007.

    Dailykos blogger  writes a scathing dairy titled:

    Obama to eat green fingers

    The diarist links to the newspaper article.
    Many of the bloggers who share the view of the diarist will comments as follows:

    "See i told you he was a green finger eater."
    "Damn why is Obama turning his back on gold finger eaters."
    "We should have nominated the gold finger eater instead."
    "Obama is a green finger sympathizer"

    When challenged about the article and the veracity of the claims.

    the diarist or the commenters who agree with the diarist usually responds with:

    * crickets*

    or

    usually levels off a snarky or mean response.

    It's called the Cycle Of DOOOOOOOM.

  •  I just heard that (2+ / 0-)
    Recommended by:
    slinkerwink, jmadlc55

    BO is defending Geithner on the news.

    How pathetic--unless they have some rabbits to pull out of a hat, BO will probably be seriously damaged by this whole thing.

    Bush's presidency is now inextricably yoked to the policies of aggression and subjugation. Mike Whitney

    by dfarrah on Tue Mar 17, 2009 at 07:44:39 PM PDT

    •  I'm beginning to wonder where this is going (1+ / 0-)
      Recommended by:
      askew

      BO is defending Geithner on the news.

      How pathetic

      You would really expect him to trash him, like you're doing?

      You can also call him President Obama, or President, or Barack or even O'Bama for St. Patty's

      but BO?

      Hispano Progresivo coming soon to a computer screen near you.

      by jmadlc55 on Tue Mar 17, 2009 at 08:04:34 PM PDT

      [ Parent ]

      •  No, I would (0+ / 0-)

        think BO would diplomatically say that he and Geithner are not on the same page, so sorry about that, but pres appointmts do come and go and life goes on.

        Bush's presidency is now inextricably yoked to the policies of aggression and subjugation. Mike Whitney

        by dfarrah on Wed Mar 18, 2009 at 10:47:38 AM PDT

        [ Parent ]

  •  Geithner and Summers Have The Stench Of The (4+ / 0-)

    Bush Administration all over them.

  •  HEY! The GOP Rejected OVERSIGHT (1+ / 0-)
    Recommended by:
    yoduuuh do or do not

    from the very beginning.  These people lobbyed up and got the DEM's and GOP not to include ANY OVERSIGHT.  I bet they told the new administration...we'll be different now...and continued to do things as usual.  NOW that 10 Million people have lost their jobs and are hearing the rath of the populist is breathing down the necks and all of a sudden the MSM wants to report bad news now that Obama is in office, YOUR OUTRAGE against OBAMA is off base.  

  •  they can't rethink their usual approach (1+ / 0-)
    Recommended by:
    polar bear

    to capitalism and to its flawed substructure.

  •  God knows that i have been hard on Geithner (1+ / 0-)
    Recommended by:
    polar bear

    for not finishing the stress test and crafting a clearly outlined financial and banking plan.

    However, it is very very early to dismiss Geithner right now. Not only would it be very bad politically for a president who just got elected in a time of a severe economic crisis to dismiss his SOT, it would also send a tremendous panic wave through the world markets basically signaling that the US economy has totally collapsed.

    So, no to dismissing Geithner right now.

    Don't give a damn a/t each & every politician currently alive in the US. Last time i voted for the top part of the ballot was 1972. Never missed SB election

    by Mutual Assured Destruction on Tue Mar 17, 2009 at 09:56:20 PM PDT

    •  agree, but keep G&S as window dressing, (1+ / 0-)
      Recommended by:
      Mutual Assured Destruction

      and bring in the bad boys--kuttner, greider, johnson, stiglitz, roubini, et al.

      •  I am not sure that Stiglitz and Roubini would (1+ / 0-)
        Recommended by:
        polar bear

        take the job. Stiglitz was an informal adviser during the Clinton years and he was often part of the late night discussion in the WH. But he recently expressed his feelings clearly about working in the WH or the Treasury.  I am not sure that Roubini can even qualify to work for the federal government.

        Kuttner is a tricky case. I always wanted Krugman in the team, but he is such a lightning rod

        Don't give a damn a/t each & every politician currently alive in the US. Last time i voted for the top part of the ballot was 1972. Never missed SB election

        by Mutual Assured Destruction on Tue Mar 17, 2009 at 10:17:57 PM PDT

        [ Parent ]

        •  Is Obama allowed to have an informal (0+ / 0-)

          brunch with them or something, though?  Kuttner said he doesn't know if G&S are letting any good info through--that Obama needs to talk to some other economists himself.

          •  Of course he can have as many advisers (1+ / 0-)
            Recommended by:
            polar bear

            as he wants and he can claim executive privileges to shield the content of those conversations.

            I am not sure that Summers and Geithner are keeping Obama in some kind of a bubble isolated from the outside world. There is plenty of misinformation and disinformation and we need to be careful about what we read.

            I know for certain from people who work in the department of treasury that Geithner works about 18 hours per day and even sleeps in his office. He has almost no stuff right now and things are falling through the cracks. I am not defending the man, but he is handling a lot of work right now. That department needs to be staffed and fast.

            Don't give a damn a/t each & every politician currently alive in the US. Last time i voted for the top part of the ballot was 1972. Never missed SB election

            by Mutual Assured Destruction on Tue Mar 17, 2009 at 10:29:09 PM PDT

            [ Parent ]

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