Timothy Geithner is at it again doing what he knows best: shafting the American public. You remember Geithner, the tax dodging, illegal nanny hiring head of the New York Federal Reserve Board who failed to see the oncoming storm in the financial markets, and indeed helped to precipitate it and somehow got promoted to Treasury Secretary? The New York Times is reporting that Geithner prevailed in fashioning the Obama administration's upcoming bank bailout "after a spirited internal debate" with other Obama administation advisors, including David Axelrod. As usual, Geithner is carrying water for big banks (some of whom he or his friends worked for) at the expense of average Americans.
STEPHEN LABATON and EDMUND L. ANDREWS of the New York Times, in their article, "Geithner Said to Have Prevailed on the Bailout" indicate the ways the bailout will help bankers but not consumers. Write Labaton and Andrews:
In the end, Mr. Geithner largely prevailed in opposing tougher conditions on financial institutions that were sought by presidential aides, including David Axelrod, a senior adviser to the president, according to administration and Congressional officials.
Mr. Geithner, who will announce the broad outlines of the plan on Tuesday, successfully fought against more severe limits on executive pay for companies receiving government aid.
He resisted those who wanted to dictate how banks would spend their rescue money. And he prevailed over top administration aides who wanted to replace bank executives and wipe out shareholders at institutions receiving aid.
Source: www.nytimes.com/2009/02/10/business/economy/10bailout.html?ref=business
Geithner's bailout plan has 3 prongs: 1) encouraging investors to buy mortgage related assets from banks, with the FDIC providing guarantees (the so-called "bad bank" approach); 2) capital injection by the Fed Reserve to unfreeze the market for loans; 3) review of the capital level of all banks to see how much capital they need.
But Geither apparently fears and opposed what he saw as too much federal oversight--not surprising coming from the man who could not fill out his own tax forms and who as the President of the New York Fed was a champion of market deregulation that brought on the crisis. According to the same article in the NYTimes:
"...officials said Mr. Geithner worried that the plan would not work — and could become more expensive for taxpayers — if there were too much government involvement in the affairs of the companies.
Mr. Geithner also expressed concern that too many government controls would discourage private investors from participating.
...But as intended largely by Mr. Geithner, the plan stops short of intruding too significantly into bankers’ affairs even as they come onto the public dole.
A spokeswoman for Mr. Geithner, Stephanie Cutter, had no comment. ...
But as intended largely by Mr. Geithner, the plan stops short of intruding too significantly into bankers’ affairs even as they come onto the public dole.
Significantly, the Times reports that under Geithner's plan, the plan will not recquire shareholders to lose most of their investment. "Nor will the government announce any plans to replace the management of virtually any of the troubled institutions, despite arguments by some to oust current management at the most troubled banks," wrote the Times. So all in all, this is a very cozy plan for Geithner's friends in the banking circles (guess where he will go after he leaves Treasury?) allowing scofflaw bankers to walk free and their shareholders to essentially have the government insure their investments. Only the taxpayer is at a loss here, in the wonderful world of Timothy Geithner.
Concludes the Times: "And for all of its boldness, the plan largely repeats the Bush administration’s approach of deferring to many of the same companies and executives who had peddled risky loans and investments at the heart of the crisis and failed to foresee many of the problems plaguing the markets." Why is this NOT a surprise since Timothy Geithner was serving as New York Fed head under Bush and advised Paulson on every step of the first cache of TARP? Why is this NOT a surprise since Geithner is a protege of Citi's (the biggest beneficiary from the bailouts)Robert Rubin and the New York Fed under Geithner looked the other way on Citi? (Citigroup's supervisors, including the Federal Reserve, failed to identify a number of their risk management shortcomings and to induce appropriate changes in behavior." www.propublica.org/article/more-mea-culpas-from-geithner-as-regulator-090122) Why is this NOT a surprise since Geithner made pie-in-the-sky predictions as late as March 2007 about the financial situation when addressing the Fed Reserve Bank in Charlotte, Va?
Meanwhile, in a fascinating interview with Amy Goodman on democracynow.org, U.S. Representative Marcy Kaptur of (Dem-ohio) notes that the agencies that should have been handling the credit crisis: the FDIC and the SEC have not. Kaptur says Treasury is involved even though it does not have the banking oversight that the FDIC has because it is Wall Streets friend. She also makes some choice comments about the Treasury under Geithner:
"...but the federal institutions that were normally used to do workouts and to resolve pending bank failures are the Federal Deposit Insurance Corporation and the Securities and Exchange Commission. They have all the examination powers. They have enormous power to do workouts, to track that loan, to get it, to put the borrower at the same table. If they have to write down some losses, both by the lender and by the mortgagee, they do that. The Securities and Exchange Commission comes in and, through their auditors, they deal with the real valuation of property, even in a downturned economy.
Those institutions were put on the shelf. They were not used. In fact, I think one of the reasons they were not used is because when they come in, they bring examiners. They actually look at the books. They can do mortgage audit trails. And I think that Wall Street really didn’t want that, and they were powerful enough, in order to help to pass a bill, scaring Congress right before the election, before a new president was elected last fall, that they really put all the power in the Treasury Department, which isn’t a housing agency. It really doesn’t do bank regulation in the same way that the FDIC does, nor oversight. Treasury really works with Wall Street. They basically sell US debt. There’s a real circuit that goes between Wall Street and Washington, the Capitol, the US Treasury Department. So they used the wrong agency.
They brought in people from the very companies, like Goldman Sachs, to run the Treasury that had been one of the agencies—one of the companies that was going under, so they made it into a bank holding company. You can follow the trail of what they did. Meanwhile, they’re protecting their interests on Wall Street."
...
AMY GOODMAN: Congress member Kaptur, your assessment of the Treasury Secretary Tim Geithner and who he has brought on?
REP. MARCY KAPTUR: Well, you had asked me the question before about the influence of Wall Street in Washington. Mr. Geithner has now brought one of the major lobbyists who had lobbied for Goldman Sachs as his chief of staff, Mr. Patterson. And this revolving door between Washington and Wall Street is terribly strong. And I say, how can we trust the very people who brought us to this point to now manage the public dollars, the taxpayer dollars of the people of the United States? We need to clean out that operation, and we need to hold the Wall Street banks and all of their associates accountable to the American people. The scales of justice have to be balanced. They are far out of whack right now.
Source: http://www.democracynow.org/...
It's wonderful to see President Obama finally come out swinging with a populist message on his economic recovery plans. But can he do the same for the bank bailouts considering Timothy Geithner's history, his latest shenanigans, and the banker's brew that Geithner has concocted?
NOTE: for more information on Geithner, see my diaries: "Executive Salary Cap Loopholes: Remember Geithner is Writing the Caps" http://www.dailykos.com/story/2009/2/6/02535/78286/752/693853
"My Least Favorite Member of Team Obama Is..." (Geithner easily won the poll) http://www.dailykos.com/...
"Obama: Cut Geithner Loose" http://www.dailykos.com/story/2009/1/21/43440/1452/541/686969
NOTE #2: Since posting this diary I became aware of another (but fortunately with different background information) dealing with the New York Times story. See bobswern's "NYT: Geithner wins. We Lose." http://www.dailykos.com/...