Yesterday I posted a diarythat very few folks read - noting that Secr Tim Geithner has more and more been proven spectacularly wrong on every front, the most recent and frightening evidence being yesterday's unemployment figures.
How the unemployment figures played into this, I go into more detail below. But yesterday's two-fer news articles [on the disturing jobs figures and on the Citi group stock plan] started out with many laughs at Sheila Bair's expense:
My diary cited business articles guffawing over and ridiculing Sheila Bair, since - as of yesterday, Geithner was dissing Sheila Bair over at the FDIC by taking the side of Citi's Vikram Pandit, in allowing Citi to exchange our [taxpayer's] more-powerful types of share holdings into common stock - where the taxpayers would then merely be left holding the bag for Citi's bad debt - if Citi then collapsed further.
Is the maxim true that [s]He who laughs last, laughs best? More over the fold...
Yesteday, the business newsmakers were laughing at Bair. Investors after all were standing at the sides of this upcoming deal with mouths frothing, having borrowed money to buy these shares because the Citi stock deal that Geithner is about to allow is a sure money maker for them They don't want to wait - they are paying good money on the debt they;ve taken so they can buy up that stock - and the pressure was on Geithner to get the deal done - which would coincidentally help out those stock purchasers.
Geithner was happy to oblige Citi, Pandit and those frothing investors
And Sheila Bair's concern that Citi is in a truly deep hole? - That its bad debts could be catastrophic?
After all, as one analyst at a New York financial research Firm had noted
"[Sheila Bair is] the only prudential regulator in Washington who has any understanding of the need to force the disgorgement of troubled assets from troubled institutions. And you cannot have a healthy banking institution without doing that."
But as that Bloomberg article made clear, her concerns were holding up the new investors' potential profit - and each day has been costing them money - since that money they set aside to purchase the stock that Geithner wants the taxpayers to give up was, after all, mostly borrowed...
Enter Geithner - stiffing Bair, helping Pandit and those frothing new purchasers. As Bloomberg put it, Citigroup Gains Geithner Backing as Pandit Bucks Bair
Because Citi is completely sound right?
After all, Geithner ran "Stress Tests" on all the banks - and all the banks are ok, right? OK - unless Citi was still so full of crappy bad debt that it finally burst - with the US taxpayer holding the bag. But that would mean that - Geithner's tests were full of crap.
But enter problem number two.
As I pointed out in my diary yesterday, lurking in the background were yesterday's unemployment figures.
Remember, Geithner's stress test was designed to see which banks would fail in a worst case scenario. So Geithner decided that his premise would be: in the worst possible case, 8.9 percent of Americans would be out of work - and viola! - Geithner found that the banks would survive even that Tsunami.
One problem with "stress tests" conducted by the Fed that were based on the 2009 unemployment rate average of 8.9 percent. - Unemployment in May climbed to 9.4 percent
Today we have another wave rolling over Geithner - another woman who is an outsider in the Obama White house - Elizabeth Warren
who is warning publicly that Geithner F****D UP ROYALLY in designing a worst case scenario based on a fallacy
Watchdog wants stress test do-over
The CNN article, notes that Elizabeth Warren wants "more details" about the stress tests." God Bless her! And I am an atheist!
Remember geithner's promise that he would promote transparency? His website still, BTW does not even have the details of what was done with the funds that were given over to financial institutions.
So far, Geithner's strongest atrong-arm tactics have demonstrably not been against the banks but instead have been against the regulatory efforts by Sheila Bair and the calls for more transparency by Elizabeth Warren.
Moreover, the most notably publicized aspect of his claim to be effectuating tougher regs has never been what he would do substantively - but rather his attempt to combine all the agencies under one person's control. That attempt to combine agencies was starting to fall apart yesterday and
with a wave a Republican pressure his plan has definitively fallen apart today - in the very month that Summers and Geithner were about to present the plan.
Huffington Post cites the Wall Street Journal for the embarrassing news that
The Obama administration is backing away from seeking a major reduction in the number of agencies overseeing financial markets
Maybe it's not so bad: under Geithner's plan, would the FDIC powers to regulate be weakened? Based on recent history of Geithner vs Bair it would seem so.
This make three women - all of whom are currently or whose beliefs have been discounted in the past - by Obama's closest economic advisers.
Bair - FDIC - Her [successful] FDIC Mortgage plan dissed by the prior administration and never adopted by the current administration, her current worries ignored by Geithner, dissed publicly by Citi's Pandit, with Geithner's blessing.
Borne - dissed publicly by Geithner's mentor Summers during the CLinton years; never brought back to the Obama circle even though her call for regulation of Credit Default Swaps was absolutely right.
Warren - Given a post outside the administration for a reason: be a watchdog - yet whose recommendations have to date never been adopted by Obama's circle. Consistently given the cold shoulder by the entire Geithner/Summers team.
We already know that - if Obama was watching the Kennedy Profiles in Courage Awards - he would be getting the lesson in spades - it was The head of the FDIC and former chief of the CFTC who tried to avert and then reverse the economic crisis
But is Obama listening? We'll soon find out.