Tag: Timothy Geithner

In case anyone on the left hasn’t noticed, Pres. Barack Obama is not a liberal, progressive or anything that even resembles a left wing politician. He is a neoliberal, or more obvious to some of us on the true left, a right wing corporate conservative. To see him as anything else is a delusion and Tim Geithner is proof. It starts with this Washington Post article:

Geithner finds his footing

By Zachary A. Goldfarb

By early last year, Geithner was beginning to gain the upper hand in a rancorous debate over whether to propose a second economic stimulus program to Congress, beyond the $787 billion package lawmakers had approved in 2009.

Lawrence Summers, then the director of the National Economic Council, and Christina Romer, then the chairwoman of the Council of Economic Advisers, argued that Obama should focus on bringing down the stubbornly high unemployment rate. This was not the time to concentrate on deficits, they said.

Peter Orszag, Obama’s budget director, wanted the president to start proposing ways to bring spending in line with tax revenue.

snip

The economic team went round and round. Geithner would hold his views close, but occasionally he would get frustrated. Once, as Romer pressed for more stimulus spending, Geithner snapped. Stimulus, he told Romer, was “sugar,” and its effect was fleeting. The administration, he urged, needed to focus on long-term economic growth, and the first step was reining in the debt.

(emphasis mine)

I’m not an economist but from what I do understand is that you cannot “reign in the debt” without including revenue and JOBS. If the private sector, after all the tax cuts and loop holes, cannot be urged to create JOBS then it must fall to the government to provide the STIMULUS.

A tip of the hat to Jon Walker at FDL who asks, rightly How Does Geithner Still Have a Job?. He concludes:

The most amazing thing about the entire article, of course, isn’t that it shows Geithner has been a destroyer, that should have been clear from his role in the financial melt down and HAMP. Rather it is simply that Geithner can be so constantly wrong yet still keep his job. He defines failing upward.

(emphasis mine)

At Salon, Andrew Leonard notes from the same WP article by Goldfarb, there are some glaring holes in Geitner’s plan:

Geithner was and is the primary architect of the Obama administration’s pivot from the economy to the deficit.

Furthermore, since Geithner now reigns supreme on economic policy, there is zero chance of any change of direction in the next year. All the advocates for greater attention to boosting economic growth and job creation in the short term — Christy Romer, Jared Bernstein, Austan Goolsbee, and even the much-hated-by-progressives Larry Summers — are gone. Geithner is what we’ve got.

Geithner’s stated position is that without long-term action on the deficit, the government will not be able to continue to support social welfare programs.

snip

But the electoral problem for Obama may not hinge on whether or not the president has the actual power to make manifest his will on job creation, but rather on whether he is perceived to be trying. Is he giving it his best shot? Is he making it clear to the general public what constraints have been placed on him by the opposition party and external events?

The answers are no, and no. And judging by Goldfarb’s Geithner profile, the White House is fine with that. It’s going to be a tough platform to run on, if the economy continues to slump as the campaign heats up.

The conclusion by Joe Sudbay at AMERICblog is the truth that the Democrats have not yet faced:

If this nation doesn’t start creating jobs, Obama and Geithner run the risk of losing theirs. And, as the latest Washington Post/ABC News poll showed us yesterday, the numbers on the economy are really ugly:

   By 2 to 1, Americans say the country is pretty seriously on the wrong track, and nine in 10 continue to rate the economy in negative terms. Nearly six in 10 say the economy has not started to recover, regardless of what official statistics may say, and most of those who say it has improved rate the recovery as weak.

The Republicans destroyed the economy. They weren’t held accountable and are not getting the blame. It’s Obama and Geithner’s economy. And, what happens with their economy is going to have a huge impact on the 2012 election.

I’m not optimistic.

Why would anyone believe ratings or projections by the S&P or Moody’s after their part in crashing the economy?  

Rather than assess risk accurately, two major rating agencies sold their top seals of approval to their investment bank clients, blessing products that the agencies themselves knew to be undeserving, the Senate Permanent Subcommittee on Investigations concluded in a report released Wednesday. By repeatedly debasing their standards, these agencies helped banks sell shoddy securities to unsuspecting investors, inflating the value of assets that turned out to be worth far less, the report has found.

The senate panel, led by Carl Levin (D-Mich.) and Tom Coburn (R-Okla.), levels a two-part charge against the rating agencies: Not only did these companies help inflate a dangerous bubble, the report says, but they also bear responsibility for popping it, as their abrupt downgrades of mortgage-linked securities in 2007 helped set off the panic that caused markets around the world to collapse.

Wall St. wants more austerity and and their puppets in Congress will help them every step of the way. So why should anyone take this seriously? Susie Madrak at Crooks and Liars reminds that “the banks liked the recession”

You’d think, considering the part played by Standard and Poors, Moody’s and Fitch in covering up these stinking piles of crap inadvertently rating mortgage derivatives as sound and crashing our economy, they would have the good grace to shut up and sit down.

But since nothing happened to hold accountable any of these craven clowns, what possible incentive do they have to tell the truth? And what reason do we have to believe them? After all, they’ve already displayed their willingness to sell their ratings to the highest bidder.

Let me remind you that bankers actually like the recession. They like the falling wages and the weak job market. The only thing that really worries them is inflation, and only because it raises wages and depresses the value of their holdings. Don’t trust anything that comes out of their mouths, or the feckless minions who sell their souls to them.

No reason to believe them now.

One of the regulation under the Dodd-Frank bill that was passed by Congress was regulating the derivatives by publicly trading them in exchanges. One of those derivatives, foreign exchange swaps is now on the verge of being exempted from regulation by none other than Wall St,’s best friend, Secretary of the Treasury, Timothy Geithner. It is a $4 trillion-a-day market that allows businesses to convert one currency to another currency. It also supports speculation, and facilitates the carry trade, in which investors borrow low-yielding currencies and lend high-yielding currencies, and which  may lead to loss of competitiveness in some countries. It is one of the markets that the Federal Reserves spent trillions of tax dollars propping up during the financial crisis in 2008 because of its speculative practices and lack of regulation.

Now, from Robert Kuttner at The American Prospect, Timmy wants to “blow a hole in Dodd-Frank”

Treasury Secretary Timothy Geithner is close to a decision to exempt the $4 trillion-a-day foreign-currency market from key provisions of the Dodd-Frank Act requiring greater transparency in the trading of derivatives. In the horse-trading over the final conference version of that legislation last year, both Geithner and financial-industry executives lobbied extensively to give the Treasury secretary the right to create this loophole. As the practical reach of Dodd-Frank is defined by the executive branch, this will be the first major decision to signal whether regulators will act to strengthen or weaken the reforms….

Geithner has already made his own views clear. In testimony before the Senate Agricultural Committee in December 2009, he declared that the foreign-exchange market needed no special regulation. “The FX [foreign exchange] markets are different,” he said. “They are not really derivative in a sense, and they don’t present the same sort of risk, and there is an elaborate framework in place already to limit settlement risk.”

snip

However, previously confidential information recently made public by the Federal Reserve Board reveals that in the aftermath of the collapse of Lehman Brothers in September 2008, the Fed pumped in $5.4 trillion over a three-month period to keep the foreign-currency market from collapsing. The Fed’s peak injection of dollars on any one day occurred on Oct. 22, 2008, when it reached $823 billion, according to a Wall Street watchdog group’s, Better Markets, analysis of the Fed data release….

Sen. Maria Cantwell, one of the most effective advocates for strong derivatives regulation during the Dodd-Frank debates, says, “I can’t believe the first decision the administration would make to carry out Dodd-Frank would be an anti-transparency decision. The idea that the foreign-exchange markets are not at risk is preposterous — we now know that they required multitrillion-dollar bailouts. Anytime you have a lack of transparency, there is potential for abuse.”

snip

Abuse of derivatives was at the absolute center of the financial meltdown. The collateralized debt obligations that were built on pyramids of sketchy mortgages whose value collapsed were, of course, derivatives. The mortgages themselves had been converted into highly leveraged, artificial securities — the essence of a derivative. So were the credit-default swaps that took down American International Group. With a derivative, a tiny amount of capital can control a much larger financial bet, and until the Dodd-Frank reforms, the derivatives were constructed and traded privately, with no regulator scrutiny. If such bets go wrong, massive losses ensue. And in a generalized loss of confidence, even well-capitalized institutions fail to accept each other’s credits.

(all emphasis mine)

In other words, it is business as usual that got us into the financial mess were are now trying to dig out from under. Nice work, Barack

They Go or Obama Goes

Robert Scheer,

Truthdig, August 25, 2010

Barack Obama and the Democrats he led to a stunning victory two years ago are going down hard in the face of an economic crisis that he did nothing to create but which he has failed to solve. That is somewhat unfair because the basic blame belongs to his predecessors, Bill Clinton and George W. Bush, who let the bulls of Wall Street run wild in the streets where ordinary folks lived. And there was universal Republican support in Congress for the radical deregulation of the financial industry that produced this debacle.

The core issue for the economy is the continued cost of a housing bubble made possible only after what Clinton Treasury Secretary Lawrence Summers back then trumpeted as necessary “legal certainty” was provided to derivative packages made up of suspect Alt-A and subprime mortgages. It was the Commodity Futures Modernization Act, which Senate Republican Phil Gramm drafted and which Clinton signed into law, that made legal the trafficking in packages of dubious home mortgages. In any decent society the creation of such untenable mortgages and the securitization of risk irrationally associated with it would have been judged a criminal scam. But no such judgment was possible because thanks to Wall Street’s sway under Clinton and Bush the bankers got to rewrite the laws to sanction their treachery.

It is Obama’s continued deference to the sensibilities of the financiers and his relative indifference to the suffering of ordinary people that threaten his legacy, not to mention the nation’s economic well-being. There have been more than 300,000 foreclosure filings every single month that Obama has been president, and as The New York Times editorialized, “Unfortunately, there is no evidence that the Obama administration’s efforts to address the foreclosure problem will make an appreciable dent.”

[snip]

It is fairly evident by now that the White House and the Treasury have been pushed into a corner and will have to nominate, or possibly appoint, Elizabeth Warren, currently the chair of the Congressional Oversight Panel created to investigate the U.S. banking bailout (TARP), to be the head of the newly created Consumer Financial Protection Bureau. While she is eminently qualified and was the inspiration for the creation of the new agency, what is their objection? The Treasury Department and the President’s Council of Economic Advisors is a an “Old Boys’ Club” headed by an out right sexist, misogynist, Larry Summers and a closet one, Timothy Geithner. While Geithner has not out right said he opposes Warren, his statement that she was qualified was not a “bell ringer”.

As pointed out by Amy Siskind at the Post this is not Geithner’s “first clash with women in power”

One of his first acts in the role of Treasury Secretary was to attempt to push out FDIC Chairwoman Shelia Bair. As Rep. Barney Frank observed: “I think part of the problem now, to be honest, is Sheila Bair has annoyed the ‘old boys’ club…we have several regulators up in the tree house with a ‘no girls allowed’ sign…”

Geithner’s inability to respectfully interact with women in positions of power was further in evidence when he was questioned in April by the Congressional Oversight Panel. Warren rightfully asked Geithner about AIG’s funneling billions of taxpayers’ dollars to Goldman Sachs: Do you know where the money went? Geithner could barely conceal his disdain: watch his angry, condescending response here.