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Geithner Must Go
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| D-res |
| quote: | The first casualty of the president's political debacle will likely be Timothy Geithner, the severely over-confident treasury secretary well known as a lapdog of Wall Street. Geithner was effectively repudiated by the president last week when Barack Obama abruptly announced a new, more aggressive approach to financial reform. But the immediate threat to Geithner is the scandal of collusion and possibly illegal behavior gathering around the Federal Reserve Bank of New York for its megabillion-dollar takeover of insurance giant AIG.
Tim Geithner is standing in the middle of the muck because he was still president of the New York Fed in the fall of 2008 when it rescued AIG with tons of public money (now totaling $180 billion). The facts of the deal are catching up with him now and none are good, since they raise doubts about his competence and his public integrity. This scandal has smoldered for several weeks in newspaper business sections, but is about to grab front-page attention.
The House Oversight Committee, chaired by Edolphus Towns, has turned up damning evidence and called Geithner to testify the week of January 27. Committee investigators are poring through some 250,000 e-mails and subpoenaed documents and finding smoking revelations. House Republicans smell blood. House Democrats, given the present climate of popular discontent, are unlikely to rally around tainted goods.
Perhaps the most explosive revelation is that Geithner's subordinates at the New York Fed instructed AIG executives to evade securities law and conceal from the public the $62 billion the insurance company paid out on contracts with the largest investment houses and banks. AIG was already bankrupt and 80 percent owned by the government, kept afloat solely with the billions being injected by the central bank. Yet the Fed told the company to pay off the bankers at full value--100 percent on the dollar--without negotiating a better deal for the public. The bankers would not have collected a dime if the government hadn't come to the rescue.
The Fed, in other words, gave the largest, most prestigious banks a very sweet deal--much sweeter than anything the banks or the federal government will offer to homeowners facing mortgage foreclosure. The central bank, in effect, was operating a backdoor bank bailout that nobody could see. The public billions devoted to AIG went in one door at the insurance company and came out another door to the private banks. Goldman Sachs alone collected $13 billion.
Failure to disclose is a big no-no in corporate finance. People can go to jail if they willfully withhold material information from shareholders and the Securities and Exchange Commission (SEC), or they may be sued for investor fraud. Yet that is what the New York Fed told AIG to do. The company officers wanted to report fully to the SEC. Their Fed overseers told them to take out the disclosure out of their report to the SEC (the facts were ultimately not disclosed until five months later). The Fed, remember, is the government's principal banking regulator. It is supposed to enforce the laws, not tell regulated firms to break them.
What was the Fed anxious to hide? Clearly, it was the clandestine and illegitimate conduit it had devised at AIG to funnel billions to the banks, unseen by the public. Keeping this bailout secret would avoid arousing even greater anger about the bailouts. It might also help prop up stock prices at endangered banks, though savvy financial players swiftly figured out what was going on. Only the people needed to be kept in the dark, along with their elected representatives in Congress.
The Federal Reserve was trying to cover its own butt. And Timothy Geithner's. Disclosing precisely what Geithner had done to arrange backdoor bailouts on the New York end would have definitely damaged his chance of becoming Obama's treasury secretary. When the facts were eventually acknowledged, members of Congress repeatedly demanded to know which firms got the Fed's money. The Federal Reserve Chairman and his top deputies said it would be "inappropriate" to say.
Somebody seems to be lying in this matter. When the Fed's irregular action to block AIG's full disclosure was first reported, Treasury officials said Geithner was not involved because he had "recused" himself from the AIG dealings. Yet, according to the latest revelations reported by the New York Times, the general counsel of the New York Fed, Thomas Baxter, has told House investigators that Geithner verbally approved AIG's generous payouts to the banks.
So which is it? Was Geithner involved or wasn't he? It seems highly improbable Geithner could have managed to remain ignorant of this very controversial decision not to disclose. In fact, it would have been derelict for him not to have known. Committee members will want to probe the question further--what did Tim Geithner know and when did he know it? Let's hope he is under oath. Martha Stewart, remember, went to prison not for trading stocks on insider information but because she lied to federal investigators.
The treasury secretary's precarious situation may well spill over to damage the fate of Federal Reserve chairman Ben Bernanke, seeking Senate confirmation for a second term. Until now, the Board of Governors in Washington has claimed to be aloof from the AIG mess at the New York Fed. This may also be untrue, according to the latest revelations. Some of the Fed governors in Washington, it turns out, were quite upset by the deals being made by Geithner's staff at the New York Fed. Lying is easier when a government agency is given privileged secrecy.
"What does any of this buy us?" some governors asked, according to one newly disclosed e-mail message. Good question. For that matter, what did the public get for its $180 billion? Senators might want an answer before they vote to give Bernanke another four years. Bernanke's distress was revealed last week when he suddenly announced that he wants a GAO audit of the entire AIG deal-making. That was jarring because Bernanke has repeatedly claimed the Congressional demands for a GAO audit of the Federal Reserve would destroy this sanctified institution.
The smell of scandal poses a more fundamental question about the future of the Federal Reserve. The president's financial reform proposals would authorize the Federal Reserve to become the super-regulator of the entire financial system--empowered in privileged secrecy to decide the most fateful matters of who should fail, who should be saved. The largest banking institutions are comfortable with this "reform," since they proposed the idea. Anyone else who looks closely at the Fed and the AIG fiasco should see immediately the alarming implications. |
http://www.thenation.com/doc/20100208/greider |
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| otec |
| Who cares about Geithner ? |
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| Shakka |
| quote: | Originally posted by otec
Who cares about Geithner ? |
The people who are currently grilling his midget ass in Congress right now. Namely Edolphus Towns. |
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| pkcRAISTLIN |
i wasn't going to bother, but since you went back to highlight the passage:
| quote: | Originally posted by D-res
Bernanke's distress was revealed last week when he suddenly announced that he wants a GAO audit of the entire AIG deal-making. That was jarring because Bernanke has repeatedly claimed the Congressional demands for a GAO audit of the Federal Reserve would destroy this sanctified institution.
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this is completely untrue. Bernanke has no issues with being audited by the GAO, indeed its done regularly. He has problems with congress sticking their noses where they don’t belong in an effort to undermine the independence of the fed. Somebody needs to get their facts straight. |
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| Comrade Stalin |
| Hasn't the government made money from all these bail outs!? |
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| Groundhog Boy |
| quote: | Originally posted by Shakka
The people who are currently grilling his midget ass in Congress right now. Namely Edolphus Towns. |
If people actually understood, even remotely, some of the topics, and watched today's hearings, they should be more outraged with the ignorance of our Congress people. |
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| pkcRAISTLIN |
| quote: | Originally posted by Groundhog Boy
If people actually understood, even remotely, some of the topics, and watched today's hearings, they should be more outraged with the ignorance of our Congress people. |
This.
Could you imagine the grilling people would be receiving had the economy imploded? Everyone’s just trying to feather their own nest by being seen to be tough on the big evil banks, even the big evil banks that prevented an economic meltdown and helped save the world’s economy. |
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| D-res |
| quote: | Originally posted by pkcRAISTLIN
i wasn't going to bother, but since you went back to highlight the passage:
this is completely untrue. Bernanke has no issues with being audited by the GAO, indeed its done regularly. He has problems with congress sticking their noses where they don’t belong in an effort to undermine the independence of the fed. Somebody needs to get their facts straight. |
For s sake it's not about audits. Audits happen, but their scope is limited.
| quote: | | The public billions devoted to AIG went in one door at the insurance company and came out another door to the private banks. Goldman Sachs alone collected $13 billion. |
Why is this necessary? Justify why the bankers get their investments back in full and everyone else gets shorted. That's the point.
from last nov:
http://www.marketwatch.com/story/pa...heet-2009-11-19
| quote: | | WASHINGTON (MarketWatch) -- Rep. Ron Paul, who has sought to audit the Federal Reserve for 26 years, has inched ever so much closer to his goal. A key congressional panel on Thursday approved legislation introduced by the Texas congressman that - for the first time in the central bank's 95-year-history -- would require government audits of Federal Reserve monetary policy, as well as how much the central bank has lent and will lend to specific banks. |
| quote: | | Paul's provision would seek to alleviate concerns that the audits would be politicized by setting a six-month time lag on the publication of previously unreleased audit data about the Fed's monetary policy decision-making. No additional scrutiny would be placed on transcripts and minutes of the Federal Open Market Committee meetings. |
Wouldn't that alleviate some worry about political influence |
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| Rasidel Slika |
| quote: | Originally posted by Shakka
The people who are currently grilling his midget ass in Congress right now. Namely Edolphus Towns. |
video? |
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| Groundhog Boy |
| quote: | Originally posted by D-res
Why is this necessary? Justify why the bankers get their investments back in full and everyone else gets shorted. That's the point. |
I'm just curious if you know who else besides Goldman got paid out 100% for their CDS portfolio? You do realize they weren't even the highest paid, they're just the most successful, so the easy scapegoat for our uninformed populace and the Congressmen pandering for votes that tell them what they want to hear. Societe General was the highest, and THEY'RE NOT EVEN A US BANK! When do you ever hear about them? Just Goldman, and they've repaid the TARP money. They could even pay back the $13 billion they got from the AIG pass-through, and STILL no one would back off. As a company, in terms of society's, perception, they're ed, and might as well go private by having partners buy back the company.
Secondly, you realize that in exchange for the CDS exposure, Maiden Lane III was set up, whereby the Fed took possession of the CDOs on the banks, like Goldman and SocGen. Those are now worth more than they were when the transaction took place because of the economic recovery (http://dealbook.blogs.nytimes.com/2...o-us-taxpayers/). Recent news has actually shown that Goldman approached AIG to cancel the CDS contracts long before this happened, because they realized that in the long run, they'd be more valuable, but AIG wouldn't concede (http://www.huffingtonpost.com/2010/...d_n_437041.html). And that was before the CDOs really went to , showing they were a) thought the CDOs in the long term would be worth more in the long run, and/or b) worried about AIG's solvency.
Lastly, last year, the Fed paid Treasury $45 billion in RECORD profits (http://www.washingtonpost.com/wp-dy...0011103892.html).
The public is plainly ignorant of all of these aspects, and our Congress just continues that problem. If any of these spineless s actually spoke up about some of the truth, it should mitigate some of the populist animosity (from both sides), but they don't, they just exacerbate it.
BTW, Stephen Lynch from MA was by far the biggest ing moron of the day. |
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| pkcRAISTLIN |
| quote: | Originally posted by D-res
For s sake it's not about audits. Audits happen, but their scope is limited. |
So, you’re in favour of a “limitless” audit scope are you? so you think that monetary policy should be audited by congress? You don’t think a central bank’s monetary policy should be off-limits to politicians?
http://www.forbes.com/feeds/afx/200...afx6726149.html
| quote: | Originally posted by D-res
Why is this necessary? Justify why the bankers get their investments back in full and everyone else gets shorted. That's the point. |
Investments?? :conf: Uh, AIG is an insurance company. All the banks that had coverage from AIG had a right to access that coverage during the crisis. Given the situation however, AIG didn’t have nearly the funds to pay up to everyone. The fed propped up the insurance company to prevent risk spreading even further. This is all a matter of public record, and you should already know the answer to your question.
No, it would do the EXACT opposite. See my link above. Its time you grew out of your childish fascination with ron paul’s conspiracy theories. |
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