Wednesday, February 11, 2009

THE INSIDER

On November 10, I referred to then-potential Treasury Secretary Tim Geithner as another "entrenched Wall St. guy" who would use his position at Treasury to "ask for more money that the banks can horde. And use for executive bonuses. And distribute as dividends to their shareholders."

Then on November 24, I wrote that the so-called necessity to bailout Citibank was largely the fault of Robert Rubin, as well as his "protege[] Tim Geithner, your soon-to-be Treasury Secretary," who "worked over the weekend with such luminaries as Hank Paulson & Ben Bernanke to let this latest boondoggle go down. More of the same . . . and lots more to come."

So why am I mentioning this? Mostly because a lot of people have been willfully naive, keeping themselves in the dark as to who Tim Geithner really is. Believing that since Obama picked him, he must be a good guy.

He's not.

He was the head of the N.Y. Fed when it brokered last spring's sale of Bear Stearns to Morgan-Chase (read: he gave Morgan the money to buy Bear for pennies on the dollar). He played a key role in deciding not only to bail out AIG (which insured a large proportion of Goldman Sachs' trashy investments), but also to let Lehman go under, yet never felt the need to explain this inconsistency.

He's a tool of Wall St., he's always been a tool of Wall St., and from what we've seen in his short stint at Treasury, he will remain Wall St.'s biggest tool. From yesterday's NYT, discussing the back-room dealings that led to the announcement of Treasury's plans for all the bank's bad assets:
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.
* * *
Abandoning any pretense about limiting the moral hazards at companies that made foolhardy investments, the plan also will not require shareholders of companies receiving significant assistance to lose most or all of their investment. Some officials had suggested that the next bailout phase not protect existing shareholders. (Shareholders at most banks that fail will continue to lose 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.
Finally, while the administration will urge banks to increase their lending, and possibly provide some incentives, it will not dictate to the banks how they should spend the billions of dollars in new government money.
In sum, Geithner went to the mat, and won, in an effort to insure that Wall St.'s biggest will continue to receive our money, yet not be constrained in any way as to what they do with our money once they receive it. Of course. This is what Tim Geithner has spent his entire career doing.

And this is the man Obama tabbed to oversee his economic policies.

Tim Geithner is a very important man in the big picture for those who are really setting policy -- both inside D.C., and on Wall. St. That's why, unlike Daschle and Killefer, no one withdrew Geithner's nomination for failing to pay his taxes.

Labels: , ,

10 Comments:

Anonymous Applesaucer said...

Bravo! Awesome post. You've put it all together in one piece.

Anyway, some people are making a big deal out of the Kanjorski CSPAN interview. Something like "you see, armageddon was around the corner, we had to do SOMETHING!"

First, most of the people opposed to the orginial TARP plan were opposed, in part, because it was authored by Hank Paulson and pitched by the Federal Reserve talking heads (mostly Ben Bernanke).

Notice the source of Kanjorski's Armageddon story -- I think he said Paulson and the Fed.

So, if we didn't believe what Paulson, Bernanke and crew said in the first place, we were supposed to believe Kanjorski, who relied on them for his information.

Secondly, there's no real evidence of this meltdown. Within the story, there are factual inaccuracies about date and time.

Can the people who trumpet this story as proof that they are right offer any evidence or even explain what Kanjorski said? I bet not; they refuse to read the financial pages, in the first place, right?

Third, even we who are opposed to TARP know that there's a big problem out there. The problem will end up with these banks failing or being nationaled. One of the these two outcomes is inevitable for most of these banks, so why funnel money to bonusses, dividends and M&A transaction in the meantime? Why give money to the bad managers who got their companies into this mess in the first place?

There are some in the Obama Administration who understand this. But Geithner (and Summers) -- Wall St.'s bag men -- are making sure that their friends are taken care of...at least until the bitter end, when it all blows up anyway.

Anyway, good job!

Applesaucer

7:54 AM  
Blogger Smitty said...

Okay. I read some of the sites you sent me to, and have been following this enough between you, Cole's site and a few others to finally "get" that I should have written my own Senators much more vociferously and often in opposition to Geither.

This is a great piece, Mike. But...now what? What can I do? What can we do?

See, my own demented brain summarized this as class war. Geither and his ilk have taken care of their buddies, and the notion they are working on seems to be: feed the rich. Powerful, unrestrained wealth is what drives our economy, in their minds. It's one step worse than "trickle-down" economics in that it seems to not matter how much wealth, if any, trickles down. What matters is the resuscitation of massive wealth, my own pithy mortgage be damned.

That's class war; at least to me...

Viva la revolucion, or let them eat cake?

9:11 AM  
Anonymous wfta said...

I'm sure there is nothing to worry about. I have it on the authority of Will Wilkinson of the Cato Institute that the entire financial crisis is the fault of the US Congress forcing home ownership on people who could not afford it.
http://marketplace.publicradio.org/display/web/2009/02/11/wilkinson/

12:59 PM  
Blogger Deb said...

So, to sum it up, basically, you're saying that Tim Geither is a tool.

Right?

OK, good. Just checking.

2:55 PM  
Blogger DED said...

Good post, Mike.

When I wrote that I was unhappy with Obama picking Clinton and Holder you told me that Geithner was a worse choice. You were right.

I saw some of the Bank CEO hearings today. I got the impression that they were really trying to look innocent in all this. Citibank's CEO even said that he'd work without pay or bonus until the company was profitable again. Easy to say when one's net worth is in the tens of millions. Anything to avoid going to jail.

Believe or not, Barney Frank might be able to steer things away from Geithner's position. He didn't seem all that impressed with the group. Basically he said, (I'm paraphrasing) "What do you guys need bonuses for? Do you really need to have an incentive to succeed? If you don't get your bonus are you going to start taking days off, or coming in late to work? Aren't bonuses for the guys that are in the lower ranks who don't have a stake in the success of the company?"

He also said that if any of the banks wanted to give the money back because they don't like the terms, "we'd accept it."

I'm not saying that this thing won't be really horrible. I'm saying that there's a chance that Frank will make it less than really, really, really horrible. That might not seem like much, but since our gov't seems hell bent on spending trillions anyway, I'm hoping for a shred of damage control.

I won't hold my breath, nor do I expect anyone else to either.

4:35 PM  
Blogger steves said...

Great post. Thanks for following this and offering your analysis.

6:41 PM  
Blogger Mike said...

But...now what? What can I do? What can we do?

That's class war


I don't know that it's "class war" in the traditional sense we think of it, largely because there's no "production" in this country for anyone to control the means of.

In other words, the old paradigm of property-owning vs. tenants, or factory owners vs. workers doesn't make sense in 21st Century America.

But, there is a battle going on, and it transcends traditional notions of left-right. Dem-GOP, or even property-owner vs. non-property-owning to a degree. And it's The Kleptocrats vs. everyone else.

A small cadre of Wall St. Insiders and their enablers on Capitol Hill, Pennsylvania Ave, the Federal Reserve, K Street, Madison Ave, and in the press are fleecing, looting, robbing the remaining 295 million or so.

This is really happening. It's not conspiracy, it's not paranoia. It's happening, and it's open and above-board!

So what I think people can "do" is to understand what's fucking happening! And then when they see what's so goddamn obvious, they can put a stop to it.

Look at James Watt, Donald Rumsfeld, Karl Rove. When cabinet officers are exposed as crooked or incompetent, their bosses get rid of them.

Getting rid of Geithner won't solve things, by any means, but removing one of the crooks from his position as head of the national treasury might not be a bad start. And it would send a message to The Insiders that we're getting wise to them.

Believe or not, Barney Frank might be able to steer things away from Geithner's position.

Fuck Barney Frank. After Paulson and Bernanke, he had the biggest role in ramming through that abomination last fall.

7:35 AM  
Blogger Smitty said...

n other words, the old paradigm of property-owning vs. tenants, or factory owners vs. workers doesn't make sense in 21st Century America.

But, there is a battle going on, and it transcends traditional notions of left-right.


That's exactly what I mean. It's not a "traditional class war" any more. It's a different kind, and you said it: Kleptocrats versus us. Big massive banking business conglomerates versus taxpayers and homeowners.

If Obama really is the peoples' president, he'll throw the bums out, right?
[/naivite']

8:35 AM  
Blogger DED said...

Fuck Barney Frank. After Paulson and Bernanke, he had the biggest role in ramming through that abomination last fall.

I wasn't trying to defend him. I realize his hand in what happened then (and now). Based on what I saw in the committee meeting yesterday, I was trying to argue that he might yield a lesser catastrophic evil then what Geithner has going. Maybe, in the intervening months he's seen what's happened with the legislation and he's changed one iota.

Because, to be honest, unless you've got a "million angry taxpayer" mob ready to march on DC (as Edwardo suggests), there's nothing else that can be hoped for. Congress won't listen to calls or read their faxes and emails. It's a done deal. We're fucked.

The polls I've seen show that the public believes something needs to be done and they're on board with this "stimulus" and everything else that this admin is suggesting. Republicans are perceived as obstructionist. Besides, they're not offering any alternatives to the public besides "tax cuts" which Dems are having a field day with as being Bush redux.

Since we can't "throw the bums out" here in Feb '09, I'll have to pin my hopes on Barney Frank being less of a "kleptocrat" than Geithner or anyone else. Because, what other choice do I have?

11:23 AM  
Blogger Mr Furious said...

Yeah, Geithner sucks. Maybe later I'll have time to read the post, links and comments, but for now, I'm just throwing those two cents in.

1:16 PM  

Post a Comment

Links to this post:

Create a Link

<< Home