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Dear Secy Geithner: It’s Not Just Some Silly Bloggers Waiting for Change

I’ve now read in two different places that U.S. Treasury Secretary Timothy Geithner blames some of his bad pub on those rascally bloggers.

Well, it’s not just the bloggers.  How about Paul Krugman in a column on Monday headlined, Behind the Curve:

So here’s the picture that scares me: It’s September 2009, the unemployment rate has passed 9 percent, and despite the early round of stimulus spending it’s still headed up. Mr. Obama finally concedes that a bigger stimulus is needed.

But he can’t get his new plan through Congress because approval for his economic policies has plummeted, partly because his policies are seen to have failed, partly because job-creation policies are conflated in the public mind with deeply unpopular bank bailouts. And as a result, the recession rages on, unchecked.

O.K., that’s a warning, not a prediction. But economic policy is falling behind the curve, and there’s a real, growing danger that it will never catch up. (emphasis Clips & Comment)

Or, how about Krugman last week in The Big Dither:

Last month, in his big speech to Congress, President Obama argued for bold steps to fix America’s dysfunctional banks. “While the cost of action will be great,” he declared, “I can assure you that the cost of inaction will be far greater, for it could result in an economy that sputters along for not months or years, but perhaps a decade.”

Many analysts agree. But among people I talk to there’s a growing sense of frustration, even panic, over Mr. Obama’s failure to match his words with deeds. The reality is that when it comes to dealing with the banks, the Obama administration is dithering. Policy is stuck in a holding pattern.

Notice something?  Geithner is mentioned in the Big Dither, but the bullseye for this mess with the banks and AIG is falling squarely on the president in both columns.

Here’s from an op-ed from David Smick in Tuesday’s Washington Post, Tim Geithner’s Black Hole:

Pity Barack Obama’s economic advisers. The blogs are now demanding their scalps, and Treasury Secretary Tim Geithner and his colleagues face a nasty dilemma: There are no solutions to the banking crisis without extraordinary political and financial risks. Thus, they have adopted a three-pronged approach, delay, delay, delay, in the hope that somebody comes up with a breakthrough. …

… The Obama team needs to remember that we got into this mess because of a lack of financial transparency. It’s time to tell the American people what the stock market already knows: that the path to recovery will probably be expensive and politically unpopular, perhaps explosively so. …

… In the end, at least one thing is certain: Our present position is unsustainable. The longer we delay fixing the banks, the faster the economy deleverages, the more credit dries up, the further the stock market falls, the higher the ultimate bank bailout price tag for the American taxpayer, and the more we risk falling into a financial black hole from which escape could take decades.

Here’s the problem with voters, taxpayers.  Or, should I say here’s the problem with at least this voter and taxpayer.  I voted for change.  I was incensed, not so much by the $700 billion Paulson bailout, but by the rabbit hole the money seemed to disappear down.  We were told at the time that there was a national emergency and the government needed to dole out this money and fast.  We were told it would be used to corral some of those toxic assets and allow the banks to get back on track.  Here’s a couple of stock quotes from today’s close:

• Citigroup – $1.05
• Bank of America – $3.75

The Bush Administration either lied to buy time or no one knows what the hell they’re doing.  Don’t forget, Tim Geithner was one of the architects of TARP 1 as head of the New York Fed.

I want one of two things.  First, justice.  That means the pigs who brought this down upon us should experience the ultimate downside of that pure capitalism they love so much – failure.  Or, second, someone in the federal government to take whatever time is needed and explain to the American people as simply as possible why any of these foolish companies are too big to fail and what it will take to make things right.

When Tim Geithner whines about blogs, he’s whining about Americans who are frustrated with a system that is rigged for only the wealthy and privileged among us.  He’s whining about people who do their part, play their role in this economy whose lives are being changed or put on hold because of high tech, high finance gambling on Wall Street.  While the Treasury Secretary ‘dithers’ and prepares to throw more of our money into the maw of AIG or CitiGroup with little transparency or meaningful explanation, he’s blowing his boss’ political capital as well as our tax dollars.

I guess you could sum this up as follows: If we’re in what’s akin to a wartime situation, lay it out for us, don’t talk down to us.  And, since this isn’t war, shed the light of day on where the hundreds of billions of money from the executive branch has gone – every penny – and explain what $4 trillion in “guarantees” from the Federal Reserve means.

Must Read – Understanding the Problem with Banks and the Government

You should read the David M. Smick’s entire column, Tim Geithner’s Black Hole, over at the Washington Post.  Here’s an excerpt:

… The logical alternative — talk show hosts’ solution du jour — is to temporarily restructure or nationalize the banks and leave taxpayers alone. Remove the toxic assets, replace management and cut the too-big-to-fail financial dinosaurs into smaller, nimbler entities. Then reprivatize these smaller banks and let the recovery begin.

Oh, if it were that simple. I suspect Obama’s advisers would like nothing more than to dismantle an irresponsible firm such as Citigroup. They are afraid to do so, for one reason: All the big banks are connected to a potentially lethal web of paper insurance instruments called credit default swaps. These paper derivatives have become our financial system’s new master.

The theory holds that dismantling a big bank could unravel this paper market, with catastrophic global financial consequences. Or not. Nobody knows, because the market for these unregulated financial derivatives, amounting potentially to over $40 trillion (by comparison, global gross domestic product is now not much more than $60 trillion), is the financial equivalent of uncharted waters. …

Finally, Bernanke Tells Us How He Really Feels …

From Bloomberg Tuesday afternoon:

“If there is a single episode in this entire 18 months that has made me more angry, I can’t think of one other than AIG,” Bernanke told lawmakers today. “AIG exploited a huge gap in the regulatory system, there was no oversight of the financial- products division, this was a hedge fund basically that was attached to a large and stable insurance company.”

Bernanke’s comments foreshadow tougher oversight of systemically important financial firms, and come as President Barack Obama seeks legislative proposals within weeks for a regulatory overhaul. The U.S. government has had to deepen its commitment to prevent AIG’s collapse three times since September as the company accumulated the worst losses of any U.S. company.

The company “made huge numbers of irresponsible bets, took huge losses, there was no regulatory oversight because there was a gap in the system,” Bernanke said. At the same time, officials “had no choice but to try and stabilize the system” by aiding the firm.

AIG is getting as much as $30 billion in new government capital and relaxed terms on its bailout announced yesterday.

Bailouts, Stimulus, Etc. – What Has The Rush Gotten Us?

Drudge Report has been trying mightily since Saturday to “sell” this story: If there was such a hot rush to pass the stimulus bill, why was President Barack Obama taking the weekend off in Chicago?

What Drudge does is show he’s in the tank for the Republicans when he runs a picture like the one to the left “above the fold” all weekend with the following headline: What’s the rush? ‘Urgent’ stimulus on hold for Obama’s weekend off …

First of all, no president of the U.S. has a “weekend off.” Not even George W. Bush, although some may say he took years off.

This is a potshot – Drudge urging the producers over at Fox News to beat up on the president.

But, despite Drudge’s partisanship, he points out a real problem with Republican and now Democrat management of the U.S. economic crisis.  Our politicians are scaring us silly and ramming TARPs, assorted bailouts and stimulii through the government machine with very little transparency and even less accountability.

Back in the Fall when the Troubled Asset Relief Program, aka $700 billion bailout, was rammed through Congress there was lots of scary talk about meltdowns and companies so big and far-reaching that we couldn’t possibly let them fail.  $350 billion of that bailout went out to the banks and Wall Street.  We still have barely working credit markets.  They’ve loosened up a bit, but nothing much has changed in the past several months.  We also know that a lot of our tax dollars were wasted on bonuses, exorbitant compensation for failing management teams, mergers and acquisitions.

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Relief Plan for Foreclosures on Wednesday …

An article in the Times of London talks about President Barack Obama’s tough road to hoe on economic stimulus and bailing out those bankers who are too big to fail.  According the Times, Obama will travel to Phoenix on Wednesday and unveil a $50 billion plan to directly help those facing foreclosure.

Barney Frank, the Democratic chairman of the House Finance Committee, said Mr Geithner should not to repeat the mistakes of his predecessor Hank Paulson, who “lost sight of the rest of the country and pissed them off entirely,” with his initial bank bailout.

He Frank warned the Treasury Secretary that voters want to see fewer foreclosures and more bank lending to ordinary consumers before they support the rest of the financial rescue plan. “They understand the political need,” Mr Frank said.

If these guys think that just because they work $50 billion in for the little guys while they still talk of trillions for bankers and brokers that folks like me will fall in line on bailouts – they’re nuts.

I hope we can get the right kind of help to those folks who were taken advantage of, but that doesn’t make wasting our dollars on Bank of America and Citi any more palatable.  If we’re going to sink taxpayer dollars into more bailouts of the people who created the mess, I want to see value for that investment.  That’s what nobody’s explained – Barney Frank, Tim Geithner and all the rest.

The Daily Graphic: TARP (Bailout) Recipients 2008 Lobbying Expenses

Over the course of 2008, companies like Bank of America and PNC Bank Corp. shelled out well over $100 million to lobby Washington politicians on behalf of the financial services and banking industry.  Others on the list of handing out the big bucks to the likes of members of Congress, Bush and now Obama Administration officials include, Goldman Sachs, Morgan Stanley, CitiGroup and JP Morgan.  Information and graphic courtesy of The Center for Responsive Politics.

After Geithner’s Performance, Nationalization Now …

Nobody’s talking Communist takeover, but this article just up at the New York Times site makes you wonder why the smartest people in the room don’t seem to have learned from the travails of others. (Japan, Sweden)

Nationalization would mean that taxpayer money was at least going toward something we of which we would have at least notional ownership.  Nationalization would allow the government to target the banks worthy, by some standard, of saving.  After five or ten years, shares of those banks could be offered into the market where they would be on their own once again – with the taxpayers reaping the financial benefit for taking the risk in bringing them back from the brink.

Or, how about letting all of those that may fail, fail.  Keep our money out of the game until the dust clears and then use the two to three trillion of taxpayer dollars as seed money for honest people to start new banks in a better regulated system?

At any rate, here’s a bit from the Times tonight:

But without a cure for the problem of bad assets, the credit crisis that is dragging down the economy will linger, as banks cannot resume the ample lending needed to restart the wheels of commerce. The answer, say the economists and experts, is a larger, more direct government role than in the Treasury Department’s plan outlined this week.

The Treasury program leans heavily on a sketchy public-private investment fund to buy up the troubled mortgage-backed securities held by the banks. Instead, the experts say, the government needs to plunge in, weed out the weakest banks, pour capital into the surviving banks and sell off the bad assets.

Bank Bailout: Hurts Worse When the Politicians Failing Us Inspired Hope and Promised Change

There are so many things to dislike about the big banks, brokerages and insurance companies that brought the financial crisis upon us that one doesn’t know where to begin.  So instead, let’s begin with the politicians who we elect and pay to keep us out of these messes.

They failed us last fall with the first enactment of the TARP – the $700 billion bailout – and they’re failing us again.  Only now it hurts worse because the folks failing us are the ones who inspired hope and promised change.

I had a fantasy that change would mean a different approach in handling the greed and inequity which hide behind the  corporate ramparts.  I thought change would mean a president taking advice from the likes of Krugman and Galbraith and instead we’ve got Summers and Geithner.  Where the problem with Krugman and Galbraith may be that they’re too “liberal” for a president trying to be non partisan and centrist, the answers to our problems do not lie with “the establishment,” represented by Summers and Geithner.

I’m angry, there are lots of people angry, and we don’t want to be told any reckless business is “too big to fail.”

On Tuesday, Geithner was still singing, Too Big to Fail.  He didn’t tell us much, but he did tell us Washington is still willing to pull out the stops for the investment class.  Congress is no better.  When it comes to the financial services sector, Congress is operating in the irrelevant sector.

What we do still have a chance at here is change.  Some players need to be thrown out of the game, and their survival shouldn’t have anything to do with how far their tentacles reach into the larger economy or the campaign accounts of our elected officials.

So, here’s another fantasy … Perhaps Treasury Secretary Timothy Geithner’s announcement Tuesday was only a trial baloon.  Maybe he and Larry Summers were on the phone with Robert Rubin and Alan Greenspan and thought they might be able to rig the game one more time for Wall Street.  Geithner may have said, “Boys, I just don’t know, I think we’ve run our string, but I’ll try for one more – but I’m telling you, if there’s blowback, this president is different than the last two …”

That’s my fantasy anyway.

Maureen Dowd’s Spot-On Analysis of Wall Street Bailout II

If you’re not already ticked off about Washington’s response to corporate recklessness begetting trillions in corporate welfare, here’s something from Maureen Dowd today to fire you up:

Despite the touting, the Treasury chief unveiled a plan short on illumination, recrimination, fine points and foreclosure closure. The Dow collapsed on its fainting couch as Sports Illustrated swimsuit models rang the closing bell.

It wasn’t only that Geithner’s own tax history — and his time as head of the New York Fed when all the bad stuff was happening on Wall Street, and when he left with nearly a half-million in severance — makes him a dubious messenger for the president’s pledge to keep the haves from further betraying the have-nots.

It wasn’t only that Americans’ already threadbare trust has been ripped by Hank Paulson’s mumbo-jumbo and the Democrats’ bad judgment in accessorizing the stimulus bill with Grammy-level “bling, bling,” as the R.N.C. chairman, Michael Steele, called it.

The problem is that the “lost faith” that Geithner talked about in his announcement Tuesday cannot be restored as long as the taxpayers who are funding these wayward banks don’t have more control.

Read Dowd’s entire column here.

Video: Geithner Interviewed by Brian Williams and CNBC Reporter After Bailout II Announcement

Full Text: Remarks by Timothy Geithner on Financial Stability | Bailout II | TARP, Financial Crisis

(Source: Dept. of the Treasury)

Secretary Geithner Introduces Financial Stability Plan

Remarks by Treasury Secretary Timothy Geithner
Introducing the Financial Stability Plan
Tuesday, February 10, 2009

As prepared for delivery

As President Obama said in his inaugural address, our economic strength is derived from “the doers, the makers of things.”

The innovators who create and expand enterprises; the workers who provide life to companies; this is what drives economic growth.

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Transcript: President Barack Obama, First Press Conference, February 9, 2009

(Source: CNN)

President Obama: Good evening, everybody. Please be seated.

Before I take your questions tonight, I’d like to speak briefly about the state of our economy and why I believe we need to put this recovery plan in motion as soon as possible.

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Has the Game Changed In Washington Yet?

Point Number One Taxes are Too Complicated:

The past few days of news about Obama Administration appointees and their tax issues got me thinking about the complexity of the tax system.  My wife and I pay someone every year to do our taxes.  I did  a quick poll around the office and didn’t find a single person who doesn’t invest every year in either software or the services of a tax preparer to do their taxes.  Put as simply as I can think: I’m happy to pay my fair share of taxes; I’m not happy that the system is so complex I have to spend money to pay taxes.  That’s bullshit.

Point Number Two – Either These People Aren’t That Smart or They’re the Victim of Their Own Greed:

I’m disappointed with Timothy Geithner because he’s not a game changer when it comes to solving our economic problems.  Tax problem or not, didn’t like the pick.  Tom Daschle on the other hand – that just hurts.

Not emotionally, per se.  It hurts the Party, it hurts any effort the president will undertake to fix an immoral health care system and it hurts our attempts to turn back the clock on pay to play in Washington.

Having worked in D.C. during the heydays of the Clinton Administration, I can attest to everything they say about Daschle being a hardworking, earnest, serious-minded public servant.  He was also above reproach on personal ethics.  He was genuinely liked on both sides of the aisle in the U.S. Senate.  Daschle has apparently cashed in during the intervening years.  Well, as far as I can see from what I’ve read and heard, he’s remained true to the basic policy positions he held as a U.S. Senator.

But when someone gives you a limo and driver – at your beck and call – and you use it fairly often, that’s like income.  Apparently Daschle has known since last summer that he had this problem.  He just now paid?  More bullshit.

When Cabinet appointments can be taken down for having an undocumented Guatemalan nanny, do you think Daschle is saavy enough to know last Fall, say, that he better take care of that issue?  He’s tried to pawn it off on his accountant, more bullshit.  Not paying your taxes is a political career showstopper.  It’s that important he should have been on top of it.  He’s either not bright, arrogant or greedy.

So what we’ve lost is a man who could have greatly helped move the current Administration’s efforts to fix the healthcare system.  Daschle didn’t just hurt himself he hurt us all.

Here’s an email I got from a very liberal Democratic friend of mine who has been involved with Democratic campaigns and causes since the early 1970s:

This is absurd, f…..ing democrats, excuse my latin…………….I pay my taxes, and I contribute significant amounts of money to causes that are important, because I think it is our responsibility to do so.   I am obviously out to lunch……………
Democrats really dont give a shit….they dont do either…….we know they didnt give money, that has been an embarrassment, now we learn they are so stupid as to not pay any attention to the tax liability…………………………………….really, really stupid…………………………………………….

Point Third – Expectations Are High

Many of us who got on the O Train honestly believe what Barack Obama says when he claims that his Administration will govern more “from the bottom up,” we’ll end the pay to play culture in Washington, blah, blah, blah.  So far we’ve got the same economic team that brought us the deregulation which lead to this current financial mess, there are more ties to Goldman Sachs in the Administration than to community organizing, the White House press office website still sucks, and next week the Secretary of the Treasury is going to announce Wall Street Bailout II.

I’m not feeling the game change in Washington.

Transcript: Rahm Emanuel on Meet the Press, January 18, 2009

(Source: NBC’s Meet the Press)

MR. DAVID GREGORY:  Our issues this Sunday:  the transition ceremonies are under way, and in just two days the historic inauguration of Barack Obama as our nation’s 44th president.  He’ll inherit a country in economic turmoil, an ongoing multifront war on terror and renewed violence in the Middle East. What will be his first priority?  And is he already facing his first fight on the Hill, as Democrats and Republicans clash over a proposed stimulus package?

(Videotape)

REP. JOHN BOEHNER (R-OH):  Oh, my God.  I don’t even–my notes here say that I’m disappointed.  I just can’t tell you how shocked I am at what we’re seeing.

(End videotape)

MR. GREGORY:  Will Mr. Obama be able to find a bipartisan solution?

Plus, a bump on the road to the Cabinet; Obama’s Treasury pick admits a taxing mistake.  What could this mean for the nomination of Timothy Geithner?  This morning, an exclusive interview with the man who will be by Obama’s side in the office:  the gatekeeper of the president, incoming White House Chief of Staff Rahm Emanuel.

Then, Inauguration Day will be a time of great significance in this country. How will Mr. Obama capture the moment?  And will his presidency be able to live up to the high expectations?  Insights and analysis from our special roundtable:  NBC News special correspondent Tom Brokaw; columnist for The New York Times David Brooks; presidential historian Doris Kearns Goodwin; host of PBS’ “Tavis Smiley” and PRI’s “The Tavis Smiley Show,” Tavis Smiley; and NBC News political director and chief White House correspondent Chuck Todd.

But first, incoming White House Chief of Staff Rahm Emanuel.

Welcome back to MEET THE PRESS.  As we look forward to an historic day, Inauguration Day and the inaugural address, the president-elect has spoken about the need to capture the moment that Americans are in.  What does he want to say on Tuesday?

MR. RAHM EMANUEL:  Well, I, I don’t–at one level, I don’t think it’s different than what you’ve heard over the campaign.  On the other hand, it’s a–the inaugural and the inaugural address is something significant in American history and its culture.  I think the–what you will hear is a time and a place in which we all have an era of responsibility, that too long there’s been a culture of anything goes, and that to do what we need to do as a country, to, to regain America’s greatness and continue to move forward and be an example around the world, that we need that culture of responsibility not just to be asked of the American people, but that its leaders must also lead by example.  And so that for–in both business, in the corporate boardroom, to in government offices, that there has been a culture of–that anything goes and is permissible, and that we want–must once again restore a values system that respects and honors a sense of responsibility, and that we all have something to give to our country and have an obligation to do that, to return it to its greatness.

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