NYT Examines Geithner's History: Close Ties To Wall Street Execs

New York Times:

Last June, with a financial hurricane gathering force, Treasury Secretary Henry M. Paulson Jr. convened the nation's economic stewards for a brainstorming session. What emergency powers might the government want at its disposal to confront the crisis? he asked.

Timothy F. Geithner, who as president of the New York Federal Reserve Bank oversaw many of the nation's most powerful financial institutions, stunned the group with the audacity of his answer. He proposed asking Congress to give the president broad power to guarantee all the debt in the banking system, according to two participants, including Michele A. Smith, then an assistant Treasury secretary.

Read the whole story: New York Times

Comments

[tbone99]

Geitner is the REAL president- Obama is the likeable figurehead.

[parrotista]

One interesting thing in the article that might easily be overlooked - "haircuts", or why there weren't any in the AIG bailout, for example. From the article -

"Analysts say the New York Fed should have pressed A.I.G.’s trading partners to take a deep discount on what they were owed. But Mr. Geithner said he had no bargaining power because he was unwilling to threaten A.I.G.’s trading partners with a bankruptcy by the insurer for fear of further destabilizing the system."

That sounds rational. Why make noises if you're not prepared to follow up on it? Why make empty threats? In fact, the threats themselves could spread fear in the market.

In light of the extraordinary meeting later on, when Treasury forced the top banks to take money, we can wonder if, in retrospect, whether a similar extraordinary offer might've been made to AIG's trading partners.

A) it's understandable if the government wasn't prepared to go that far just yet
B) there may be one crucial difference: the banks that took the Treasury money were all American banks. AIG's trading partners, however, were not. Some of them were international. So we may not have possessed the leverage over them that Treasury had with the American banks.

More evidence to support Geithner.

- Craig

[PhilipTaylor]

Is it TIME to remove "Sleepy and Pleasy" of Wall Street and get an ADULT who sees the BIG Picture?

1. PhD who has written prize winning books and articles
2. Has friends on Main Street and is loyal to them
3. Has no financial or cultural link to Wall Street
4. Relies on FACTS and is willing to think "outside the box" at what is best for ALL America
5. Will be respected by other Non-Wall Street Experts
6. Willing to stand up to a Congress that took $5 Billion from Wall Street

TIME FOR CHANGE WE CAN BELIEVE IN PRESIDENT OBAMA!

[Carolab]

KUCINICH: BRING FED UNDER TREASURY

Washington D.C. - Congressman Kucinich made the following statement addressing news reports that President Obama and advisors are considering nationalizing parts of the U.S. banking system. In the statement, Kucinich urges Congress not to nationalize banks, but to place the Federal Reserve under the Treasury Department.

"At a time when millions of Americans are losing jobs, homes, and pensions, our government is prepared to give another trillion to the banks. We are ready to compound the moral hazard by nationalizing banks, which are allegedly profit-making entities.

"This is anti-democratic. INSTEAD OF NATIONALIZING BANKS, WE SHOULD NATIONALIZE THE MONEY SYSTEM BY PLACING THE FEDERAL RESERVE UNDER THE U.S. TREASURY, END THE FRACTIONAL RESERVE SYSTEM AND STOP BANKS FROM LENDING CREDIT INTO CIRCULATION. THEN INSTEAD OF BORROWING MONEY AND CREATING DEBT, GOVERNMENT CAN SPENT THE MONEY INTO CIRCULATION to rebuild and restore America with money for jobs housing, healthcare and education I will soon be introducing legislation to accomplish this.

"Banking is not a proper function of the government, but OVERSIGHT is. The Treasury Department should not be outsourcing to the Fed its oversight responsibilities. The Fed, which failed miserably to oversee the banks, should be put under Treasury instead.

"Its time for the government to operate in the public interest, not in the interest of private banks. Its time to stop bailing out banks and begin building up America."

http://www.campaignforliberty.com/blog.php?view=9407

[Carolab]

Dennis Kucinich Explains Our Current Economic Situation (C-Span)

http://video.google.com/videoplay?docid=-2864340017700873183

[parrotista]

The Fed as part of Treasury? We really want Presidents to have the power to manipulate the economy this way ahead of an election? And whether they do it or not, they'll be accused of it. You want to politicize it this much? This is a terrible idea and Kucinich is absolutely wrong.

Also, it's beyond my abilities to get into a serious discussion of fractional reserve banking - but I can try to point out a couple things. One being that fractional reserve banking is a basic concept at the heart of all modern market economies. Not just the US under the Fed. Everywhere. For centuries. (I'll even venture the guess that there's a functional equivalent in most socialist economies like the former Soviet Union).

That doesn't make Kucinich wrong on that. But he's way, way out of the mainstream there. He's where you usually find most loonies, though also the occasional genius.

- Craig

[TaxDayMan]

Great another Obama CZAR! More than the Romanovs, Welocome to the National Socialist Republic of America!

[leftLibertarian]

Timmy = Wall Street's Poodle.

Fetch more money Timmy!!

ARFFF!!

[DLBSR]

That's funny. :-)

[TaxDayMan]

REMEMBER HE'S OBAMA's MAN! Bill Ayers, Rev. Wright, Saudi King, Chavez, Castro, etc. etc. etc.

[thnk4selfagain]

I just finished this fine reporting on Sec. Geithner from NYT. Combined with the piece on Geithner and Citi from WaPo a few weeks back, some things are clear:

1) Leaders of Wall Street hand picked Geithner, who had no experience in Fed banking, to lead the NY Fed. Geithner received (and continues to receive) the patronnage of Rubin and Summers, both enriched by Wall Street's derugulation or lack of regulation. The only praise of Geithner in NYT article comes from financial industry players. They are confident with the Sec, because they have been grooming him from the start, and Geithner does not know better.

2) Geithner does not seem to have mastered his job at the NY Fed. His tenure was marked by less reguation in the face of evidence of banking destabilzation. He relied on his mentors and patrons to lead him in policy, and what little policy he claims as his own sounds incompetent and a mass redistribution of public resources to the industry.

3) Obama, apparently "bamboozled" by advisors like Summers and Rubin, promotes Geithner to the level of his incompentence: Geithner still relies on the industry to formulate policy for an *economy* he is supposed to oversee. Geithner demonstrates no understanding that he works for Americans not his patrons.

[PhilipTaylor]

You got it 100% Right!

Why does Obama allow this? Especially after the NY Times article!

Obama should appoint a TOP (non-Wall Street) expert to direct all analysts and all further Bailout activity and all further efforts to bring Main Street out of this Wall Street Driven Crisis! Main Street is suffering while Geithner and Summers reward their Corrupt Friends on Wall Street!

Someone who has a PhD, written books and articles, some hands on knowledge, and understands how to unwind the CULTURE, SCHEMES, and TACTICS that have put our Once Great Country at RISK!

It is time to find a GROWN UP to supervise “Sleepy and Pleasy" regarding Wall Street!

[TaxDayMan]

Great another CZAR, More than the Romanovs! Welcome to the National Socialist Republic of America!

[parrotista]

Wrong. Praise for Geithner comes from Bernanke who was a Princeton professor and a leading expert on the Great Depression before being named Chairman of the Fed.

Geithner shared a free-market philosophy of less regulation with most people in the industry and indeed with much of the leadership of Congress and in the White House for most of the last 10 or 15 years. It's certainly fair to criticize him for that. But it doesn't show lack of mastery of his job at the NY Fed or incompetence.

Geithner is publicly breaking with the industry on the issue of regulations and turning his back on some of the philosophies of his youth. This is the grown-up thing to do. Of course, it's better to always be right all along but not everyone can be as lucky as all of us here at HuffPo. In his case, his background gives him the advantage that he can't be easily dismissed as a socialist or some ultra-liberal.
- Craig

[thnk4selfagain]

Geithner is calling for a Resolution Authrority to be housed at the Fed -- to be able to break up too-big-to-fails not to prevent them from forming. It is an astounding proposal promoted as a call for regulation, but is really the banks trying to get ahead of Congress in calls for regulation that could actually be *effective.* Geithner and Bernanke with straight faces wants us to trust the Fed after they both while at the Fed let Americans down in their oversight helping to cause the biggest global financial meltdown in history.

And Bernanke is not blameless. He continued Greenspan's bubble, and when he tried to pull back it was too late. Geithner may be grown-up (as you say) but he is out of his depth and public business should not be run by unaccountable bank lobbyists. We cannot afford Geithner's incompetance.

[Carolab]

"But it doesn't show lack of mastery of his job at the NY Fed or incompetence. Geithner is publicly breaking with the industry on the issue of regulations."

By virtue of Gramm-Leach-Bliley, the President of the New York Fed was given umbrella regulatory authority over the financial conglomerates it created, with particular powers in the case of "systemic risk". Geithner not only fell down on that, he let Gerald Corrigan handle the study instead.

Read: The Man Who Saved (Or Got Suckered By) Wall Street

Geithner has learned the ways of the financial industry at the feet of some of its biggest legends. He was almost immediately taken under the wing of Gerald Corrigan, a gregarious former New York Fed chief who is now a managing director of Goldman Sachs. Corrigan describes his relationship with Geithner as close, and it has flourished since Geithner’s first days at the Fed. Another frequent adviser—“you don’t want those things to get too formal,” Corrigan notes—is also a preeminent banker, Merrill Lynch C.E.O. John Thain, a Goldman alumnus and former head of the N.Y.S.E. 

http://www.portfolio.com/executives/features/2008/05/12/New-York-Fed-Chief-Tim-Geithner?page=2#page=2

[Carolab]

Also read The Man Who Saved (or got suckered by) Wall Street in portfolio.com

[Carolab]

For all who CLAIM the Fed is NOT private:

It says RIGHT IN THE ARTICLE and it said in the WASHINGTON POST as well about a month ago, that THE FED IS PRIVATE. "Sitting like a fortress in the heart of Manhattan’s financial district, the New York Fed is, by dint of the city’s position as a world financial center, the most powerful of the 12 regional banks that make up the Federal Reserve system.

The Federal Reserve was created after a banking crisis nearly a century ago to manage the money supply through interest-rate policy, oversee the safety and soundness of the banking system and act as lender of last resort in times of trouble.

The Fed relies on its regional banks, like the New York Fed, to carry out its policies and monitor certain banks in their areas. The regional reserve banks are unusual entities. They are PRIVATE and their shares are owned by financial institutions the bank oversees.

Their net income is paid to the Treasury. At the New York Fed, top executives of global financial giants fill many seats on the board. In recent years, board members have included the chief executives of Citigroup and JPMorgan Chase, as well as top officials of Lehman Brothers and industrial companies like General Electric "

______________

IOW, the Fed exists to serve the interests of the entities that sit on its board, own it and control it. Congress has NO oversight, nor has the executive branch.

[PhilipTaylor]

Why then do people think the FED is doing such a fine JOB?

[Carolab]

Or the IMF and BIS, for that matter. From wiki:

While monetary policy is determined by each sovereign nation, it is subject to central and private banking scrutiny and potentially to speculation that affects foreign exchange rates and especially the fate of export economies.

Failures to keep monetary policy in line with reality and make monetary reforms in time, preferably as a simultaneous policy among all 55 member banks and also involving the International Monetary Fund, have historically led to losses in the billions as banks try to maintain a policy using open market methods that have proven to be unrealistic.

Central banks do not unilaterally "set" rates, rather they set goals and intervene using their massive financial resources and regulatory powers to achieve monetary targets they set. One reason to coordinate policy closely is to ensure that this does not become too expensive and that opportunities for private arbitrage exploiting shifts in policy or difference in policy, are rare and quickly removed.

[Carolab]

Further, the International Monetary Fund (IMF) works as a team with the Bank for International Settlements (BIS) which is controlled by the (private) banks (the Bank of England and the European Central Bank are also private).

The International Monetary Fund (IMF) is a PRIVATE international organization that oversees the global financial system by following the macroeconomic policies of its member countries, in particular those with an impact on exchange rates and the balance of payments. It is an organization formed to stabilize international exchange rates and facilitate development.[2] It also offers financial and technical assistance to its members, making it an international lender of last resort. Its headquarters are located in Washington, D.C., USA.

The Bank for International Settlements (or BIS) is an international organization of central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks." It is not accountable to any national government.

Based in Basel, Switzerland, the BIS was established by the Hague agreements of 1930.

As an organization of central banks, the BIS seeks to make monetary policy more predictable and transparent among its 55 member central banks. It sets policy among all 55 member banks also involving the International Monetary Fund.

Tim Geithner is on the board of the IMF.

Ben Bernanke is on the board of the BIS.

[Carolab]

IF YOU WANT TO KNOW WHO TO BLAME for this INTERNATIONAL CRISIS and WHY and WHAT IS (probably) COMING NEXT:

The Tower of Basel: Secretive Plans for the Issuing of a Global Currency
Do we really want the Bank for International Settlements (BIS) issuing our global currency

by Ellen Brown

http://www.globalresearch.ca/index.php?context=va&aid=13239

[parrotista]

A certain amount of healthy skepticism towards institutions like the Fed is a good thing. It's part of that eternal vigilance that is the price we pay for liberty. And the structure of the Fed certainly does not fit neatly into what we're taught about the Constitution and the branches of government - so we must be vigilant towards the possibility of extreme abuse and the subverting of our economic system and Constitutional government by private interests.

Having said that, there's something wrong when, after all these similar threads, someone like me has to point out how overboard some of the critics are: The Fed's Board of Governors consists of 7 members who are appointed by the President with the advice and consent of the Senate. That doesn't seem too far removed from the democratic process.

Why do some people insist on putting out misleading descriptions of the Fed's organization and structure, in the hopes that someone like me isn't around to point out how grossly wrong it is?
- Craig

[Carolab]

The Board of Governors includes WALL STREETERS like Jamie Dimon who is a Class A Director. And Jamie Dimon/JP Morgan was in the middle of the Bear Stearns takeover for pennies on the dollar, along with Tim Geithner, misportrayed by the media as "rescue". Not to mention JP Morgan working with the FDIC and the Fed to take over WaMu, and its involvement in forcing the merger of Merrill Lynch with Bank of America through a threaten-ed collateral call. The Fed could simply have bailed out Bear directly or given time to find an outside buyer. Google it.

In fact, right before Lehman declared bankruptcy, CEO Richard Fuld also sat on the Board as a Class A Director.

There was tremendous "insider trading" involved with Lehman. John Paulson & Company's hedge fund made a pile placing bets well ahead of Lehman's collapse that it would fall. And that's not the only company he bet against. Read "The Man Who Knew Too Much" in portfolio.com.

And, JP Morgan got a pass-through of $138B from the Fed that went right to Lehman POST bankruptcy and the CME and ICE clearinghouses both report that Lehman is meeting all of its obligations. Part of the AIG bailout went through the backdoor Barclay's, which bought Lehman's assets. Barclay's of England is one of the foreign banks that has shares of the Fed.

Another Fed Director is Jeffrey R. Immelt, Chairman and Chief Executive Officer
of GE, which got a $140B bailout.

[Carolab]

They don't mention PIMCO, which hired Greenspan as a consultant. PIMCO is the asset manager for the GSE (Fannie, Freddie, Ginnie) mortgages. Also, they do not mention that BlackRock was picked up by Bank of America in the merger with Merrill Lynch -- and that Jamie Dimon threa-tened a collateral call on Merrill Lynch if the merger did not go through.

[inthecolour]

It seems like a lot of people have been on edge to get into another round of Geithner-bashing hence the intense overreaction to this articles contents wich are really not that revelatory. Geithner, as head of the NY Fed met with a lot of people from Wallstreet and even formed extensive work relationships with them as it was part of his job to oversee the major financial institutions in NY. Some of his relationships/meetings can be seen as conflicts of interest.

How is any of this new? Or particularly shocking? Quick someone alert Obama! He must have not known about this stuff!

I think the only reasonable, level-headed response to the NYT article has been Paul Kedrosky's response. Check it out here:

http://paul.kedrosky.com/archives/2009/04/tim_geithner_ou.html

[tbone99]

Mr. Geithner said his actions in the bailout were motivated solely by a desire to help businesses and consumers.

....but hey if these bankers want to put aside a little next egg for me in Hong Kong , I wouldn't want to hurt their feelings.

This guy has our pie all over his face !!!

[SMDHP]

yawn.....then blame the GOP who did not properly vet him during the confirmation hearings.

[KoolAidAmerica]

they voted against him mostly
do they have the majority in senate or house?

[leftLibertarian]

SMDHP - sounds like you don't have a problem giving unlimited amounts of tax payer dollars to failed and failing institutions without a hint of oversight?

Welcome to the Banana Republic of America!

[research]

How about broad power to guarantee all the debt owed by citizens?

[gardenkitty]

The NYT takes several pages and thousands of words to say what anyone with half a brain already knows: Geithner is as much one of the Old Boys Network as the crooks who are directly responsible for the financial debacle. There is no way he can envision a solution that doesn't bail out his buddies on Wall Street. He is the wrong man to get us out of this crisis, because he is at heart one of Them and not one of Us, the people of the USA.

[SMDHP]

yawn....and if he wasn't close to wall street you tr0lls would be feining outrage over him not having the right experience like you are doing with the Auto industry task force.

Just go away and play while the adults clean up your mess.

[TaxDayMan]

If by "tr0ll" you mean someone who is not a "blind follower" of the "chosen one" YES I am a "tr0ll"!

[leftLibertarian]

For SMDHP , a 'troll' who is someone who does not agree with him/her?

Sounds like you're the 2009 version of the 2002 BushBot.

[annecros]

IndieBlue asked, and it was too skinny to respond in thread:

"How has the fed artificailly supported high interest rates or high fees? Interest and fees have remained high (and grown) as the Fed has reduced rates to historic lows?

Althoug I do like the last two sentences? Where can I get the tee-shirts?
Reply Favorite Flag as abusive Posted 02:38 PM on 04/27/2009

Reply to this comment:
Previewing Your Comment

No T-Shirts. I really am not a venture capitalist.

Because without the cash infusion, at our costs, the banks would have had to compete. Now, they have a built in profit margin that keeps everybody fat and happy, and fatter and happier because they can utilize the cartel they have formed to set prices and gouge the consumer.

[IndieBlue]

Had to compete with who? Anyone they are not competing with already? If you're upset with the big banks (or the hypothetical Big Bank/Fed Cartel conspiracy) then take your deposits out of those banks and put them into credit unions or independent banks--there still are some out there. A lot of those took TARP money, too, but are not necessarily charging exorbitant fees or interest.

Besides, I don't think these banks are charging more because they have a built-in profit margin and are happy about it. They are charging more because they are virtually (if not totally) insolvent. Why else would they suddenly increase interest on card holders, for example, who have been longtime customers and have an excellent credit history? They wouldn't. It's terrible business.

[annecros]

One another, that is who they should be competing against.. That is that whole sticky thing about cartels. You can charge what you want if you have a stranglehold on the market.

They are posting profits to stockholders and increasing interest rates to cardholders. They can post a profit because, well, they have our money.

There is some discussion that some TARP funds were issued under duress. I would really like to see that looked into by a court of law.

Of course, the FED can't be sued.

[Montgriz]

Well, could it be for the same reason, the gas and oil.companies raised prices? It's all about the money, dear....nothing ele...

[IndieBlue]

BTW, you'd better not try to have tee-shirts printed. Dick Armey probable already owns the copyrights.

[annecros]

Or I might be labeled a right wing extremist by those I pay.

Aren't these interesting times?

[delta7777]

.
the FED should not be run by Wall Street
.

[DLBSR]

Ha, in my opinion Wall Street owns the Fed, Congress, and the Treasury Department.

The banksters & big Financial companies - led by GOLDMAN SACHS - "donate" $5 BILLION over past 10 years to BUY CONGRESS, BOTH parties, to BUY political influence.
http://www.wallstreetwatch.org/soldoutreport.htm

They succeed (at BUYING Congress) so spectacularly, that when the Big Financials, (having PUSHED for DEREGULATION over past two decades, and then used that Deregulation to run themselves into the ground!) GO BANKRUPT, they promptly run to Congress (with their collective Front-Man, former GoldmanSachs front-man (Chairman) HANK PAULSON), to tell Congress - GIVE US $700 BILLION DOLLARS, or we are going to take the US economy down with us" !!!!

Here's the TWO BIG DEREGULATION ATROCITIES
http://en.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000
http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act
.... that were PUSHED by CLINTON's TreasurySecretary ROBERT RUBIN, and BUSH's TREASURY SECRETARY HANK PAULSON - BOTH of GOLDMAN-SACHS !!

Paulson was Goldman-Sachs CHAIRMAN, at the time Rubins, GS FORMER Chairman, was PUSHING CLINTON TO SIGN uber-Right-Wing Republican PHIL GRAMM's DEREGULATION MONSTOSITIES!!!

THIS is NOT Rocket Science ,GOLDMAN SACHS OWNS BOTH PARTIES !!
And when they WENT BANKRUPT, their "investment" in Congress paid off - Congress HANDING THEM BILLIONS of Taxpayer dollars, NO STRINGS ATTACHED, NO OVERSIGHT ALLOWED !!

Here's Maureen Dowd's update - GS now OWNS the OBAMA financial team, TOO!
http://www.nytimes.com/2009/03/22/opinion/22dowd.htm

[Carolab]

DLSBR - you really need to add the information I have researched about Jamie Dimon-JP Morgan into this. You are overlooking a big piece of the puzzle otherwise. The House of Morgan, after all, started the Fed.

[takeyourballandgohome]

Let's replace Geithner with someone who has worked closely to the pizza parlor in Idaho, or maybe the cattle rancher in Texas, or perhaps the artist in Arizona. Who needs someone with experience on Wall St. in these times? Silly really! Let us just start from scratch...hey, maybe even a new graduate from some up and coming business school program from a school no one has heard of. That might work!

[annecros]

Hey, and I understand that you are being sarcastic and all, but how can a random name from the phone book do any worse.

[IndieBlue]

You could pick the name "Nardelli"...

[Montgriz]

BINGO! Geithenr is a tool of Wall St...

[IntellectuallyHonest]

Why are there trillions of dollars for Israel's wars and New Yorks banks but nothing for student loans, credit card debt and universal health insurance?

[IndieBlue]

because Obama's a "socialist", not a socialist.