Treasury Toxic Asset Program Rife With Conflicts Of Interest

The hiring of private firms to provide "independent" advice to both the Treasury Department and the Federal Reserve raises concerns about potential conflicts of interest, according to a letter written by the Project on Governmental Oversight (POGO) and delivered to key members of Congress.

It seems that some of those firms will be highly familiar with the assets in question.

According to POGO's letter, the Federal Reserve Board has contracted with four firms to manage its $1.25 trillion program that purchases mortgage-backed securities. One of those firms also works with the New York Fed to manage three companies it set up to absorb toxic assets, known as Maiden Lane, Maiden Lane II and Maiden Lane III.

The four firms are Pacific Investment Management Co. (PIMCO), BlackRock, Inc., Goldman Sachs Asset Management, and Wellington Management Company, LLP.

In addition, the Treasury Department is expected to approve five private firms to manage what it is calling its "Legacy Securities Program." PIMCO and BlackRock are also on that list.

Legacy appears to be the new term for "toxic."

"It's perfectly understandable that the government is relying on the expertise of these private fund managers to assist with the complex tasks of asset management and valuation," wrote Danielle Brian, director of the independent nonprofit, which investigates government misconduct. "POGO is concerned, however, about the conflicts of interest that could arise if these fund managers are also investing in the same types of assets for their private clients."

A spokeswoman for the Treasury Department declined to comment.

POGO's letter cited a Bloomberg story from early March that highlighted potential conflicts of interest that could arise with this sort of arrangement.

"Citing two people with knowledge of the arrangement, Bloomberg News recently reported that PIMCO had been advising the federal government on the value of $118 billion in assets --including securities backed by residential and commercial loans -- that were guaranteed in the bailout of Bank of America Corp. But PIMCO had also been investing in these same types of mortgage-backed securities for a wide range of private clients," the letter notes.

As of March 31, according to PIMCO's own disclosures, it was holding nearly a billion dollars in its mortgage-backed securities fund.

Comments

[themodernleader]

Modern white-collar criminals always rely on "complexity" to hide coverup of previous crimes, conspire and carry out other crimes of thievery, fraud and money distribution. Only experts, who just happen to be my personal friends can favorably measure the value of unsaleable assets. Only experts can help distribute trillions to my friends. The management of money is to complex for simple souls. Corrupt managers create complexity to cook up corrupt policy.

[SassyKat]

Its all incestuous

[sonofsamphm1c]

From their letter to congress:

“We appreciate the initial efforts by Congress to oversee these asset managers and their conflicts of interest, but we hope you’ll agree that the answers you’ve received so far have been less than satisfactory,” said POGO Executive Director Danielle Brian in the letter to Congress.
Not surprisingly, the private asset managers have defended their contracts and arrangements with the government, arguing that taxpayers are protected from conflicts of interest by internal firewalls that separate the employees working on the government contracts from the employees working for private clients.

While it is clear that the government should be collecting much more information from these asset managers before concluding that taxpayers are adequately protected from conflicts of interest, it appears that the Fed and Treasury are mostly relying on the asset managers for self-disclosure. ...

======

In other words, they have no idea, but they sure want to sling some mud at Geithner, and THP is always up for that.

[SCG]

Yes, it's all about poor Timmy.

You have the same interests hired by the taxpayers to advise the government, are the same interests which are representing investors, in the scheme.

If that isn't a conflict, then there isn't such a thing as conflict of interest.

[sonofsamphm1c]

By departments full of totally different people who are disallowed from communicating with one another.

It's a small world. Perhaps they could find a MBS dealer on Mars and get their advice there.

[Chace Haynes]

I hope he spends the majority of the rest of his life in jail or picking up trash in an orange suit.

[Helzapoppin]

File under "DUH!"

[paixa3]

Toxicity = Summers, Bernanke, Geithner, Paulson

[nancytheragingliberal]

How true. I am livid that O. gave these people the job of running our finances. They never should have been hired in the first place. Very bad move, O. You won't be seeing any money from me any time soon.

[pragmaticdallasite]

Indeed

[toypiano]

Agreed.

[rabiddog6708]

I can't keep up with what's been going on
I think my heart must just be slowing down
Among the human beings in their designer jeans
Am I the only one who hears the screams
And the strangled cries of lawyers in love

God sends his spaceships to America, the beautiful
They land at six o'clock and there we are, the dutiful
Eating from TV trays, tuned into to Happy Days
Waiting for World War III while Jesus slaves
To the mating calls of lawyers in love

Last night I watched the news from Washington, the capitol
The Russians escaped while we weren't watching them, like Russians will
Now we've got all this room, we've even got the moon
And I hear the U.S.S.R. will be open soon
As vacation land for lawyers in love

"Lawyers In Love" - Jackson Browne "Lawyers in Love"

[ibsteve2u]

Re: "Waiting for World War III"

Not going to be any "World War III".

Why? Because of the fact that China uses the greed of their individuals as a motivational force while retaining ultimate operational control, and can and does act AS A NATION to harvest resources globally while using their currency to leverage the output of other nations aside - making it easy to predict that China will win "the Great Capitalistic War".

China recognized just how greedy our Republicans and "blue dog" Democrats are, and have been in the process of buying effective control of the world for several decades now.

The only question is: Will they turn capitalism off like a spigot once they have global control?

lollll....ask a few Republicans that.

[NevadaPatriot]

China is not without their own problems. Albeit they are in a much stronger position then America now.

[johnbatist]

What’s good for the goose is good for the gander.

[Mauimom]

Get rid of Geithner!!!

Obama, you made a REALLY bad mistake hiring this guy. Doesn't he need to go spend more time with his family or something?

He is a disaster, and you [Obama] will BE a disaster if you don't soon switch away from his horrible ideas & policies.

[PhilipTaylor]

The ROARING 20's had nothing on the M0B in power on Wall Street in 2009 with complete control of Congress, Geithner, and perhaps even Obama!

[toypiano]

Yikes, true that!

[sonofsamphm1c]

Lol. You could be more wrong, but it would take a wrongness enhancing miracle.

[johnbatist]

Get rid of Geithner and replace it with another industry stooge? the system politcal/economic system is headed for a complete collapse in the comming years.

[killpack]

"Treasury Toxic Asset Program Rife with Conflicts of Interest"

What a laughable statement. As if anyone in the public needed to be told that. No wonder this guy gets laughs. He ought to give stand up a try.

[SammyD]

Where's the video on TurboTax Timmy being laughed out of China? Hilarious. Timmy, it's not just some Americans that know you have zero credibility.

[sonofsamphm1c]

He was not laughed out of China. What you are claiming is simply false. Some college students laughed at something he said.

So what?

Like college students know a great deal about international finance. LMAO.

You can't change reality. Geithner is a on a roll. His stock is going up like crazy. World political leaders and world financial leaders are gaining a great deal of confidence in his plan for recovery.

You bet on red/pink. You lost.

[PhilipTaylor]

Either you work for Geithner or you are one of the Wall Street Cr00ks wringing their hands in anticipation of another $Trillion payday for Wall Street!

Either way your sales pitch is flat as a pancake!

[voltage356]

These guys put the mob to shame!

[PhilipTaylor]

The ROARING 20's had nothing on the M0B in power on Wall Street in 2009 with complete control of Congress, Geithner, and perhaps even Obama!

[voltage356]

This guys put the mob to shame.

[UNCLEJOE]

FED VS SSW
We have two titanic gladiators at war: Money Lenders vs. the Producers of Real Wealth; in more specific terms, represented by the Federal Reserve Bankers (Fed) vs. the Social Security Workers (SSW).

The surreptitious goal of the Fed Gladiator is to reduce the SSW Gladiator to a Medieval Serf. Unfortunately, the SSW Gladiator is totally unaware of the Fed's real intent.

This Undeclared War has been going on since 1913 when the Fed obtained its Charter from the US Congress under the insidious pretense of guaranteeing to stabilize the US Economy. And "Since its inception, it has presided over the crashes of 1921 and 1929; the Great Depression of '29 to '39; the recessions in' 1954, '57, '69, ;75., and '81, a stock Market "Black Monday" in '87, and a 1,000% inflation which has destroyed 90% of the dollar's purchasing power." (The Creature from Jekyll Island by G. Edward Griffin, page. 20)

And add onto this list of financial crashes, the recessions of 2002, and this last crash of 2008.

The problem the Fed gladiator has in destroying the SSW gladiator is the resiliency of the SSW; new Middle Class entrepreneurs arrise from the ashes of their forebears and begin to procreate new producing SSW Gladiators.

However, this Fed problem has finally been solved: using the same stratgy that wiped out the Middle Class in Germany after the First World War. And that created a perfect environment for a dictatorship: Run-away Inflation.

[bunnyhead]

The Creature from Jekyll Island by G. Edward Griffin, should be required reading in high school.

[PhilipTaylor]

Nice Idea!

The ROARING 20's had nothing on the M0B in power on Wall Street in 2009 with complete control of Congress, Geithner, Bernanke, and perhaps even Obama!

[Guberman]

one would posit...and I hope he has...to Geitner...

"whatever they do, they better be clean"...is that possible?

I sure hope so...

Cheers

[ibsteve2u]

Goldman Sachs this, Goldman Sachs that...always Goldman Sachs. Now former SEC chief Artie Levitt is going to work for them.

lollll....too bad you cannot waterboard in the interests of journalism; I bet you could wrangle some interesting tidbits out of the people of Goldman Sachs....