Fix Geithner's Gaffes

I am banning everyone from making these two dumb points anymore about the financial collapse and the ensuing bailout. I'm sorry I have to impose this ban, but people keep making these points when they are so painfully stupid, it hurts me to hear them.

1. Expressing disappointment in the greed of the bankers.

People play within the rules you give them. Humans are almost infinitely greedy by our nature. What were these bankers going to say, "Golly, you know everyone is allowed to take massive risks and reap massive bonuses for their efforts, but no, I have no interest in all that money. I'll just play it safe because one day this might wind up hurting the American taxpayer."

On which planet would anyone, let alone a Wall Street CEO, say that? In fact, they would be fired if they had that attitude. How are you going to tell your board that all the other companies are a making tremendous amount of money but you have chosen not to because you think that risk might wind up in the taxpayers' lap? Not only would you be laughed out of the boardroom, but you would be removed from office.

It is the job of the government to set the rules by which we play this game. They are supposed to be the refs. They are charged with oversight and regulations that do not allow this kind of excessive risk taking. Because if you allow it, people will do it!

Don't you get it? The executives of these companies already took home the money in tremendous bonuses for all the years they showed a profit. They don't give a shit that it was a house of cards. That's your problem, not their problem. They already have the money.

Now, the controversial part - I don't really blame them much. If you set up a system where someone gets rewarded for doing the wrong things, you can bet your bottom dollar that they will. I would never take steroids because I value my testicles too much, but am I surprised that all of the top baseball players took steroids when Major League Baseball had no punishment for doing so? Of course, not. It's not the "right" thing to do, but it is the obvious thing to do.

Alex Rodriguez got two contracts worth over half a billion dollars for taking steroids and improving his numbers. What lesson do you think the other players are going to learn from that? If you don't set boundaries against it, you incentivize bad behavior. So, please don't pretend to be surprised when it happens.

The real responsibility is not with the players as much as it is with the league (and in this case, the federal government). So, when I hear John McCain (and many others, including some progressives) bemoaning the greed of the bankers and talking about how they should have voluntarily made less money, I laugh and laugh and laugh.

Yes, there is a real problem with greed. And that greed came into play when the lobbyists of those industries pushed for looser regulation and corrupt and/or stupid politicians allowed them to do that under the guise of "free and unfettered markets." The real greed is when they changed the rules of the game. But after that, it is tilting against the windmills to think anyone playing that game wouldn't do exactly what the bankers wound up doing.

2. Saying the banks might not take the bailout money if the conditions of the bailout are too tough.

Our Treasury Secretary, Tim Geithner just said that and I lost all respect for him. More importantly, I lost all trust in him. There is an ironclad rule that we all know - beggars can't be choosers. Except, of course, unless you have your own guys on the inside.

In private industry, the borrower - especially a desperate borrower and one who is already bankrupt - does not get to dictate the terms of his bailout loan. If my company runs out of money, I don't get to go around telling people how they will give me a loan and how much money I will make going forward. No, they are the ones giving the money. They will set the rules. That's how capitalism is supposed to work.

But Geithner, and Paulson before him, told us that these financial companies will not take the bailout money if it hurts the personal, financial interest of their executives. That is certainly their prerogative. Well, then, they can piss off.

There are other ways to clean up that mess so it does not cause more damage to our economy. We can guarantee some or all of the money in those banks. We can take over some of their assets at reduced prices. That's what happens in a bankruptcy. But here the government can also back up the consumers and even other industries involved, so there is an additional layer of protection.

So, it's not like I don't understand the gravity of the circumstances or that these banks are connected to other parts of our economy. But it's also not right to pretend that the only solution is to make sure these particular banks - and their executives - survive and thrive.

In fact, I have some of top economists in the world on my side. Economists like Joseph Stiglitz who believes the better solution might be to nationalize these banks for a short period of time to stabilize the financial system and then sell them off.

But here's one thing we definitely do not have to do - kowtow to the demands of the Wall Street executives. We should put the most stringent pay caps on all of their executives and any other rule and regulation we think is necessary. You see, they can't demand more money when they bankrupted their companies! If they don't want the bailout, they can take a long walk off a short Wall Street.

So, when I hear our Treasury Secretary make this completely disingenuous point, it is impossible not to think that he isn't one of their inside guys. At the very least, he is a guy that has bought into the concept that business as usual on Wall Street must continue. The obscene profits, the complete lack of long-term accountability, the whole bubble of Wall Street is justifiable and must be maintained. Well, that's what I'm not buying.

When I read Geithner defend this broken system and beg the companies for their cooperation as he gives them trillions of dollars of our money, I get a clear sign that he is not one of us. He is one of them. This is an inside job.

So, if he is going to find ways to help them, he better get more creative than this. Because these two arguments aren't going to fly anymore. And these are not the days of the Bush administration where we have to leave everything in the hands of the almighty executive branch. If they want another dollar out of Congress, they have to fix Geithner's gaffes.

No more money for incompetent executives (or ones that purposely drove their companies into the ground while taking huge bonuses along the way). And no more regulation free zones on Wall Street. Let's set clear and fair rules, and make damn sure people follow them. Let's lay down the hammer before we lay down our money.

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Comments

[gorgonopsid]

Cenk,
It's a pleasure to read your comments, with which I agree. I think especially that you've said the truth regarding the bankers-- they're programmed to wring the most profit from any situation, and by their lights are simply doing their jobs. To me the problem is that rapacious greed is considered a virtue. My son is addicted to the BBC dinosaur specials, and in one of them a plant eating stegosaur becomes mired in a mudhole. The stink of the carcass draws many carnivorous Allosaurs, each of which in its turn becomes stuck in the muck and dies, the stink of its carcass attracting yet more Allosaurs, who also become enmired and die. The Allosaurs only smelled food and went after it, without the brain power to figure out the consequences.

[LoriNEPA]

Your comments on how we incentivize bad behavior are right on the mark. I just used the exact same argument regarding A-Roid the other day. What can I say - great minds think alike!

Sadly, I think Obama made a huge mistake appointing this guy. Geithner's comments and "plans" show exactly where his allegiances lie and they are not with Main Street.

[ihavenobias]

Brilliant piece. And yet another example of why your voice would be a perfect fit for the 10pm MSNBC slot.

[Realist]

Hmm, maybe that's why he got paid $400K on his way out of the NY Fed to Treasury - revolving door right in front of our faces while they thieve and steal. Who gets a $400K parachute when they take a new job?

Geitner is in on the charade b.c he is either too dumb or criminal. If he is too dumb it is easy to believe. All the little rascals in DC know how to do is live off the fat of their dirty ways and knowing how to look the other way rather than stand up. Like that little rascal Kevin Martin at FCC - or Mike Powell - all just feeding at the DC trough full of pigs and SWELLS! Did Gietner participate in a few bankrupt countries at IMF? The Kkleptocracy full of little geitners doing their dirty work... for a few hundred K$ lol!

[waitforme]

Yes, THAT Paulson line plus the Paulsen lines that make this 'need to spend SO much money, agan, for banks, again with no details as to protections and accountability' laughable -- if we weren't crying all the way to the bank. (Do you remember Paulsen on his knees in front of Nancy Pelosi, begging for all that money? The whole sorry image is still in front of us; Geithner doesn't remove it, the way he's sounding.)

I am guessing that Geithner will be next on Harvard professor and bailout overseer Elizabeth Warren's list of people -- like Paulsen -- who lied about what he is doing, or obfuscated about what he is doing, or made grave errors in what he is doing, and no good will come of this one either.

Give us, instead of Geithner, whom we saw coming, Nobel Prize winning economist Dr. Joseph Stiglitz and/or Elizabeth Warren herself, and/or Sheila Bair -- head of FDIC; there are a very few others who could take the time and have the know-how to do it right.

[itmaybetoolate]

Cenk! I miss you man. No more TYT in the mornings on XM! I could not agree with you more! You have, as usual, gotten to the heart of the matter.

I think it is time to cancel the XM subscription and subscribe to TYT! Podcasts, here I come.

[kaski]

First of all the Federal Reserve is untouchable by congress and even the President. They are an entity unto themselves. The Federal Reserve is NOT a part of our government. It is no more Federal than Federal Express is. If you look inyour phone book under the Federal government pages you will not find the Federal Reserve. The Federal Reserve is just a name given to a privately owned banking corp. Owned by families such as the Rockeffellers, Morgans, Warburgs, Duponts, Schiffs, Harrimans and the Rothschilds. These families are Americas (privately owned) central bank. They make their own rules for their benefit not the American publics. They operate on total greed and the need for power and control. The only way to stop them is to have congress overturn the 1913 Federal Reserve Act that gave these families control of Americas central banking system unconstitutionally. Don't take my word for it though. Investigate it for yourselves. Go to google and search JFK and the Federal Reserve, search Lincoln and the central bank, search Andrew Jackson and the central bank... "Those that don't know history are doomed to repeat it. Those that know history own the future."

[clevelandchick]

The TYT subscription is totally worth it. I've had since they left AAR.

[Aaror]

Amusing you mentioned the steroid issue, I used a similar analogy to explain the mess to my wife. Here is what I told her:
Imagine that the detroit tigers (picking on the tigers cause I saw a frosted flakes commercial yesterday) lobbied the refs to stop calling players who lean into the pitch to get a walk. In key games, the tigers use that tactic, but other teams quickly pick up on it, and the refs have agreed to apply the rules to everyone.
Soon the teams no longer try to hit the ball, but instead try to crowd the plate and get hit. Players are chosen on their ability to fill the strike zone with their bellies, and games become a merry-go-round of walks. Scores shoot up, and ERA's go down (mitigating the walk stats for the pitchers), everyone is happy-well, except for the fans.
Oddly enough, once the fans object (aka people realize the dodgy loans are not worth their face value), the system falls apart. Now you have managers saying you can't punish players for leaning into the pitch, players demanding to keep their salaries for having big bellies, and owners screaming for someone to make the fans come to games.

[dizmo4]

Geithner is really in an impossible position. The Bush administration has screwed up the handling of the bail out so badly that everyone hates they idea. Its not an easy thing to get these institutions to start lending again. It may seem trivial at first blush but once the details are known its incredibly complicated when your options are limited by obstructionist republicans in the senate.

I remain skeptical but i do like how they're moving to quasi-nationalize the banks---creating a public/private company to back new loans. Any car loan or student loan or home loan will essentially e coming from the Federal Government. That will get credit flowing. I'm still waiting for more details but the concept is sound.

$50 billion to home owners to prevent forecolsure is something Paulson and the Bush administraiton would not have done. Again, I'm still awaiting the details of the plan but i'm not going to dismiss this outright until Geithner has had a chance to put together the program.

[lwaxanatroi]

Can Obama nationalize the banks without congressional support? I think not. He's had to shift the stimulus in significant ways to get 3 GOP votes in the senate. If we could swear Franken in, we'd only need 2--but make no mistake, we'd need 2. And we'd lose some Blue Dogs on the issue of nationalization. It's a lovely idea, nationalization, but it's not going to happen unless and until we have breadlines as long as those in the '30's. Right now, bad as things are, most of the problems haven't hit most of the people. Maybe if and when they do, there will be an appetite for nationaliz­ation--whe­n, of course, we'll be nationalizing ghost shells of former great banks,and the TARP money will be safely ensconced in personal accounts in the Caymans. We have to work within the political framework we have, and that framework is a whole lot more fragile than we wish to admit. Arianna is attacking the prez for bipartisanship, when all he's doing is counting the votes in the senate and doing what he absolutely has to do to get 60 votes. In one way, I'd love to see a real honest to God filibuster--send them to the mattesses--but it would take a huge toll on the economy and on ordinary people if we let that happen.

[Disdain]

Where is the Change?

[MossyOak]

I was feeling a ray of hope after Obama sold his stimulus package with details in Indiana and Florida this week. And then I listened to Geithner yesterday.. so much for hope. Obama distanced himself from the bailout physically, but how do you rectify his populist stimulus with the Gigantic Geithner Give-a-Way? How do you rectify Obama putting all his key economists in a room with Geithner, who all disagree with him, and Geithner comes out with this "plan" that isn't a plan? We've been had by someone and this time we can't even blame Bush.

Anyone who isn't skeptical is delusional.

[SeekWisdom]

'greed came into play when the lobbyists of those industries pushed for looser regulation and corrupt and/or stupid politicians allowed them to do that under the guise of "free and unfettered markets." The real greed is when they changed the rules of the game'

I think you've side stepped a significant detail. It was the greedy bankers who lobbied to gut the rules and now you say it's not their fault - they just went with the new rules??? Granted the corrupt / stupid politicians get credit too, for buying the B.S., but I don't think the bankers get a free pass since they set the whole thing up.

[clevelandchick]

Cenk is right on both of his points.

People for the most part work within the rules given them and when the administrations of the last 25 years gutted the rules for the financial industry, those working in that industry adjusted. The responsibility for this scandal belongs to our political leaders for taking the 'free market' bait and pushing aside all rules and protections that would have prevented this mess.

He is also right about Geitner, when I heard he repeated that moronic Paulson line I just about choked. He is one of them, one of those who played by the wrong rules for decades. Summers ditto. Obama picked exactly the wrong people to deal with this mess.

[fromNina]

Mr. Geithner was president of the Federal Reserve Bank of New York and Vice Chairman of the Federal Open Market Committee.
It is IMPOSSIBLE that he was unaware that this financial crisis was coming, or that he had no part in creating it.

[Realist]

Amen - and he is a pawn of the fat cats. Thus the $400K payoff.

[ptarantino]

Geitner lost my trust when:

1) It was discovered he's a tax cheat

2) Head of NY FED that picks the winner & losers of this racket

3) Worked for the IMF

4) Hired a Goldman Sachs lobbyists as his COS.