Tag Archives: New York Federal Reserve Bank

How Can We Afford a Lame Duck Treasury Secretary?

Treasury Secretary Tim Geithner.

New Orleans   Yes, I understand the politics and for reasons that are easy to guess but terrible to live through, President Obama at this late date can’t push his disastrous failure of a Treasury Secretary Tim Geithner to the curb despite the fact that he is owned from head to toe by Wall Street, wears a bank ankle bracelet that keeps him from moving away from their wishes, and has been codependent in extending the housing crisis and thwarting any meaningful effort at modifications in home valuation or foreclosures.  For Obama to finally concede the disaster of Geithner his advisers would argue would be to show weakness, so we have to suffer through and Obama may lose this election and hopes for a second term with Geithner hanging around his neck.   Add to this horror that Geithner has already conceded he will be gone if there is a second term, so he’s a lame duck when we need a stud duck at Treasury.

Now we even have a building consensus shared by both the editorial pages of the Wall Street Journal and the New York Times that Geithner must go.  They come to the conclusion perhaps for different reasons but nonetheless with the same result.  The LIBOR scandal has brought them together and should rally all of us.  LIBOR, as most know now, is the London Inter Bank Offer Rate, which was supposed to be a benchmark standard for interest rates in trillions of transactions because it was really a plaything for both big bank trading desks and executive suites at Barclays and other huge banks who wanted to conceal their weaknesses from the world and their investors.

Geithner as head of the New York Federal Reserve knew there was monkey business before Obama became President when he was still one of the small, but significant, wrenches in the Bush Administration toolbox.  He sent a letter to the equivalent of the British federal reserve making some suggestions for things they might do if they felt like it and when they got around to it.  Clearly all of them thought that this chicanery was small potatoes give the level of criminal conspiracies they were watching threaten the entire global economic system with subprimes and credit defaults.   It wasn’t and everyone (see above!) admits that now.  Obama under a different calculation could cashier Geithner for what he did as a Bush boy and fib about his contribution to the current disasters while sending him away for the earlier crimes in sort of a Penn State/NCAA maneuver.

But he won’t, because we’ve learned that’s just not how he rolls.

At the least we should start seeing a new “star” at Treasury who becomes the de facto secretary and heralds the kinds of changes we should be able to expect if there is a second Obama Administration.  Even his advisors should be on the right page with me on this.  There needs to be some fancy footwork that sends the signals that change in some different directions is on the way.

You remember that whole “Hope” thing?  We need some of that now!

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Pushing Back the Banks in the Wake of Occupy

tumblr_lt7r2hsiK51qav5oho1_500 Orleans Given all of the niggling around the impact of the Occupy Wall Street movement and its impact, it is worth raising some footnotes a little higher on the tally sheet where the results are important, but perhaps unnoticed.  Take these recent developments into account.
Small example, but telling is that JP Morgan Chase, perhaps the most arrogant of banks led by Jamie Dimon, announced that they were NOT planning to add the surcharge onto customers’ accounts for use of debit cards.  Bank of America, which had led the jump into the deep water with their announcement of the $5 per month charge, has also indicated that it is perhaps backing up from its Netflix moment in the wake of customer response.

As we have discussed earlier, lawyers who have successfully litigated with these outfits have called this nothing but grant larceny.  I had the discussion with my banker at Capital One who could only rationalize that it was being considered because “they had to raise money somewhere.” We all know that the defense that “you needed the money” is both the truest and least effective response any criminal can make.

The Times did a sad service with a front page article on the shrewd calculations that Bank of America and its colleagues have made by pushing direct and automatic payments for customers to their regular vendors from utilities to credit card companies to home mortgages and back again.  The story was an easy reminder for readers both how easy it is to sign up for such payments and how hard it is to unravel them to the degree you become welded to your bank regardless of the outrageous charges and abuse.   We are near the point where we are going to need to demand an easier “exit” policy from our banks, just as we had to achieve with our cell phone companies around keeping our phone numbers in recent years.  The little things can kill you!

Even though Occupy has not been successful in seeing any traction on the urgent “Geithner Must Go!” campaign to hold him responsible for some much of the Wall Street pandering and pampering he led first as the critically important head of the New York Federal Reserve Bank, the storm may finally be coming on the horizon.  Amazingly a story in today’s Times documents the giveaway with AIG where banks were paid in full from the federal coffers and were not asked to take any haircut, but in face were even required to shave.  Even banks that offered to take less that they were owed were informed by Geithner’s Fed, since he was head at the time, that they would be paid in full.

At least Geithner, now at Treasuery, with Ben Bernacke at the Federal Reserve are having to line up to finally provide some regulation for non-bank banks in recent hearings in the wake of Occupy.  Of course it is not enough, but even bringing 30 financial institutions like Mass Mutual, Zurich, some hedge funds and outfits like Blackrock and others under regulation because they control over $50 Billion in assets is something.  The Financial Stability Oversight Council still has to wait for comments so the lobbyists will be feeding at the trough, but at least now they need to realize that they might have to reckon with real, immediate, and potentially powerful political outrage if the boys give yet another break to the bankers.

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