David Dayen thinks Tim Geithner's disobedience of Obama's orders fed the anger at government Trump parlayed into the presidency

Of course, this begs the question whether Obama knew what he was doing, or even wanted to know.

Here in The New Republic:

Every action fit Geithner’s worldview: The financial system must be stabilized at all costs, as the only way to heal the economy so real people benefit. “We do not need to imagine that he was in the pocket of any one bank,” Adam Tooze wrote in the new book Crashed. “It was his commitment to the system that dictated that Citigroup should not be broken up.” ...

Today, some may welcome the internal dissension in the Trump administration. But Geithner’s actions to protect banks from the president he served, and the anger it bred at a “rigged” system, diminished the public’s faith in government intervention and helped install Trump in the White House.

WaPo: Obama's Timmy TurboTax Geithner has a new life as a predatory lender

From the story here:

Mass-mailing checks to strangers might seem like risky business, but Mariner Finance occupies a fertile niche in the U.S. economy. The company enables some of the nation’s wealthiest investors and investment funds to make money offering high-interest loans to cash-strapped Americans.

Mariner Finance is owned and managed by a $11.2 billion private equity fund controlled by Warburg Pincus, a storied New York firm. The president of Warburg Pincus is Timothy F. Geithner, who, as treasury secretary in the Obama administration, condemned predatory lenders. The firm’s co-chief executives, Charles R. Kaye and Joseph P. Landy, are established figures in New York’s financial world. The minimum investment in the fund is $20 million.

Dozens of other investment firms bought Mariner bonds last year, allowing the company to raise an additional $550 million. That allowed the lender to make more loans to people like Huggins [at 33 percent].

Jim Cramer reads fellow Democrat Tim Geithner and suddenly discovers frugality: both men are only five years behind the curve

THE MARKET IS UP 11% SINCE CRAMER SAID SELL IN SEPTEMBER 2013

Jim Cramer, quoted here:

"I think America's gone frugal. Just like our parents, or grandparents, or even great-grandparents changed their patterns of behavior somewhat radically after the Great Depression, I'm thinking we've changed ours, too."

Here's a newsflash for you Jim: America went frugal already more than five years ago. Why do you think things are the way they are?

See Mish's "The Age of Frugality" here, from October 19, 2008, which noted that frugality had finally (!) made the cover of a magazine after he'd been talking about it since at least March:

"Frugality has finally made front page. BusinessWeek is commenting on The New Age of Frugality."

Cramer thinks there's a new opportunity in the "new" frugality. Remember, this is coming from the same guy who told you in October 2008 to get out of the market if you needed your money in the next five years. If you took his advice, you missed one of the most incredible bull markets in the history of investing. Unfortunately, being five years behind Jim doesn't realize we've already reaped the opportunity of the new frugality.

The future?

I'm still with Chris Whalen and Ambrose Evans-Pritchard: DECADES of economic shrinkage ahead. We've already enjoyed the prosperity which the debt we racked up provided. Civilizationally speaking: It's time to pay for all that.

Sorry old boy.

Unnumber'd Maladies each Joint invade,

Lay Siege to Life and press the dire Blockade;

But unextinguish'd Av'rice still remains,

And dreaded Losses aggravate his Pains;

He turns, with anxious Heart and cripled Hands,

His Bonds of Debt, and Mortgages of Lands;

Or views his Coffers with suspicious Eyes,

Unlocks his Gold, and counts it till he dies.

-- Samuel Johnson, 1749

Housing, Shmousing. Here's What's Really Been Happening.

RC Whalen, here, in January:

"[J]udicial states remain mired in foreclosure backlogs that still stretch ahead for years to come.  Because Barack Obama and Tim Geithner refused to restructure the truly sick parts of the US housing sector (and the zombie banks with these exposures), only sectors where speculative capital can be deployed quickly and easily are showing signs of life.  You don’t see private equity firms buying homes in Scarsdale, NY, or Greenwich, CT, now do you?  Even ignoring the horrible effects of SS Sandy, was NJ housing really recovering?"  

Obama's Gangster Government Of, By And For The Banks

Matt Taibbi provides a pretty thorough look at the recent history of the bailout alliance between the federal government and the big banks for Rolling Stone, here, from which this excerpt:

All of this – the willingness to call dying banks healthy, the sham stress tests, the failure to enforce bonus rules, the seeming indifference to public disclosure, not to mention the shocking­ lack of criminal investigations into fraud committed by bailout recipients before the crash – comprised the largest and most valuable bailout of all. Brick by brick, statement by reassuring statement, bailout officials have spent years building the government's great Implicit Guarantee to the biggest companies on Wall Street: We will be there for you, always, no matter how much you screw up. We will lie for you and let you get away with just about anything. We will make this ongoing bailout a pervasive and permanent part of the financial system. And most important of all, we will publicly commit to this policy, being so obvious about it that the markets will be able to put an exact price tag on the value of our preferential treatment.

But Taibbi goes pretty easy on Obama's role in all of this, who has profited handsomely from it with reelection, focusing instead mostly on underlings like Geithner and Summers. Taibbi seems to hate only the big bankers for their profiteering, not the administration responsible for the continuing massive bailouts. He never connects Obama's admiration for dictatorship in China with our gangster government's stick up of the American people, and even gives Obama credit for some success with HAMP. It's as if the imperial president is merely an accessory to the crime, which Taibbi calls right up front "one of the biggest and most elaborate falsehoods ever sold to the American people."

By the way, Taibbi endorsed Elizabeth Talking Bull for president.

US Public Debt Under Obama Has Soared Exactly 50 Percent In 43 Months

(Source: little Timmy Geithner's Treasury Department)

Were 20,000 Non-Union Pensions At Delphi Victims Of Geithner At Treasury?

Administration officials have testified otherwise under oath.

The Daily Caller claims to have the goods on Geithner's Treasury Department, here. You know Geithner, the guy who forgot to pay taxes on his IMF salary, but is still the Secretary of the US Treasury Department anyway.

Neil Barofsky Calls Geithner And Obama Two-Faced Housing Bailout Liars

'[I]n 2009, $50 billion in TARP funds had been committed to help homeowners through the Home Affordable Modification Program (HAMP), a program that the president announced was intended to help up to 4 million struggling families stay in their homes through sustainable mortgage modifications. Hundreds of billions more were still available and could have been used by the White House and the Treasury Department to help support a massive reduction in mortgage debt. But Geithner avoided this path to a housing recovery, explaining that he believed it would be “dramatically more expensive for the American taxpayer, harder to justify, [and] create much greater risk of unfairness.” Treasury amplified that argument in 2010, after it reluctantly instituted a weak principal reduction program in response to overwhelming congressional pressure. ...

'[T]hree years later, with a tightening presidential election and a Democratic base disillusioned by the government’s abandonment of its promise to help homeowners (less than 8 percent of the funds originally allocated in TARP for foreclosure relief has actually been spent), Geithner and the administration would like to present themselves as having undergone a conversion.'

Read the entire entry here.

The announcement of HAMP is what really got Rick Santelli's goat on CNBC one day in early 2009 and set off a fire storm which coalesced in the outrage of the Tea Party movement. The conservative instincts of the Tea Party movement were and remain opposed to bailouts of homeowners, bankers, car manufacturers, insurers, multinationals like GE, and on and on. Barofsky is probably right that this is nothing more than a cynical political ploy to shore up support among Democrats. But if he's not buying it, who will? 

Noted Progressive Calls Second-Great-Depression-Excuse For TARP "Crap"

Dean Baker, here:

[T]he commonly claimed "second Great Depression" scenario is, to use a technical economic term, "crap."  The first Great Depression, by which I mean a decade of double-digit unemployment was not locked in stone by the mistakes made at its onset. There was nothing that would have prevented the government from having the sort of massive stimulus spending that eventually got us back to full employment (a.k.a. World War II) in 1931 instead of 1941 and without the war. The fact that we remained in a depression for more than a decade was due to inadequate policy response.

Don't you see? There are no problems which Keynesian monetarism cannot solve, it's just that FDR didn't practice them then,  and that Obama is not practicing them now.

Otherwise Baker makes the case for clearing the system the quick and dirty way, the way free markets are supposed to work:

The place to look for insight on this question is Argentina, which went the financial collapse route in December of 2001. This was the real deal. Banks shut, no access to ATMs, no one knowing when they could get their money out of their bank, if they ever could.

This collapse led to a plunge in GDP for three months, followed by three months in which the economy stabilized and then six years of robust growth. It took the country a year and a half to make up the output lost following the crisis.

While there is no guarantee that the Bernanke-Geithner team would be as competent as Argentina's crew, if we assume for the moment they are, then the relevant question would be if it is worth this sort of downturn to clean up the financial sector once and for all. I'm inclined to say yes, but I certainly could understand that others may view the situation differently.


Once again, the domestic analogy would be 1920, but that's so, I don't know, modern.

Neil Barofsky, TARP "Watchdog", Blasts Financial Fascism In New Book

And Gretchen Morgenson of The New York Times provides a favorable review, here:

He is Neil Barofsky. Remember him — the man whose job it was to police the $700 billion Troubled Asset Relief Program? And his new account, a book titled “Bailout” (Free Press), to be published on Tuesday, is a must-read. ...

He soon discovered that the [Treasury] department’s natural stance of marching in lock step with the banks meant that he had to question its policies and programs repeatedly to ensure that taxpayers weren’t at risk for fraud and abuse.

“The suspicions that the system is rigged in favor of the largest banks and their elites, so they play by their own set of rules to the disfavor of the taxpayers who funded their bailout, are true,” Mr. Barofsky said in an interview last week. “It really happened. These suspicions are valid.” ...

Meaningful changes to our broken system may finally come about, he writes, if enough people get angry. His conclusion is this: “Only with this appropriate and justified rage can we sow the seeds for the types of reform that will one day break our system free from the corrupting grasp of the megabanks.”

At the center of that whole sordid affair of regulatory capture at the time was Tim Geithner at Treasury, former head of The New York Federal Reserve Bank, who obviously isn't simply morally challenged with respect to paying his taxes, but also with respect to reporting LIBOR irregularities.

Unfortunately for us, we not only had two candidates for president in 2008 who voted FOR TARP (Sen. John McCain and Sen. Barack Obama), in 2012 the Republican candidate still defends it, as recently as March here in USA Today Away:

"There was a fear that the whole economic system of America would collapse, that all our banks or virtually all (banks) would go out of business," Romney told a town-hall-style forum in Arbutus, Md. "In that circumstance, President Bush and Hank Paulson said, 'We've got to do something to show we are not going to let the whole system go out of business.' I think they were right. I know some people disagree with me, I thought they were right to do that.".

And not only that, Romney is as unlikely as anyone to get angry about bailouts in future. We can't even get Romney to be angry about ObamaCare.

It's not even clear Obama's recent $100 million in attacks against Romney's personal character have made him mad, especially when it's the subject of speculation on conservative talk radio. Here Rush Limbaugh notes Romney "finally" gets ticked off about Obama's (plagiarizing) use of (Elizabeth Warren's) "you didn't build that", but even Rush isn't 100 percent convinced:

RUSH: You know, folks, I think this actually made Romney mad! I actually think that what Obama said finally ticked Romney off. I think Romney now has realized Obama is not a nice guy who's just befuddled and wrong. That was Romney's prior description of Obama: "He's a nice guy, just doesn't know what he's doing." I think this really got to Romney. Let's squeeze one more in here...

RUSH: Yes, siree bob! Something lit a fire. I am convinced that what Obama said actually has made Romney mad. Not in an insulting way. It has made him mad over what we're up against now. And, of course, as I say: The Obamaites are saying that their guy was "taken out of context." Right. Okay. ...

RUSH: Have you seen anything on Romney's speech in Irwin, Pennsylvania? "A little bit." Well, before we go to the break, let's play sound bite nine again and then follow it up with the last one. This is Romney on fire yesterday in Irwin, Pennsylvania, a suburb of Pittsburgh. He's really ticked off now, I think. This is about Obama saying (impression), "You started a business? You didn't do that! You didn't make that happen! You didn't build that. Uhhhh, you didn't -- you -- you -- you had help! You had a road, a bridge. You didn't do that."

And I think Romney is really ticked. I think there's now a fire burning under the posterior. So here are the two bites. Just bang 'em back-to-back, Mike.

If conservatives aren't sure if Romney's really angry, who is? The man is cool, I tell you, as in passionless, just like Obama. And that is the prerequisite for deception.

On the outstanding problems of our time, from massive bailouts of the banking system to government coercion in healthcare, Gov. Romney is on the same side as Obama and the Democrats.

Some choice!

Meanwhile, the American people just shrug.

A country that can't get angry about anything is a country that deserves what's coming to it (see France).

Geithner's NY Fed Knew Of Barclays Bank LIBOR Lies In April 2008 And Did Nothing

The little twit who got away with failing to report income on his tax returns and became our Treasury Secretary should hang for failing to report this.

As reported here:

The Federal Reserve Bank of New York learned in April 2008, as the financial crisis was brewing, that at least one bank was reporting false interest rates.

At the time, a Barclays employee told a New York Fed official that "we know that we're not posting um, an honest" rate, according to documents released by the regulator on Friday. The employee indicated that other big banks made similarly bogus reports, saying that the British institution wanted to "fit in with the rest of the crowd."

Although the New York Fed conferred with Britain and American regulators about the problems and recommended reforms, it failed to stop the illegal activity, which persisted through 2009.

New York Fed's Geithner Knew All About Libor Irregularities In 2008

So says a story, here:

According to the calendar of then New York Fed President, Timothy Geithner, who is now U.S. Treasury Secretary, it even held a "Fixing LIBOR" meeting between 2:30-3:00 pm on April 28, 2008. At least eight senior Fed staffers were invited. ...

Darrell Duffie, a Stanford University finance professor who has followed the Libor issue for several years, said that he believed regulators were "on the case reasonably quickly" after questions were raised in 2008.

"It appears that some regulators, at least at the New York Fed, indeed knew there was a problem at that time. New York Fed staff have subsequently presented some very good research on the likely level of distortions in Libor reporting," Duffie said. "I am surprised, however, that the various regulators in the U.S. and UK took this long to identify and act on the misbehavior."

Wolfgang Schauble Calls Tim Geithner's EFSF Leverage Idea STUPID!

It's about time someone did.

Ambrose Evans-Pritchard has the quotation from the German finance minister, here:

"I don't understand how anyone in the European Commission can have such a stupid idea. The result would be to endanger the AAA sovereign debt ratings of other member states. It makes no sense," he said.

Obama Regime's Default Alarmism is Straight out of Saul Alinsky

Caroline Baum notices that the Obama regime is acting strangely:

Instead of dangling the default threat every chance they get, Obama and Geithner should be telling the world that the U.S. has every intention, and the resources, to meet its debt obligations. They should shout it from the rooftops, put a banner on the Treasury Direct website, and use the Sunday talk shows to reassure investors, not frighten them.

Rule 3 for Radicals: Whenever possible, go outside the experience of the enemy.

And make no mistake about it, you are the enemy.

The Stench From Geithner's New York Federal Reserve Bank

Commentary from David Kotok of Cumberland Advisors yesterday:

It is important to understand that the narrative of this financial crisis period is not being properly written. It is being colored either by insufficient information on the part of writers and analysts, or it is being managed by those whose agendas conflict with telling the truth.

Let’s back these allegations up with some examples. Truth first! Has the behavior that occurred inside the Federal Reserve Bank of New York been fully revealed? There are hundreds of people working in the markets area of the NY Fed. What did they know and when did they know it? What did the leadership of the NY Fed know and when did they know it? Geithner specifically. And what about the directors? Fuld was on the NY Fed board. As Lehman CEO, is it conceivable that he didn’t know about repo 105? Does anyone believe that he didn’t know it would change his balance sheet? Can we accept that the CEO didn’t know that he had a UK legal opinion because a US firm wouldn’t give one? If he did know, was he in a conflict position while sitting on the board of the agency that was his potential savior and with whom he had primary dealer status? When Lehman had a $3bn repo rejected by another Fed primary dealer because it was worthless, did the Fed catch it? If yes, what action was taken? If not, why not?

By the way, another primary-dealer CEO also sat on the NY Fed board at the same time. What was his obligation as a Fed director? What was his duty when he saw a $3bn piece deemed worthless by his own people? Once they rejected Lehman and protected their firm, was their obligation over? Maybe yes if the CEO didn’t sit on the board of the NY Fed. But he did sit there, and therefore he wore two hats. The NY Fed continues to stink up the joint by trying to avoid transparency unless and until it is forced to do so. Bloomberg News sued the Fed for disclosure and finally succeeded after a judge found in favor of journalism.

The New York Fed now has listed the CUSIP numbers of the assets in the limited partnership created during the Bear Stearns Affair. Maiden Lane number 1 is now public. This pile of junk even includes short positions in AMBAC and MBIA debt instruments. Check the NY Fed website for details. Query: is a short position in AMBAC the proper use of a section 13/3 emergency loan of the central bank, authorized by the Fed’s Board of Governors and implemented by the NY Fed?

Remember that it is an accident of history which places the NY Fed in a unique position among the twelve regional Fed banks because it houses the Fed’s portfolio. The NY Fed president is also in a unique position in the Fed’s policy decision-making structure. He is a permanent voting member of the FOMC unlike his eleven other regional bank presidents who have to rotate their voting status.

In this writer’s view the behaviors at the NY Fed during Geithner’s reign were appalling and need full Congressional examination. The nest needs to be opened and any infestation of rats needs to be exhumed. Repo 105 and the special year-long examination of Lehman offer the first clues. And think about it: these revelations came about because a bankruptcy judge ordered it. They were not found by the Fed; they were not dereived from any criminal investigation. Where was the oversight of the NY Fed? Where were/are the legal arms of criminal investigation? And how much of this will be discussed and debated and placed into consideration BEFORE some new legislation commits this country to a financial regulatory system that we will have to live with until the next crisis?

Tim Geithner and Ben Bernanke Usurped The Power Of The U.S. House Of Representatives

So why aren't they in jail? They illegally bought trash loans and credit default swaps with taxpayer money and without congressional authorization. The Fed is permitted to buy only government-backed securities. If government disobeys the law, what's treason? Why should Joe American obey any of the laws of this land when its highest ranking officials don't? Aren't these "high crimes and misdemeanors"? Karl Denninger wants to know, here:

THE FED ADMITS TO BREAKING THE LAW

Now how long will it be before something is done about it?

April 1 (Bloomberg) -- After months of litigation and political scrutiny, the Federal Reserve yesterday ended a policy of secrecy over its Bear Stearns Cos. bailout.

In a 4:30 p.m. announcement in a week of congressional recess and religious holidays, the central bank released details of securities bought to aid Bear Stearns’s takeover by JPMorgan Chase & Co. Bloomberg News sued the Fed for that information.

The problem is this: The Fed is not authorized to BUY anything other than those securities that have the full faith and credit of The United States.

In addition Ben Bernanke has repeatedly claimed that these deals would not cost anyone money. But the current value looks differently:

Assets in Maiden Lane II totaled $34.8 billion, according to the Fed, which set their current market value in its weekly balance sheet at $15.3 billion. That means Maiden Lane II assets are worth 44 cents on the dollar, or 44 percent of their face value, according to the Fed.

Maiden Lane III, which has $56 billion of assets at face value, is worth $22.1 billion, or 39 cents on the dollar, according to the Fed’s weekly balance sheet. A similar calculation for the Bear Stearns portfolio couldn’t be made because of outstanding derivatives trades.

In other words, they have lost more than half of their value.

This was and remains a blatantly unlawful activity.

The Fed has effectively usurped Article 1 Section 7 of The Constituion which reads in part:

All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.

The Fed effectively appropriated taxpayer funds without authorization of Congress. At the time these facilities were put in place neither TARP or any other Congressional authorization existed for them to do so, and to date no bill has been put through Congress authorizing the expenditure of taxpayer funds, either through putting them at risk or via outright expense, for this purpose.

Nor does it stop with a "mere" Constitutional violation - The Federal Reserve Act's Sections 13 and 14 do not permit Fed asset purchases except, once again, for items carrying "full faith and credit" guarantees. Credit-default swaps and trash mortgages most certainly do not meet these qualifications.

I know I've harped on this for more than two years, but here we have a raw admission of exactly what was done - and there is simply no way to construe any of it in a light that conforms with either The Constitution or black-letter statutory law.

What's worse is that Tim Geithner, head of the NY Fed at the time, was very much involved in this - that is, he in effect personally, along with Ben Bernanke, usurped the power of the United States House.

The Fed has spent two years trying to hide this from the public and Congress. It has fought off both Congressional demands for disclosure and multiple FOIA lawsuits, the latter of which has resulted in a series of adverse rulings (and, it appears, was ultimately going to force disclosure anyway.)

These actions are unacceptable but promising "never to do that again" is insufficient. In a Representative Republic where the rule of law is supposed to be paramount - that is, where we do not crown Kings and relegate everyone else to the status of knaves, unlawful actions such as this demand that strong and unmistakable sanction also be applied to all wrongdoers in addition to protection against future abuse.

In this case this means that both Geithner and Bernanke must go - for starters.

Amending The Federal Reserve Act of 1913 (as Chris Dodd has proposed to prevent future lending bailouts) is not sufficient in that The Fed did not lend in this case, it purchased, and by buying what we now know were trash loans it violated the black letter of existing law.

There is only one effective remedy for an institution that has proved that it will not abide the law: it must be stripped of all authority that has been in the past and can be in the future abused.

This means that The Fed, if we are to keep it at all, must be relegated to a body that only practices and provides monetary policy - nothing more or less - and that all monetary operations must be performed openly, transparently, and within those constraints.

We cannot have a republic where an unelected body is left free to violate The Constitution with wild abandon and those acts are then allowed to stand.

One final thought: If the individuals responsible for this blatant black-letter violation of the law do not face meaningful sanction for these acts, and neither does The Fed as an institution, can you fine folks over at The Executive, Judiciary and Legislative branches of our government please explain to us ordinary Americans why we should obey any of the laws of this land when you will not enforce the laws that already exist?