Posts Tagged ‘Timothy Geithner’

The passing scene: Links & comments 6/18/14

June 18, 2014

A Tale of Torture and Forgiveness by Ariel Dorfman for TomDispatch.

The Chilean-American write Ariel Dorfman described how a British officer was tortured by the Japanese during World War Two, how the officer tracked down his torturer and what happened next.  Anyone who thinks that torture is morally acceptable ought to read this article.

Timothy Geithner Reveals Himself in His New Book by Noam Scheiber for the New Republic.

Does he pass the test? by Paul Krugman for the New York Review of Books.

Treasury Secretary Timothy Geithner wrote in his new memoir that bailing out the banks saved the USA from another Great Depression.  Maybe so and maybe not, but his policy of protecting the banks from prosecution, restructuring or strict regulation has created the conditions for a new and worse financial crash.

What the Theory of “Disputive Innovation”  Gets Wrong by Jill Lepore for The New Yorker.

I think this article is based on a misunderstanding.   Clayton Christensen was not trying to tell business executives how to become disruptive innovators, but warning of the danger of neglecting basic skills and products and of being blindsided by competitors who gain a foothold in the low end of the market.

An inside story of the Wall Street bailout

August 16, 2012

Neil Barofsky was special inspector general for the Trouble Asset Relief Program from December 2008 to March 2011.  His new book, BAILOUT: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street, told me a lot about not only of the failures of the Obama administration, but of the dysfunctional culture of Washington, D.C.

In Barofsky’s early days in Washington, he was kindly advised not to be too abrasive or controversial.  Herb Allison, the former Merrill Lynch executive who was the so-called “TARP czar,” told him that if he played the game, he was assured of moving on to a good job either in Washington or Wall Street; otherwise, he would be unemployable.   That is also what Senator Richard Shelby (R-Alabama) told him—that if he did his job right, he would make a real difference and serve the American people in a meaningful way, and he also would never be able to get a job again.

His account makes U.S. government seem like the court of King Louis XVI in 18th century France.  Everybody was obsessed with protocol, rank, status, privileges and keeping in the good graces of the powers that be.  Having a big office was very important.  High officials were flattered as if they were demi-gods.  Barofsky wrote that he made up his mind early on that he was going to do his job well and then get out.

He was a federal prosecutor in New York who prosecuted Colombian drug lords and white collar criminals.  A Democrat, he was appointed in the waning days of the Bush administration after Congress insisted on the IG position as a condition for approving TARP.  Treasury Secretary Hank Paulson gave him the cold shoulder, but Treasury Secretary Timothy Geithner was downright hostile.  He learned early that the secret of influencing the executive branch is to have friends in Congress, and the secret of influencing Congress is to cultivate the press, which he did.

His report is another confirmation of the failure of the Obama administration to bring Wall Street under control.  According to Barofsky:

  • Secretary of the Treasury Timothy Geithner basically trusted the banks to manage their own bailout.  They were lent $4.7 trillion, not just the $700 billion authorized by Congress, with no significant audit or supervision, under conditions in which they could hardly fail to profit.  In one case, a couple of bankers literally designed a program which they then proceeded to administer, to their great profit.
  • The purpose of the bailout was to get credit flowing into the economy again for consumer loans, home mortgages and financing for small business, but this didn’t happen, and nothing was put in place to assure that it would happen. Barofsky conceded that a bailout probably was necessary in late 2008 to prevent a financial collapse, and that the banks repaid most (not all) of the money advanced.  But he said there was no need to bail out the banks at 100 cents on the dollar, and no justification for refusing to audit how the money was spent.
  • The Home Affordable Modification Plan (HAMP) was never intended to provide help homeowners avoid mortgage foreclosures, but rather, in Geithner’s words, to “foam the runway” for the banks—that is, to stretch out the foreclosure process so that banks and mortgage servicers would not be overwhelmed by having more foreclosures than they could handle.  Barofsky said Geithner resisted audits and measures to protect homeowners from fraudulent mortgage servicing programs.
  • There is nothing in place to prevent another financial crash, as bad or worse than the one that went before.  The only thing different is that government has authority which will make possible future bailouts without going to Congress.

While Barofsky’s book did confirm my low opinion of Secretary Geithner, it did raise my opinion of Congress.  Barofsky was able to accomplish what little he did—a few audits, a few successful prosecutions for fraud—through the support of courageous Democrats and Republicans in Congress.  I have a higher opinion of Senator Shelby than I did before, although qualified by the fact that he is a highly partisan Republican who anti-labor, anti-civil rights, and opposed to creation of a Consumer Financial Protection Board.

Barofsky currently is a senior fellow at New York University School of Law.

The following brief segments from PBS’s Newshour provide an impression of Barofsky’s personality, background and thinking.

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Why Elizabeth Warren belongs in the Senate

August 15, 2012

Elizabeth Warren, as the appointed chair of the Congressional Oversight Committee on the Troubled Asset Relief Program, asked questions that needed to be asked.  In September, 2009, she asked Treasury Secretary Timothy Geithner where the TARP money went, and why the bailed-out banks didn’t have to accept stringent conditions that were imposed on the bailed-out automobile companies.  You can see his response on the video above.

If Warren wins election as Senator from Massachusetts this November, she will be able to continue to ask the questions that need to be asked.

Click on The Woman Who Knew Too Much for a profile of Elizabeth Warren in Vanity Fair magazine.

Click on Congressional Oversight Panel for the archive of its reports on TARP.