Timmy Blows His Stack

I can understand Timmy The Invisible Boy wanting to keep a low profile right now with all the news concerning the Fed getting ripped off by banks in securities sales, but he's not doing himself any favors with this blow up at the FDIC's Sheila Bair over a turf fight...turf that Timmy owns 95% of anyway.

Treasury Secretary Timothy Geithner blasted top U.S. financial regulators in an expletive-laced critique last Friday as frustration grows over the Obama administration's faltering plan to overhaul U.S. financial regulation.

Nice.

Mr. Geithner, without singling out officials, raised concerns about regulators who questioned the wisdom of giving the Federal Reserve more power to oversee the financial system. Ms. Schapiro and Ms. Bair, among others, have argued that more authority should be shared among a council of regulators..

The government's proposal would empower the government to take over and break up large financial companies, merge two bank regulators, and toughen oversight of mortgages, among other things.

Administration officials say they aren't worried about the overhaul's prospects, adding that there is consensus on key aspects, including the regulating of over-the-counter derivatives. Treasury officials say they expected a big debate over the complex legislation. The first piece, which addresses executive pay, passed the House Friday.

"The industry is already back to their pre-meltdown bonuses," said White House Chief of Staff Rahm Emanuel. "We need to make sure we don't slip back to risky behavior where the institutions have all the upside and the taxpayers have all the downside, which is why we need regulatory reform."

Neal Wolin, Treasury's deputy secretary, said Mr. Geithner told regulators "they have the prerogative to express their views, but he wanted to make sure that, since everyone had agreed on the importance of achieving reform this year, everyone stayed focused on that goal."

That goal of course making sure that the FDIC and SEC aren't stepping on Timmy's crank with their regulatory boots. Why, if the FDIC and SEC had more power, they actually might try to conduct oversight of banks, and we can't have that. Regulators will be testifying on Capitol Hill about the proposals, and it could get catty. However, the President's proposal is in Timmy's favor, and that means Sheila Bair will have to back off and sit down.

The initiative comes as criticism spreads of President Barack Obama’s proposal to give the Fed powers to oversee systemic financial risks. Treasury Secretary Timothy Geithner last week told regulatory chiefs -- including Sheila Bair, the Federal Deposit Insurance Corp. chairman who opposes making the Fed the sole systemic-risk agency -- they should stop attempts to campaign against the administration’s revamp of rules for the industry, a person familiar with the matter said.

“We are prioritizing and expanding” the examination process to “assess key operations, risks and risk management activities of large institutions,” Tarullo said in prepared remarks for today’s hearing. “This program will be distinct from the activities of on-site examination teams so as to provide an independent supervisory perspective.”

Seems the boss-man has Timmy's back on this more or less.

The usual suspects have more on Timmy's temper-tantrum. Yves Smith:

Obama seems unable to recognize he has pinned the fate of his presidency on two people, Geithner and Summers, who are part of the problem. The stillborn PPIP was a terrible idea. Paulson had two efforts on variants of the "buy toxic assets" idea and failed. The stress tests were a farce. The Potemkin reform plan puts more regulatory authority in the Fed, which was far and away, of all the regulators, least interested in supervision.

Tyler Durden:

On a more serious note, this begs the question: is the SecTsy finally losing it and why? Or, in a Machiavellian ploy of sinister brilliance, did Larry Summers orchestrate all of this by turning off CNBC access at the U.S. Treasury, in hopes of creating a brief but deadly Western standoff between his adversaries (all of them)? If nothing else, it would explain the cable station's increasingly declining viewership.

Moe Tkacik:

(Tim Geithner shouldn't be the one to point fingers here, though. His own fixes have been a direct continuation of the those of the Bush administration).

Personally, I think giving the Fed even more power is a horrendous idea. Look what they've done (or failed to do) with their existing power so far, after all. But the real problem is Geithner and Treasury. It's been a multi-trillion dollar shell game so far, and any time Geithner gets called on it, he doesn't respond well. Yeah, the guy's under a lot of pressure, far more than any SecTreas needs to be. But too bad, he took the job knowing damn well what it meant.

I've said that Timmy has been the wrong guy since the get-go. Seems like I'm not the only one anymore who may believe that.