The Revenge Of Timmy And The Paydays

In the Trump era where the Consumer Financial Protection Bureau has been all but shut down, Dodd-Frank legislative provisions have been rolled back, and the Trump tax bill has put billions upon billions more in the pockets of Wall Street, it should be no surprise that the same guys who got us into subprime housing are now going into the payday lender business.

Meet Mariner Financial, who will literally give money away to customers...and then use its crushing corporate power to take twice the loan back, plus interest.

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. 

That's right, our old friend Timmy is back, and he's in the legal loan shark business.

And business is booming.

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. 

“It’s basically a way of monetizing poor people,” said John Lafferty, who was a manager trainee at a Mariner Finance branch for four months in 2015 in Nashville. His misgivings about the business echoed those of other former employees contacted by The Washington Post. “Maybe at the beginning, people thought these loans could help people pay their electric bill. But it has become a cash cow.” 

The market for “consumer installment loans,” which Mariner and its competitors serve, has grown rapidly in recent years, particularly as new federal regulations have curtailed payday lending, according to the Center for Financial Services Innovation, a nonprofit research group. Private equity firms, with billions to invest, have taken significant stakes in the growing field. 

Among its rivals, Mariner stands out for the frequent use of mass-mailed checks, which allows customers to accept a high-interest loan on an impulse — just sign the check. It has become a key marketing method. 

Just sign on the dotted line and cash the check.

And then the goon squad shows up to break your neck.

The company’s other tactics include borrowing money for as little as 4 or 5 percent — thanks to the bond market — and lending at rates as high as 36 percent, a rate that some states consider usurious; making millions of dollars by charging borrowers for insurance policies of questionable value; operating an insurance company in the Turks and Caicos, where regulations are notably lax, to profit further from the insurance policies; and aggressive collection practices that include calling delinquent customers once a day and embarrassing them by calling their friends and relatives, customers said.

Finally, Mariner enforces its collections with a busy legal operation, funded in part by the customers themselves: The fine print in the loan contracts obliges customers to pay as much as an extra 20 percent of the amount owed to cover Mariner’s attorney fees, and this has helped fund legal proceedings that are both voluminous and swift. Last year, in Baltimore alone, Mariner filed nearly 300 lawsuits. In some cases, Mariner has sued customers within five months of the check being cashed.

And all of this is 100% legal thanks to Trump and the GOP.  Oh, and Obama's Treasury Secretary, who definitely landed on his feet.

There are tons of these Wall Street-funded "finance companies" around.  Just here in NKY, there's Eagle Finance, One Main Financial, Heights Finance Corporation, Regency Finance Company, Republic Finance, and of course Mariner Finance, all within 5 miles of where I live.

Oh, and it's Kentucky, so the payday lenders are still there too.

But remember, the economy is doing great, right?

The Fabulous Fed Fail Follies

ProPublica and This American Life have teamed up for a pretty depressing story of former Federal Reserve examiner Carmen Segarra.  Her job in 2011 and 2012 was to take a look at infamous banking giant Goldman Sachs and figure out why the Fed missed their involvement in the subprime mortgage meltdown.

She was fired for doing her job, and the recordings she made were devastating.  Her boss, Columbia University finance professor David Beim was brought in to figure out what went wrong.  New York Fed President William Dudley, who brought both Beim and Segarra in, wanted answers.  He just didn't want to do anything with those answers.

As ProPublica reported last year, Segarra sued the New York Fed and her bosses, claiming she was retaliated against for refusing to back down from a negative finding about Goldman Sachs. A judge threw out the case this year without ruling on the merits, saying the facts didn't fit the statute under which she sued. 

At the bottom of a document filed in the case, however, her lawyer disclosed a stunning fact: Segarra had made a series of audio recordings while at the New York Fed. Worried about what she was witnessing, Segarra wanted a record in case events were disputed. So she had purchased a tiny recorder at the Spy Store and began capturing what took place at Goldman and with her bosses. 

Segarra ultimately recorded about 46 hours of meetings and conversations with her colleagues. Many of these events document key moments leading to her firing. But against the backdrop of the Beim report, they also offer an intimate study of the New York Fed's culture at a pivotal moment in its effort to become a more forceful financial supervisor. Fed deliberations, confidential by regulation, rarely become public. 

The recordings make clear that some of the cultural obstacles Beim outlined in his report persisted almost three years after he handed his report to Dudley. They portray a New York Fed that is at times reluctant to push hard against Goldman and struggling to define its authority while integrating Segarra and a new corps of expert examiners into a reorganized supervisory scheme. 

Segarra became a polarizing personality inside the New York Fed — and a problem for her bosses — in part because she was too outspoken and direct about the issues she saw at both Goldman and the Fed. Some colleagues found her abrasive and complained. Her unwillingness to conform set her on a collision course with higher-ups at the New York Fed and, ultimately, led to her undoing.

Segarra was fired for not being nice enough to the Masters of the Universe.  Oh, but it gets worse, as the recordings show Segarra was at a meeting where fellow investigator Michael Silva recounted the infamous day the financial system "broke the buck" during Lehman Brothers' last death throes.

Silva had been in the room with Geithner in September 2008 during a seminal moment of the financial crisis. Shares in a large money market fund – the Reserve Primary Fund – had fallen below the standard price of $1, "breaking the buck" and threatening to touch off a run by investors. The investment firm Lehman Brothers had entered bankruptcy, and the financial system appeared in danger of collapse. 

In Segarra's recordings, Silva tells his team how, at least initially, no one in the war room at the New York Fed knew how to respond. He went into the bathroom, sick to his stomach, and vomited. 

"I never want to get close to that moment again, but maybe I'm too close to that moment," Silva told his New York Fed team at Goldman Sachs in a meeting one day.
Despite his years at the New York Fed, Silva was new to the institution's supervisory side. He had never been an examiner or participated as part of a team inside a regulated bank until being appointed to lead the team at Goldman Sachs. Silva prefaced his financial crisis anecdote by saying the team needed to understand his motivations, "so you can perhaps push back on these things."

The Fed tried to convince big trading houses like Goldman Sachs to step up and backstop the system back then. They laughed.

In the recordings, Silva then offered a second anecdote. This one involved the moments before the Lehman bankruptcy.

Silva related how the top bankers in the nation were asked to contribute money to save Lehman. He described his disappointment when Goldman executives initially balked. Silva acknowledged that it might have been a hard sell to shareholders, but added that "if Goldman had stepped up with a big number, that would have encouraged the others." 

"It was extraordinarily disappointing to me that they weren't thinking as Americans," Silva says in the recording. "Those two things are very powerful experiences that, I will admit, influence my thinking."

Treasury Secretary Tim Geithner had to drag the big banks like Goldman Sachs kicking and screaming before they would help, and they made huge profits when they did.  The story goes on to detail several more recordings Segarra made, and the intense pressure Segarra was under to drop anything that might embarrass Goldman Sachs.

Pointing the finger at Eric Holder for failing to prosecute is one thing, but Tim Geithner, William Dudley, and the Fed completely dropped the ball on this mess.  It never should have happened.

Last Call

The Justice Department is apparently moving on a criminal investigation into the Libor rate fixing scandal by the world's top banks, and since all of them do business in the US, it could get ugly, fast.

As regulators ramp up their global investigation into the manipulation of interest rates, the Justice Department has identified potential criminal wrongdoing by big banks and individuals at the center of the scandal.

The department’s criminal division is building cases against several financial institutions and their employees, including traders at Barclays, the British bank, according to government officials close to the case who spoke on the condition of anonymity because the investigation is continuing. The authorities expect to file charges against at least one bank later this year, one of the officials said.

The prospect of criminal cases is expected to rattle the banking world and provide a new impetus for financial institutions to settle with the authorities. The Justice Department investigation comes on top of private investor lawsuits and a sweeping regulatory inquiry led by the Commodity Futures Trading Commission. Collectively, the civil and criminal actions could cost the banking industry tens of billions of dollars.

Hope those charges come before November.  Would be really nice to see some bankster heads roll before the election.  Sadly, if it does happen it will come after November 7.  Obama needs the money too much.  I like the President, but the fact that Jamie Dimon isn't in jail yet doesn't make me think these criminal investigations will go anywhere fast.

We'll see.

Timmy's Tentative Tenure

Treasury Secretary Tim Geithner says that he doesn't believe President Obama will ask him to serve again in a second term.

“He’s not going to ask me to stay on, I’m pretty confident,” Geithner said in an interview with Bloomberg Television yesterday in Charlotte, North Carolina. “I’m confident he’ll be president. But I’m also confident he’s going to have the privilege of having another secretary of the Treasury.”

Geithner, 50, has led President Barack Obama’s efforts to pull the U.S. economy out of the worst recession since World War II, including overseeing bailouts of automakers General Motors Co. (GM) and Chrysler Group LLC, which have since emerged from bankruptcy. Before joining the administration in 2009, Geithner was president of the Federal Reserve Bank of New York, playing a key role in the government’s rescue packages for banks such as Citigroup Inc. (C) and Bank of America Corp. (BAC)
 
In the interview, Geithner said he would do “something else” after leaving the Treasury Department, without specifying what that would be. In August, an administration official said Geithner would stay in his job at least through this year’s presidential election.

Erskine Bowles, chief of staff under President Bill Clinton, and Democratic Senator Kent Conrad of North Dakota could be among the potential candidates to succeed Geithner, said Mark Calabria, director of financial regulation studies at the Cato Institute in Washington. 

I have to say I'd rather have Geithner over anyone the Cato Institute would mention.   Both of those meatballs would be as bad as Larry Summers on deficits and cutting the safety net.  If Geithner is replaced, he needs to be succeeded by someone who actually got the last 3 years plus right financially and economically, but that's just my opinion.

Geitner Thee Hence!

A number of Republicans are calling for Treasury Secretary Tim Geithner's head in the midst of this downgrade disaster, and if it weren't for the fact a new Treasury Secretary worth a damn would be immediately and permanently blocked by the Senate GOP, I'd be agreeing with them.

GOP Sen. Jim DeMint is of course one of those in Congress who would basically assure any confirmation fight would last well into 2012.

"The president should demand that Secretary Geithner resign and immediately replace him with someone who will help Washington focus on balancing our budget and allowing the private sector to create jobs," DeMint said in a report Saturday in The Hill.

"For months he opposed all efforts to reduce the debt in return for a debt ceiling increase. His opposition to serious spending and debt reforms has been reckless and now the American people will pay the price," said DeMint, a Tea Party favorite.

Rep. Michele Bachmann also wants her pound of Timmy's flesh.

“We were warned by all the credit agencies that a failure to deal with the debt would lead to this downgrade in our credit rating,” she said. “But instead, the president submitted a budget that had a $1.5 trillion deficit, the he request a $2.4 trillion blank check on top of that. President Obama is destroying the foundations of our economy, one beam at a time. I call on the president to seek the immediate resignation of Treasury Secretary Tim Geithner and submit a plan that balances the budget in year. Turn the economy around and put our people back to work.”

Other Tea Party candidates are picking up the call as well.  It's clear what the plan is:  If Geithner goes, then it's an admission that the Republicans are correct on the "theory" that the S&P downgrade is all President Obama's fault.  At the same time, there are a number of progressives like myself who freely admit that appointing Tim Geithner as SecTreas was arguably the President's biggest mistake in his first term.

Now I'm a strong supporter of the President.  I am not however a anywhere close to a fan of Geithner.  Not only should have the President gotten rid of him sooner, he never should have appointed anyone that close to Hank Paulson to the job in the first place.  Geither has made a chain reaction of economic disaster events possible, from refusal to go after the banks in 2009, to weakening the Dodd-Frank legislation, to his own silly tax return nonsense.

And now we're in a situation where getting rid of him becomes a proxy fight for rejecting the President himself, leaving a very rotten taste in my mouth.  Getting rid of him now would only ensure a huge confirmation fight and no leadership at Treasury at a time where we're going to need it.  As much as I despise Geithner, sacking him now would only be handing the GOP another loaded weapon to go after the President with.

It's infuriating.  If there's one guy who has been wrong in the Obama administration since day one, it's Geithner...and yet getting rid of him now is a tacit admission of the President's mistake.  It's smart of the White House to go after S&P's credibility on this, but they're going to have to fight back against the Republicans as well.  The Geithner problem I've been warning about for 30 months has now officially bitten the President and the country right on the ass.

It's arguably worth considering if trashing Geithner is better in the long run, even if it does play into the GOP's hands in the short run.  That's not my call, however.

Last Call

This Politico.com article presented without comment.

Treasury Secretary Timothy Geithner would like to leave the Obama administration this fall if economic conditions are stronger and the debt ceiling debate is resolved in a timely manner, according to a person familiar with his thinking.

Possible replacements to be President Barack Obama’s top economic adviser, according to a senior administration official, include Erskine Bowles, White House chief of staff under President Bill Clinton, and Roger Altman, a prominent investment banker and former deputy Treasury secretary.

Jamie Dimon, chief executive of JPMorgan Chase, is considered a strong dark-horse candidate.  Dimon has said he is not interested in public office but many on Wall Street believe he would accept the job if asked by Obama. But the White House will have to decide whether Dimon, who leads the most successful bank in the U.S., is too closely aligned with Wall Street.

OK, I lied.  Some commentary:  if Jaime Dimon, CEO of the richest investment bank on Wall Street, is not "too closely aligned with Wall Street" then there isn't anyone who possibly could be so.

Your Even A Stopped Clock Can Be Right Alert Of The Day

Yeah I know, John Carney is just Jim Cramer without the ridiculous sound effects and better hair, but on the subject of Tim Geithner needing to find out what America's unemployment situation is like by being unemployed, he's right.

There will be heavy pressure from within the Democratic party for the Obama administration to make changes that will both publicly mark a change of direction for the administration and privately send a message to party insiders that the White House is accepting its share of the blame for the loss of the House of Representatives.

Geithner is a clear candidate to play the fall-guy. In exit polls, six in 10 voters said the economy is the nation's No.1 problem. Around four in 10 believe their family's financial condition got worse since Obama took office. Geithner is the nation's chief economic official. A large share of the blame for last night's results will likely fall on him. 

Geithner outlasted many other economic advisers to the president, including Peter Orzsag, Herb Allison, Steve Rattner, Larry Summers and Christina Romer. Insiders say the role he played in getting Congress to pass the financial reform bill has significantly strengthened his position in the administration. 

But Geithner lacks a constituency within the Democratic party, especially on Capitol Hill. He won't have substantial backers who could protect his job, unlike many other high level Obama administration officials. He doesn't have any ties to the Democratic base. He hasn't been a substantial fund-raising draw for any Democrats. 

Geithner's best hope for keeping his job may have been for the GOP to take the Senate. In that case, the administration may have feared Republicans would block the nomination of his successor. But with the Democrats still controlling the nominee confirmation process, the administration will have a more leeway to pick a replacement. 

Four words.  Treasury Secretary Paul Volcker.  He's done it before.  Reagan's "Morning in America" happened because Volcker labored in Carter's darkness before the dawn and made the tough calls.  Carter got rewarded for that by getting steamrolled in 1980, but Volcker did what he had to do to kill stagflation.

This time around, it's going to be a lot tougher, especially with Helicopter Ben flying around crapping out bricks of cash.  Volcker could get confirmed, too...and maybe knowing Treasury was serious about dealing with the banks would go a long way.

Although that's probably exactly why it wouldn't happen, the GOP scorched earth campaign would mean that Reagan himself couldn't get appointed SecTreas.

And In The Movie Version, Helicopter Ben Is Played By...

...Paul Giamatti, ladies and gentlemen.  William Hurt is Hammerin' Hank Paulson, James Woods as doomed Lehman Brothers CEO Dick Fuld, and Timmy the Invisible Boy is played by Billy Crudup...




And that totally works, too.

HBO's movie "Too Big To Fail" will be out next year, based on Andrew Ross Sorkin's book (which is a good read.)

Larry, Timmy, And Mike

CNBC's Larry Kudlow has a Kramerian track record on pretty much everything, so I'm not sure why anyone's paying attention to his "insider" claim that NYC Mayor Mike Bloomberg will be replacing Timmy after the election.





I think Larry Kudlow is full of crap. Then again, I always think Larry Kudlow is full of crap.

Hi-Larry-ous

Larry Summers is outta here.

White House economic adviser Larry Summers is stepping down from his job at the end of the year, the administration said on Tuesday.

The White House said Summers planned to return to his position as professor at Harvard University.

The departure of Summers, director of the White House National Economic Council, would mark a major shakeup in President Barack Obama's economic team. White House budget director Peter Orszag stepped down in July and White House Council of Economic Advisers Chairwoman Christina Romer left her job at the beginning of this month.

I'm all choked up.  Really.  Now if only we can fix all the damage that Larry did AND get rid of Timmy, we'll finally be getting somewhere.

HAMPered Recovery

If there's one real total and complete foul-up that can laid directly at the feet of Obama and not "inherited from Bush" or "but it was blocked by the GOP in Congress" it's the President's failed HAMP program.  It's been a complete disaster all the way around, and it's now producing horror stories like this.

"It was really stressful," Mike Kahara, 34, recalled. "We kept asking our creditors what we could do to work things out. They just said we should make more money."

The couple received a notice of default on their mortgage from Wells Fargo in August 2009. But a bank rep said there might be some hope. The Kaharas were advised to seek assistance through the Home Affordable Modification Program, a federal program intended to help homeowners by modifying loan terms.

In December, they were notified by Wells that they were eligible for a three-month trial loan modification that would lower their monthly payments to about $1,400. The Kaharas managed to make all subsequent payments in full.

After the three months were up, Ellen Kahara said, they were told by Wells that their case was still under review and that they should keep making the $1,400 payments. They did.

The bank continued requesting paperwork as part of its review process. Ellen said she called Wells on Aug. 9 and for days afterward to check on the status of their loan modification but never got a call back.

The Kaharas received a letter from Wells dated Aug. 11 saying that their application for a permanent loan modification had been rejected. The letter said the Kaharas would have 30 days to discuss other options available to them.

"No foreclosure sale will be conducted and you will not lose your home during this 30-day period," the letter said.

But on Aug. 18 there was a knock at the door around 8 in the morning. Mike Kahara said a young man wearing a white polo shirt and dark slacks introduced himself as Sebastian Cruz of the investment firm Pacifica Cos.

Cruz said his firm had purchased the house and that he would offer the Kaharas $1,500 if they'd agree to vacate the property within two weeks.

He produced a document with Pacifica letterhead informing the Kaharas that their home "has changed ownership through the foreclosure process." It threatened legal action if the couple didn't move out.

"I thought it was a scam at first," Mike Kahara said. "Then I realized he was serious."

Dead serious.  HAMP has failed totally, only allowing a small fraction of Americans to keep their homes and just making things easier for the banks to get theirs the other 99% of the time.  HAMP is absolutely something that needs to be hung on this President's neck.  And strangely, he seems to be making no effort to alleviate the massive economic problem that is millions of Americans losing their homes despite a program specifically designed to keep them there.  The folks behind it?  Tim Geithner and Larry Summers.

So unless the hiring of Austan Goolsbee is to replace both men (which it's not) then we're still in a crapload of serious trouble.

Orange Julius Versus Timmy

Looks like GOP House minority leader John Boehner has decided to move on from the SCARY GROUND ZERO MOSQUE to switching attack vectors to something that actually does matter and something that does deserve to hurt the Democrats: going after Obama's failed economic team in a speech in beleaguered Cleveland.

Boehner, delivering what his aides billed as a major economic address, will say President Obama's team lacks "real-world, hands-on experience" in creating jobs, according to a draft version of his speech that was released in advance. The Republican lawmaker plans to cite reports that some senior aides complained of "exhaustion," including the recently departed budget chief Peter Orszag.

"President Obama should ask for - and accept - the resignations of the remaining members of his economic team, starting with Secretary Geithner and Larry Summers, the head of the National Economic Council," Boehner says in the prepared remarks, which are scheduled for delivery at the City Club of Cleveland shortly after 8 a.m. The mass dismissal, he adds, "is no substitute for a referendum on the president's job-killing agenda. That question will be put before the American people in due time. But we do not have the luxury of waiting months for the president to pick scapegoats for his failing 'stimulus' policies."

Boehner's demand for the ousters of Geithner and Summers is likely to be met with derision in the West Wing, and denounced as mere electioneering less than 75 days before the midterm election. Calls for cabinet officials to be fired is nothing new for the party out of power -- during the Bush administration many Democrats called for the ouster of Defense Secretary Donald Rumsfeld, a demand that was not met until Democrats swept the 2006 midterms.

Boehner is seeking to personalize mounting concerns among voters about Obama's handling of the economic recovery. In his speech, he argues that Obama's advisers unfairly highlight brief signs of marginal improvement to suggest a coming surge in job creation.

"The American people are asking, 'where are the jobs?' and all the president's economic team has to offer are promises of 'green shoots' that never seem to grow," Boehner says, according to the text. "The worse things get, the more they circle the wagons and defend the indefensible." After the speech, he is scheduled to participate in a question-and-answer session with business leaders in this economically distressed Rust Belt city.

And you know what? I can't argue against Boehner here. I've called for Geithner's firing long ago. Hell, I objected to Geithner from day one. Larry Summers on the other hand needed to have been shown the door last year for his complete mishandling of the stimulus package. Both these men have been awful and with unemployment hovering around 9.5% and real unemployment approaching 25% in some counties, these guys have failed across the board in getting a real economic strategy in place.

This is unfortunately for the Dems a completely legitimate avenue of attack against Obama, and you're going to see a lot more of this as we head towards the fall.  I don't see how Obama can continue to defend Geithner or Summers for much longer given the jobs and housing picture.

As much as it causes physical pain for me to admit it, John Boenher is right.  These two need to be fired because they have failed.

[UPDATE] And as Atrios tweets:  

liberals have been pointing out shortcomings of geithner and summers for some time, only a righty can make it an issue

Sad but true.

It Depends On Your Definition Of Success

Steve Waldman at Interfluidity gives a pretty detailed and exhaustively long recounting of last week's Treasury Department meetings with econ bloggers (as econ bloggers are wont to do) but Atrios flags down this paragraph in Waldman's story that really does explain a lot.

The conversation next turned to housing and HAMP. On HAMP, officials were surprisingly candid. The program has gotten a lot of bad press in terms of its Kafka-esque qualification process and its limited success in generating mortgage modifications under which families become able and willing to pay their debt. Officials pointed out that what may have been an agonizing process for individuals was a useful palliative for the system as a whole. Even if most HAMP applicants ultimately default, the program prevented an outbreak of foreclosures exactly when the system could have handled it least. There were murmurs among the bloggers of “extend and pretend”, but I don’t think that’s quite right. This was extend-and-don’t-even-bother-to-pretend. The program was successful in the sense that it kept the patient alive until it had begun to heal. And the patient of this metaphor was not a struggling homeowner, but the financial system, a.k.a. the banks. Policymakers openly judged HAMP to be a qualified success because it helped banks muddle through what might have been a fatal shock. I believe these policymakers conflate, in full sincerity, incumbent financial institutions with “the system”, “the economy”, and “ordinary Americans”. Treasury officials are not cruel people. I’m sure they would have preferred if the program had worked out better for homeowners as well. But they have larger concerns, and from their perspective, HAMP has helped to address those.

To recap, the Home Affordable Modification Program was a success as far as Treasury was concerned because it helped the banks, despite the fact that by any measure it was a massive failure as far as actual homeowners were concerned.  It didn't keep people in their homes, it didn't make them more affordable, and it didn't modify mortgage terms.  Millions dropped out of the program and will most likely lose their homes now because now the banks can afford to repossess when they couldn't in 2009.

Great for banks.  Not so good for homeowners.  Terrible for taxpayers.  Obama and Timmy really, really botched this one from start to finish.

Marcy Wheeler and David Dayen have a pair of excellent pieces on HAMP as well.  As I said over a year ago, cramdown would have been an infinitely better solution to helping howeowners...but the HAMP program was never about helping homeowners, now was it?

Sunday Funnies: Timmy Explains It All Edition

All Geithner, all day, all Bobblespeak Translations.

Tapper: what can you do to grow this economy?

Geithner: convince businesses to rehire people

Tapper: how so

Geithner: with my awesome charisma

Tapper: um do you have a backup plan?

Geithner: ha

Tapper: isn’t it terribly important to pay for unemployment benefits unlike everything else or future generations will be mad at us?

Geithner: no that’s idiotic

Tapper: shouldn’t we have less financial regulation since lack of regulation failed us before?

Geithner: no because the new law will allow the government write a strongly worded letter to businesses before they destroy America

Tapper: Liz Warren hates you but consumer groups love her

Geithner: she’s a sharp cookie I’ll give her that

Tapper: giant businesses on welfare are giving their employees free Lamborghinis

Geithner: that’s crazy we told them to buy American and get Cadillacs

Tapper: Auto companies had to take haircuts but bankers did not

Geithner: no the executives had to do that too

Tapper: Tim those were actual haircuts!

 I still say Culture of Truth makes the Sunday shows make more sense than the normally do.

The Great Wall Of Geithner

The Helicopter Ben and Timmy Show isn't exactly what you would call "accountable" to the American people.  That apparently includes the United States Senate as well.  Throw in the subject of the Senate's ire being China's currency policy and the Fed's refusal to pull China's chain on this -- because they can't, China has all the leverage here -- and you have a recipe for a good old fashioned Beltway turf war.

Democratic and Republican senators alike pilloried Treasury Secretary Timothy Geithner on Thursday for refusing to label China a currency manipulator and for ignoring a congressional mandate to issue a report on China's exchange-rate practices.

Few issues spark bipartisan agreement in Congress like criticism of administrations for refusing to get tough with China over its fixed exchange rate. Critics charge that China sets the yuan at an unfairly low rate against the U.S. dollar, making American products more expensive in China and Chinese products cheaper here, exacerbating the U.S. trade deficit and holding down U.S. export-driven jobs.

"I'm not sure what this administration's policy is ... and I don't see a China economic framework," complained Senate Finance Committee Chairman Max Baucus, D-Mont., adding that federal agencies lack a cohesive strategy for dealing with China.

The top Republican on the panel, Iowa Sen. Charles Grassley, needled Geithner about earlier remarks from President Barack Obama — made during Geithner's confirmation hearings — that he thought that China manipulated its currency to get a home field advantage. The Treasury chief repeatedly dodged questions about whether Obama still thinks that.

"So what does President Obama believe? You've had discussions with him," an exasperated Grassley asked, failing to get a firm answer.

Geithner repeatedly responded that the Obama administration is pressing China to level the playing field by opening its markets to international trade. He said that pressure from the U.S. government and others had helped China agree to modify its "indigenous innovation" policy, which protected some of its domestic manufacturers from competition but harmed U.S. exports and American firms that operate in China.

The reality is that the Senate can huff and puff all it wants to, but if the US decides to push the currency war with China right now, it's going to be a disaster.  China can afford to call in our markers if they so choose.  We can't.  That's the bottom line, and both Helicopter Ben and Timmy damn well know it.  For once, I'm backing the Glimmer Twins here over the Senate.  Pissing China off right now would assure we end up in that double-dip recession and it would happen overnight.

Long term we need to get out of China's back pocket, but it's going to be a long crawl to get there.

The Man From SIGTARP

Via Barry Ritholz, it looks like the Special Inspector General of the Troubled Asset Relief Program, Neil Barofsky, may have the AIG coverup in his sights for a criminal investigation.  That means he's coming into direct conflict with Timmy Geithner and Treasury, and the battle between the two is getting...interesting.

That tense relationship has grown out of Barofsky’s mandate to monitor and root out fraud and waste in the management of TARP, the $700 billion program passed in October 2008 to remove toxic debt from the banks. The special inspector general, in a series of reports, interviews and congressional hearings, has heaped criticism on the Treasury Department’s operation of the program.

Barofsky’s most recent broadside came on April 20, when a SIGTARP report labeled a housing-loan modification program funded with $50 billion of TARP money as ineffectual.

Treasury spokesman Andrew Williams counters that the program has resulted in modifications for more than 230,000 homeowners.

The TARP watchdog has also criticized Treasury Secretary Timothy F. Geithner in reports and in congressional testimony for his handling of the process by which insurance giant American International Group Inc. was saved from insolvency in 2008, when Geithner was head of the Federal Reserve Bank of New York.

The secrecy that enveloped the deal was unwarranted, Barofsky says, adding that his probe of an alleged New York Fed coverup in the AIG case could result in criminal or civil charges.

(More after the jump...)

Sunday Funnies: Timmy And The Big Dog Edition

This week's Bobblespeak Translations are here, and ol' Bill Clinton gets to remind the Village just exactly what the score was 16 years ago.

Tapper: is this like 1994?

Clinton: yes we provoked violence back then by ending trickle down economics and in 2008 by putting a black guy in the White House

Tapper: you are digitizing the entire world with your CGI Intitiative - will we all live on Pandora?

Clinton: no - although that would be cool

Tapper: where are your charities helping?

Clinton: we are trying to save devastated areas like Haiti, West Africa, Rhode Island and Syracuse

Tapper: wow that’s bold

Clinton: we’re installing solar lanterns in India

Tapper: Solar Lantern would be a cool
comic character

Clinton: awesome

Tapper: how do you get business to give
away money?

Clinton: Pfizer has a monopoly on a life saving drug and they realized they were losing out on a huge market of poor sick dying people

Tapper: they are filled with humanitarianism

Clinton: I appealed to their innate selfishness

Tapper: good idea - how do you deal with
rampant corruption?

Clinton: I was recently in a place where there were many poor people sleeping on the streets with a few rich people in government-paid limousines - the problem was no one in the whole nation even expect decent jobs, housing or health care

Tapper: were you in Somalia?

Clinton: no Washington DC

On the other hand, now I'm totally tempted to make a fireball-throwing Bill Clinton looking character in Champions Online named Solar Lantern.

In Which Zandar Actually Agrees With Tim Geithner

Timmy takes to the WaPo today to explain how he's going to stop the next meltdown.  Curiously, the article doesn't begin with "I shall immediately resign due to the fact I helped make this mess worse!" but it does actually offer some quasi-decent advice on what Congress needs to do: set up an independent agency to monitor banks, and give regulators the power to shut down Too Big To Fail banks when then go bad.  Even better -- and I can't believe I'm saying this -- Geithner actually wants derivatives regulated.

Thankfully, signs of bipartisan support for action seem to be emerging in Washington, including for an independent consumer financial protection agency.

That is welcome news. The best way to protect American families who take out a mortgage or a car loan or who save to put their kids through college is through an independent, accountable agency that can set and enforce clear rules of the road across the financial marketplace.

But consumer and investor protection, while critical to reform, are only one part. As the Senate bill moves to the floor, we must all fight loopholes that would weaken it and push to make sure the government has real authority to help end the problem of "too big to fail."

To prevent large financial firms from ever posing a threat to the economy, the Senate bill gives the government authority to impose stronger requirements on capital and liquidity. It limits banks from owning, investing, or sponsoring hedge funds, private equity funds or proprietary trading operations for their own profit unrelated to serving their customers. And it prevents excess concentration of liabilities in our financial system.

All of that means major global financial institutions -- whether they look like Goldman Sachs, Citigroup or AIG -- will be required to operate with less leverage and less risk-taking.

Crucially, if a major firm does mismanage itself into failure, the Senate bill gives the government the authority to wind down the firm with no exposure to the taxpayer. No more bailouts. Instead, we will have a bankruptcy-like regime where equityholders will be wiped out and the assets will be sold.

These are important steps, but they are not enough. Ending "too big to fail" also requires building stronger shock absorbers throughout the system so it can better withstand the next financial storm. To do that, the Senate bill closes loopholes and opportunities for arbitrage, and it brings key markets, such as those for derivatives, out of the shadows.

Transparency will lower costs for users of derivatives, such as industrial or agriculture companies, allowing them to more effectively manage their risk. It will enable regulators to more effectively monitor risks of all significant derivatives players and financial institutions, and prevent fraud, manipulation and abuse. And by bringing standardized derivatives into central clearing houses and trading facilities, the Senate bill would reduce the risk that the derivatives market will again threaten the entire financial system. 

I mean...this is something of a shock to see the guy who I've been riding as a Wall Street insider since Obama announced he was his pick for Treasury actually come out and publicly advocate for basically everything I've said that we've needed in order to start fixing this problem.

My next question is "What's the catch, Timmy?"  Independent regulatory oversight?  Resolution authority on megabanks?  Derivatives regulation and transparency?  The devil's all in the details there.  Geithner is absolutely correct when he says these need to be done right.  I'm thinking they will not be, and the consequences will be disastrous.

Still, credit where credit is due, and it only took 15 months, too.  Let's see these ideas become real legislation with teeth, Mr. Secretary.  But at least you're finally on the right track.

In Which Zandar Answers Your Burning Questions

If there's anything there's overwhelming bipartisan support for, it's financial reform.  Both the motivated voters on the left and the right are pissed off because the banks got bailouts and the rest of us are paying for them.  It's such a simple concept to pound the GOP on reform.

But the Democrats refuse to do so.  Specifically, President Obama refuses to do so.  Digby asks:

In any case, financial reform is not health care reform. It's very important, but it doesn't directly affect many average citizens' lives and does not carry the moral imperative that HCR does, certainly among the liberals. Passing something lame is not "laying the groundwork" for something better, it's just passing something lame. It's not creating a huge new program or establishing something important that can be built upon later. This is a fairly simple set of regulations and new regulatory structures which have a targeted job --- eliminate or reduce the systemic risk that caused the meltdown of the global financial system in the fall of 2008. They need to do this right.

I'm sure the White House would love to have a lovely bipartisan bill symbolizing a new day of peace, love and understanding. And maybe they'll get it. But they'd better watch out. There are Democrats on the left who feel zero obligation to play ball on a bill that benefits big banks and whose loyalty to the White House was badly frayed during the last year. And there may be some Republicans on the right who refuse to play ball for any number of reasons, not the least of which is to deny Obama any kind of bipartisan victory. So Obama will likely have to stitch together a coalition of his favorite "centrists" from both parties to put this thing together and hope that he can beat a filibuster in the Senate. (How many of those are there?)It seems to me that if it's going to be that kind of a dog fight he might as well get a decent bill. So far, it doesn't look as if he particularly wants one.

Why the White House doesn't want the Democrats to have even one issue that speaks to the electorate's populist fervor this fall is a question for the age.

Allow me to answer.

Any guy who kept Ben Bernanke and Tim Geithner around was never serious about financial reform in any way, shape or form.  Period.  Ever.  The Democrats aren't going to sign off of a real reform bill.  The Republicans will fight it tooth and nail.  It's almost like both parties are in the pockets of the banking industry.  If Obama was serious about financial reform, he would have passed it already.  Instead, it's been sitting on the bench even longer than HCR was.

And on the bench it will remain.  Obama's not stupid.  He knows he can't piss off the big banks, especially not now in the wake of Citizens United meaning banks can unload unlimited millions to destroy the Dems in campaign advertising.  Certainly no Senator is going to make a stand.  Certainly not 60 of them.

No, unlike HCR, which I always knew would pass, financial reform doesn't have a chance in hell.

It never did.  Anyone who thought it did is delusional.

Timmy Goes Off Script

President Obama officially has a major Tim Geithner problem as the Treasury Secretary continues to throw the administration and Congress under the bus...while testifying to Congress.

Overzealous bank regulators and an attempt by Congress to punish greedy bank executives are combining to restrict the ability of the nation's 8,000 community banks to lend to small businesses, Treasury Secretary Timothy Geithner said Tuesday.

Called to testify before the Senate Finance Committee about the Obama administration's fiscal 2011 budget proposal, Geithner instead spent much of his time discussing why lending hasn't picked up at community banks, often the only lender to small-town America.

"Where is the urgency, Mr. Secretary, in solving this," Sen. Maria Cantwell, D-Wash., demanded of Geithner. "People put the screws to the community banks and gave all the money to the big banks. I'm telling you they are coming into my office every day with these stories, so I would urge you . . . to act now and not wait for legislation."

Sen. Bill Nelson, D-Fla., said he's hearing "cries of anguish" from small businessmen who can't get loans and must close their doors. Kentucky Republican Sen. Jim Bunning turned red-faced as he angrily described how small banks in his state are being hamstrung.

"It's the (federal) regulators that have stopped the flow of money out of the community banks to the small business person, for fear of the (federal) regulators coming in and consuming the bank," thundered Bunning. "They're stopping all lending to the people who absolutely need the lending."

Geithner acknowledged that federal bank regulators who fell down on the job before the crisis now want to appear tough.

"They are now overcorrecting and they're making it hard for them (community banks) to make new loans," said Geithner, adding that he's hearing complaints too. "They say the same things to me."

Correcting the problem, he cautioned, is difficult because bank regulators are independent agencies that don't take orders from the Treasury Department.

At this point, Obama's Treasury Secretary is not only defending the banks, he's on Capitol Hill pushing the other party's talking points, and throwing his own President under the bus on his new plan to get tough with banks. I've been against Geithner from the absolute beginning and have wondered when Obama was going to get rid of him for some time now, but at this point Obama doesn't have a choice.

When your cabinet official is actively sabotaging your directives while testifying to Congress, it's time to show that official the door.  I can understand pushback from the Volcker Rules in private, but Geithner is actively wrecking the President's financial reform agenda that Treasury Secretary he should be supporting.  Instead, he's spouting the GOP line that regulation is the problem, not the solution.  Considering Americans believe the Obama Administration's lack of getting tough with the banks is a major problem, Obama's going to have to make a decision here and damn soon.

It's gotten to the point where Geithner is a Republican appointee when he's going on TV agreeing with Jim Bunning.   Time to discuss his replacement...fast.