No time is a good time for incompetence but it appears even under Obama incompetence in the position of US Treasury Secretary has won out again. For Tim Geithner appears to be Henry Paulson II. Now I should immediately qualify the word “incompetence” and replace it with deliberate deviance. This deliberate deviance is sort of like Mr.Geithner’s failure to pay taxes in 2003 and 2004. And then be caught again for the same offense later but this time for the years 2001 and 2002. This is persistent and deliberate deviance – and this is what the Financial Community in the US is guilty of and desperately working to preserve – its Golden Goosing of the US Economy.
And why not ? Given the tremendous size and personal benefice of the financial dark shadow gravy train which Wall Street has erected under the dictum that financial markets are not just efficient but Darwinianly so(financial markets eradicate the weak). So Financiers are not going to let 15-25 years of hardwork be dismantled by a small set of Black Swan events – 1 in billion chance so “we certainly did not cause it”.
Thus the Financial community is working triple overtime to maintain its position . Hence its no wonder that the stock markets staged a rally back in the bleak days of November when it was announced that Tim Geithner was nominated as Treasury Secretary – one of their own would be at the most important financial controls.
So what is Mr. Geithner doing to benefit the financial community. Just read Paul Krugman’s Bailout Bunglers:
When I read recent remarks on financial policy by top Obama administration officials, I feel as if I’ve entered a time warp — as if it’s still 2005, Alan Greenspan is still the Maestro, and bankers are still heroes of capitalism.
“We have a financial system that is run by private shareholders, managed by private institutions, and we’d like to do our best to preserve that system,” says Timothy Geithner, the Treasury secretary — as he prepares to put taxpayers on the hook for that system’s immense losses.
Meanwhile, a Washington Post report based on administration sources says that Mr. Geithner and Lawrence Summers, President Obama’s top economic adviser, “think governments make poor bank managers” — as opposed, presumably, to the private-sector geniuses who managed to lose more than a trillion dollars in the space of a few years. And this prejudice in favor of private control, even when the government is putting up all the money, seems to be warping the administration’s response to the financial crisis……
But bank stocks are worth so little these days — Citigroup and Bank of America have a combined market value of only $52 billion — that the ownership wouldn’t be partial: pumping in enough taxpayer money to make the banks sound would, in effect, turn them into publicly owned enterprises.
My response to this prospect is: so? If taxpayers are footing the bill for rescuing the banks, why shouldn’t they get ownership, at least until private buyers can be found? But the Obama administration appears to be tying itself in knots to avoid this outcome.
If news reports are right, the bank rescue plan will contain two main elements: government purchases of some troubled bank assets and guarantees against losses on other assets. The guarantees would represent a big gift to bank stockholders; the purchases might not, if the price was fair — but prices would, The Financial Times reports, probably be based on “valuation models” rather than market prices, suggesting that the government would be making a big gift here, too. And in return for what is likely to be a huge subsidy to stockholders, taxpayers will get, well, nothing.
Will there at least be limits on executive compensation, to prevent more of the rip-offs that have enraged the public? President Obama denounced Wall Street bonuses in his latest weekly address — but according to The Washington Post, “the administration is likely to refrain from imposing tougher restrictions on executive compensation at most firms receiving government aid” because “harsh limits could discourage some firms from asking for aid.” This suggests that Mr. Obama’s tough talk is just for show.
Meanwhile, Wall Street’s culture of excess seems to have been barely dented by the crisis. “Say I’m a banker and I created $30 million. I should get a part of that,” one banker told The New York Times. And if you’re a banker and you destroyed $30 billion? Uncle Sam to the rescue!
Now I ask you – is it not apparent that Tim Geithner is helping out the financial community to the detriment of the public good? But this has been precisely the problem for the past 8 if not 28 years. Leadership in government is not for the Commonwealth but rather for the wealth of the few – and especially so when dealing with the US Financial community.
Here is another view based on Tim Geithner’s outline of financial reform . Portfolio columnist Felix Salmon has this to say:
My only doubt is in number four: institutions, by their nature, will never willingly sign on any plan which makes them obsolete, which means in turn that many US regulators will fight these proposals. I’m not sure how to get around that problem, since I have no faith in the ability of the US legislature to force the matter in a constructive way. Maybe it will take one more spectacular failure – of Fannie Mae or Freddie Mac, perhaps – before the people running the USA wake up and realize that the current alphabet soup is not helping anybody except the regulatory arbitrageurs
This is the reverse side of the equation; but note the context, as Rome burns, Financial players still work to game the system to their advantage.