May 17, 2009
The recent article about Treasury Secretary “Turbo” Tim Geithner by Jo Becker and Gretchen Morgenson, appearing in the April 26 edition of The New York Times, seems to have helped fan the flames of the current outrage concerning the Federal Reserve Bank of New York. Turbo Tim was president of the New York Fed during the five years prior to his appointment as Treasury Secretary. Becker and Morgenson pointed out many of the ways in which “conflict of interest” seems to be one of the cornerstones of that institution:
The New York Fed is, by custom and design, clubby and opaque. It is charged with curbing banks’ risky impulses, yet its president is selected by and reports to a board dominated by the chief executives of some of those same banks. Traditionally, the New York Fed president’s intelligence-gathering role has involved routine consultation with financiers, though Mr. Geithner’s recent predecessors generally did not meet with them unless senior aides were also present, according to the bank’s former general counsel.
By those standards, Mr. Geithner’s reliance on bankers, hedge fund managers and others to assess the market’s health — and provide guidance once it faltered — stood out.
The New York Fed is probably the most important of the nation’s twelve Federal Reserve Banks, since its jurisdiction includes the heart of America’s financial industry. As the Times piece pointed out, this resulted in the same type of “revolving door” opportunities as those enjoyed by members of Congress who became lobbyists and vice versa:
A revolving door has long connected Wall Street and the New York Fed. Mr. Geithner’s predecessors, E. Gerald Corrigan and William J. McDonough, wound up as investment-bank executives. The current president,William C. Dudley, came from Goldman Sachs.
The New York Fed’s current chairman, Stephen Friedman, has become a subject of controversy these days, because of his position as director and shareholder of Goldman Sachs. Goldman sought and received expedited approval to become a “bank holding company” last September, thus coming under the jurisdiction of the Federal Reserve and becoming eligible for the ten billion dollars in TARP bailout money it eventually received. After Goldman became subject to the New York Fed’s oversight (with Friedman as the New York Fed chairman) the Fed made decisions that impacted Goldman’s financial state. Although this controversy was discussed here and here by The Wall Street Journal, that publication’s new owner, Rupert Murdoch, now requires a $104 annual on-line subscription fee to read his publication over the Internet. Sorry Rupert: Homey don’t play that. Although Slate provided us with an interesting essay on the Friedman controversy by Eliot “Socks” Spitzer, the best read was the commentary by Robert Scheer, editor of Truthdig. Here are some important points from Scheer’s article, “Cashing In on ‘Government Sachs’ “:
When N.Y. Fed Chairman Stephen Friedman bought stock in the company that he once headed, and where he still serves as a director, he was already in violation of Federal Reserve policy and was hoping for a waiver to permit him to hold his existing multi-million-dollar stock stash and to remain on the Goldman board. The waiver was requested last October by Timothy Geithner, then the president of the N.Y. Fed and now Treasury secretary. Yet,without having received that waiver, Friedman went ahead in December and purchased 37,300 additional shares. With shares he added in January, after the waiver was granted, he ended up with 98,600 shares in Goldman Sachs, worth a total of $13,330,720 at the close of trading on Tuesday.
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As Jerry Jordan, former president of the Fed Bank in Cleveland, told the Journal in reference to Friedman’s obvious conflict of interest, “He should have resigned.”
Unfortunately, this was not the view during the reign of Geithner, who argued that Friedman needed to remain chairman of the N.Y. Fed board to find a suitable replacement for Geithner as he moved on to be secretary of the Treasury. Friedman chose a fellow former Goldman Sachs exec for the job.
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Geithner is a protege of former Goldman Sachs chairman Rubin. And it was therefore not surprising when he picked Mark Patterson, a registered lobbyist for Goldman Sachs, to be his chief of staff at the Treasury Department. That appointment was made on the same day that Geithner announced new rules for limiting the influence of registered lobbyists. Need more be said?
Yes, there are a couple more things: Goldman Sachs was the second largest contributor to Barack Obama’s Presidential election campaign, with a total of $980,945 according to OpenSecrets.org. President Obama nominated Gary Gensler of Goldman Sachs to become Chairman of the Commodity Futures Trading Commission. As Ken Silverstein reported for Harpers, this nomination has stalled, since a “hold” was placed on the nomination by Vermont Senator Bernie Sanders. Mr. Silverstein quoted from the statement released by the office of Senator Sanders concerning the rationale for the hold:
Mr. Gensler worked with Sen. Phil Gramm and Alan Greenspan to exempt credit default swaps from regulation, which led to the collapse of A.I.G. and has resulted in the largest taxpayer bailout in U.S.history. He supported Gramm-Leach-Bliley, which allowed banks like Citigroup to become “too big to fail.” He worked to deregulate electronic energy trading, which led to the downfall of Enron and the spike in energy prices. At this moment in our history, we need an independent leader who will help create a new culture in the financial marketplace and move us away from the greed, recklessness and illegal behavior which has caused so much harm to our economy.
“Change you can believe in”, huh?
Rare Glimpses Of Honesty And Sanity
July 1, 2010
Too many of the commentaries we see these days are either motivated by or calculated to promote hysteria. When someone expresses a rational point of view or an honest look at the skullduggery going on in Washington, it’s as refreshing as a cold beer on a hot, summer day.
With so much panic over sovereign debt and budget deficits afflicting the consensual mood, it’s always great to read a piece by someone willing to analyze the situation from a perspective based on facts instead of fear. Brett Arends wrote a great piece for MarketWatch, dissecting the debt panic and looking at the data to be considered by those implementing public policy on this issue. His essay focused on “the three biggest lies about the economy”: that unemployment is below ten percent, that the markets are panicking about the deficit and that the United States is sliding into socialism. Here is some of what he had to say:
High unemployment exerts a huge deflationary force on the economy. Beyond that, the income taxes those unemployed citizens used to pay are no longer helping to pick up the tab for our bloated budget. Mr. Arends emphasized the importance of looking at the real unemployment rate – what is referred to as U6 – which includes those people deliberately disregarded when counting the “unemployed”:
In exploding the myth about claimed market panic concerning the debt, Arends dug back into his arsenal of common sense, explaining what would happen if the markets were panicked:
The specious claims about domestic socialism don’t really deserve a response, but here is how Arends dealt with that narrative:
Another prevalent false narrative being circulated lately (particularly by President Obama and his administration) concerns the hoax known as the “financial reform” bill. Wisconsin Senator Russ Feingold gave us a rare, disgusted insider’s look at how Wall Street was able to get what it wanted from its lackeys on Capitol Hill:
Lest we forget that the financial crisis of 2008 was caused by the antics of cretins such as “Countrywide Chris” Dodd, Senator Feingold’s essay mentioned that sleazy chapter in Senate history to put this latest disgrace in the proper perspective:
As I discussed in “Your Sleazy Government at Work”, the voters will not forget about the Democrats (including President Obama) who undermined financial reform legislation, while pretending to advance it. The Democratic Party has until early 2012 to face up to the fact that their organization would be better off supporting a Presidential candidate with the integrity of Russ Feingold or Maria Cantwell if they expect to maintain control over the Executive branch of our government.
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