What’s That Lassie? Little Timmy’s in the Well AGAIN?Posted: August 4, 2009
Wow, it looks like Turbo Tax Timmy has gone rogue! We better send the press up to Alaska to chase down another Palin rumor. First, there’s that nastiness over the weekend with the Stephanapolous show on ABC where he explicitly said that the administration wasn’t ruling out new taxes on the middle class. (Something Larry-the-la-la Summers also inkled, but hey, he’s not a cabinet officer, he’s something akin to a Czar that has to be overthrown by something other than scandal and public displays of stupidity.) I believe that gave Robert Gibbs Excedrin headaches number 349-357 during yesterday’s presser.
Now, there’s rumors of a temper tantrum in the presence of all the nation’s topic economists and financial regulators outlined here in the WSJ. It seems he’s not getting the Obama way on this one. The ladies in the room have taken exception to his granting Ben Bernanke (possibly later, this year, La-la Summers) all the fun and power. I guess being an independent regulator with an agency all to yourself just isn’t what it used to be; especially when you have scary lady parts and a huge brain.
Mr. Geithner told the regulators Friday that “enough is enough,” said one person familiar with the meeting. Mr. Geithner said regulators had been given a chance to air their concerns, but that it was time to stop, this person said.
Among those gathered in the Treasury conference room were Federal Reserve Chairman Ben Bernanke, Securities and Exchange Commission Chairman Mary Schapiro and Federal Deposit Insurance Corp. Chairman Sheila Bair.
Friday’s roughly hourlong meeting was described as unusual, not only because of Mr. Geithner’s repeated use of obscenities, but because of the aggressive posture he took with officials from federal agencies generally considered independent of the White House. Mr. Geithner reminded attendees that the administration and Congress set policy, not the regulatory agencies.
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.
This current turf battle is only the latest move by a group within government possibly thwarting the Treasury’s plans to continue uploading tax dollars to the bonus class in the guise of saving the financial sector. If there’s still disagreement about this point, can you imagine what other things are going on in complete disarray behind the scenes? Who is really in charge of solving this overt act of sibling rivalry? Well, if you have figured out where the buck stops in this administration, you’re doing better than me. (Hint: these folks are ALL presidential appointments).
So, I read this article at about 2:00 am CST, but now have the benefit of it being the center of discussion in many of the major econ/finance blogs. Let me share some thoughts from Naked Capitalism that pretty much echo my own.
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.
The only thing that the Treasury and Fed have succeeded in doing is cheerleading to get stock prices up so that banks could raise equity at not-hugely-dilutive prices. I spoke to a hedge fund manager yesterday who sees this rally as driven by technical and relative performance concerns, not supported by fundamentals. He is also not the first I have heard speculate that the media boosterism, particularly from sources not known for that sort of thing, like Bloomberg, suggests that official pressure has been applied to keep financial news upbeat. He thinks the markets, not just the bond market via Fed intervention, but even equity markets, are being used to try to goose the economy.
And if that fails and we have another downdraft, what successes will Geithner be able to point to? The canard of the banks repaying the TARP, when as Roger Ehrenberg points out, the warrants were massively underpriced? The only one the goosing the markets exercise, and if that ends badly, it calls a lot else into question.
I completely agree, especially, with the characterization that current policy ‘goosed the markets’. Those hapless cheerleaders of the bonus class over there on CNBC want to see the increase in the DJ and other indexes as that magical leading indicator showing it’s beacon light to the recovery. I stubbornly believe in fundamentals and am firmly sitting on the sidelines. I am waiting for another October correction.
What did Sheila Bair of the FDIC suggest?
“You are talking about tremendous regulatory power being invested in whatever this entity is going to be,” Ms. Bair told the Senate Banking Committee last month. “And I think, in terms of checks and balances, it’s also helpful to have multiple views being expressed and coming to a consensus.”
Silly Sheila! Consensus is for girly men! This is the administration of the one! Larry-the-la-la Summers has all those old boy credentials. Who do you think you are?
Tyler Durden over at Zero Hedge is a little less cryptic than me, so let me defer to him for a moment.
If Geithner gets so worked up over a couple of powerless agencies giving up their turf to an already overlordish Federal Reserve, one can only imagine how JPM’s SPY traders must dread any caller ID starting with 202 on one of those rare down days or why Wen Jiabao knows never to allow indirect interest in Tsy auctions to drop below 50% going forward.
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.
So, here’s my bottom line. Y’all know I live in New Orleans and I have for some time. You also must know by now that I live in the ninth ward. So, believe me, I don’t use this imagery lightly. This financial crisis is Obama’s Hurricane Katrina and Timothy Geithner is Heckuva Job Brownie. I bought on the high ground, so I can watch the entire thing from the lip of the bowl and later on CNN from my friend’s couch in Omaha. But, and this is a big but, I can see the bottom of the bowl from my front porch and I can see my neighbors from across the canal trying to escape the lower 9. The Health Care hoopla is a side show event compared to getting this right. Catch my drift?