I can’t tell you how disappointed I am that America’s first woman Speaker of the House has turned into a player for all seasons. First, we find out exactly how much she knew about the torture methods of the Bush Administration and when she knew about it. Then she tells a big lie about it. Rumors still abound that she was wanted Obama as POTUS because she could be the Queen Bee of Capitol Hill. His lack of knowledge and experience was certain to put her in a position of power. Too bad she is more of a demagogue than a democrat because if there was ever a chance to be the Queen of the Hill, it would’ve been with reform of the financial system.
Instead, we’re seeing her go after yet another woman who has tried to champion the voters/taxpayers over big party money. A head line from Yves Smith at Naked Capitalism says it all for you: “On Pelosi’s Duplicity and Apparent Sandbagging of Elizabeth Warren, watch dog of the TARP”. It’s a typical Capitol Hill soap opera if there ever was one. As appears customary with everything economic coming out of the democratic wing of our congressional whores, Pelosi is siding with the financial services industry over the voters/taxpayers. Yves first reminds us of the strange dance surrounding the birth of TARP. Remember, life was supposed to be different once the Democrats retook the Congress.
Recall how instrumental Pelosi was in getting the TARP passed. The widely mentioned gambit of Paulson getting on bended knee to plead for her support was a nice bit of theater to cover how readily she fell into line. The other justification for the Democratic leadership support was the claim that Treasury had given a closed door briefing to Senate and House leadership telling them the world would end if the TARP was not passed yesterday.
Some have suggested that Treasury provided data on the potentially disastrous money market fund withdrawals around the time of the Lehman failure (recall the death of Lehman led Reserve to break the buck). but that problem had already been addressed in September in part via the Fed providing non-recourse loans to purchase asset backed commercial paper, and more fully in October via yet another Fed facility. In other words, if the money market fund panic was indeed the scare tactic, the TARP was not the remedy.
But even if we give the devil its due, the performance of the Democratic leadership was pathetic. The most heinous aspect of the bill, putting the Treasury secretary outside the reach of law, was never cut back. The first draft, a doodle on a napkin, was offensive to democratic processes, the second draft added a lot more words but was still way too thin on basics, like objectives, criteria, procedures, and the final draft loaded tons of pork in to assure passage. And the ironies kept multiplying. The bill was wildly unpopular even with the media falling into line (and in the later stages, a clearly orchestrated campaign to have financial services industry employees contact legislators to counter the groundswell of opposition). And it was Senate Republicans who were the last holdouts.
Here’s the soap opera, errr, money line.
So why are we pointing a finger at Pelosi in particular? The next chapter is her appointment of one Richard Nieman to the Congressional Oversight Panel. Under the TARP rules, the House Majority leader selects one of the oversight panel members, so this choice was completely under her control.
Neil Irwin of WAPO reported today that the TALF is not having the results trumpeted by the Obama administration. This is leading, again, to speculation about the relevancy of most of these plans and, of course, job security of Treasury Secretary Timothy Geithner.
In its first two months, the government’s signature initiative to support consumer lending has fallen well short of expectations, deploying only a fraction of the amount officials had hoped to extend to stimulate auto loans, student loans and credit card lending.
The slow rollout of the program has frustrated staff at government agencies working on the effort and diminished hopes that they could engineer a rapid return to healthy lending levels, according to interviews with government and industry sources. The initiative also serves as a window into the complexities of designing a giant rescue of the financial system.
The TALF is the private-public partnership that couples the funds of private investors, like hedge funds, and the FED. The hedge funds invest small amounts that are matched by much larger amounts that would presumably come from the Treasury and Tax Payers if they wind up being nonprofitable. The combined funds will supposedly purchase non-toxic, virgin, high rated rated securities to fund everything from student loans and car loans to inventory and capital loans for business. As of yet, they really have failed to do so.
Officials envisioned TALF supporting tens of billions of dollars a month in new lending, saying it could eventually total $1 trillion. But in March, when it was launched, it backed only $4.7 billion in auto loans and credit cards. For April, it logged only $1.7 billion.
Sources involved in the program said private investors have been reluctant to work with the government, which they view as an unreliable business partner. Separately, the brokerage houses that are crucial intermediaries are being exceptionally cautious in the contracts they draw up with participants in the program, in part out of wariness that any mistakes could draw the ire of Congress or the media.
In congressional testimony on Tuesday, Treasury Secretary Timothy F. Geithner said that overall progress is “pretty good” for a program in its early days. Still, he acknowledged that participation was “lower than expected” because of “concern about the conditions that come with the assistance in the program . . . and uncertainty about whether they may change in the future.”
Meanwhile, on the bank front, stupid accounting tricks abound! Which begs the question is any one stupid enough to believe the numbers? Every large financial institution appears to be jumping on the band wagon of conveniently forgetting the month of December. What does this say about the state of public accounting today and Wall Street’s gulliblity?