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Tim's Out - Sheila and Debt Relief In?
In my piece “What’s in Store for 2010” my number one prediction was:
-Tim Geithner will resign as Treasury Secretary. Sheila Bair will replace him.
The odds of getting any of these types of predictions correct are
probably 20 to 1. Given what has happened in the past few days I would
now say that the ‘swap’ of Sheila for Tim is an even money bet.
Mr. Geithner has outlived his usefulness. He is too connected to the
bailouts of 08. Bear, Lehman, AIG, TARP and even QE are all part of his
legacy. That makes Tim a lightening rod. Too many Americans hate that
part of our history.
I don’t think the current flap relating to the deliberate
‘non-disclosure’ of information relating to AIG is that big a deal.
When the full history of this period is finally told (it will take
awhile yet) this particular transgression of Mr. Geitner will look
small by comparison. The things that we do not yet know about that we
'agreed to' during the 'crisis period' are going to cause us to roll our
eyes and bow our heads when all is said and done.
Those that had their hands on the tiller were firmly of the belief that
the western world financial system was shutting down. They left no
stone unturned in trying to save the patient. They committed future
generations for Trillions in additional debt. Every step available to
calm market fears was taken. Even withholding information. When you are
at war, and you think you are losing, you do what you have to do. If
you later win the war and someone criticizes you for using WMD so be
it.
I will take a stab at writing the President’s statement on this:
“I have today accepted the resignation of my Treasury Secretary Tim
Geithner. One year ago the global economy was facing the biggest
challenge in history. Tim and a small handful of dedicated individuals
took the steps that were considered necessary at the time to first
stabilize a collapsing system and second, put the economy of the US and the
globe on a path that would lead to recovery.”
“For this, the American people owe Tim our thanks. He worked
tirelessly during one of the darkest periods of our history. And he
succeeded. Today the economic crisis of one year ago has receded. Our
economy has stabilized and growth has resumed. Our financial
institutions have also returned to health. The financial support
provided them through the TARP program has worked. We see the evidence
of this as those banks who took assistance a year ago are now paying it
back with interest.”
“Our country continues to face serious economic challenges.
Unemployment remains stubbornly high; we face a protracted period of
large fiscal imbalances. A critical weakness continues to be with
homeowners who are unable to meet their financial obligations.”
“I have appointed Sheila Bear to replace Tim Geithner. Sheila will
bring to the Treasury Department her proven leadership and
administrative skills. She has both the knowledge of the core issues
and the compassion that is required to address the problems that are at
hand.”
“Sheila has set the standards and seen to the implementation of the
Nations efforts in restructuring home mortgages. The guidelines for
refinancing troubled homeowners that she established have been accepted
by virtually every public and private sector lender. Much more work needs to be done in this area. Many homeowners are still facing default. This reality causes human suffering and is adding to our economic problems. I am looking forward to working with Ms. Bair in this critical area as well as all of the other challenges we face.”
Okay, so that was BS. But if it does go this way, the Boss will say words to this effect. He will just do it better.
My sense is that this would be a very significant development. I
believe that Ms. Bair will introduce a very large program of PRICIPAL
debt relief for borrowers. This program will start with the D.C.
mortgage lenders Fannie, Freddie and FHA. It will be forcibly extended
to the private sector lenders. (They already have significant reserves
on a lot of this.)
I hate this development. But I think it is the ‘right thing to do’. The
inequity of it will cause great divides. The cost will be astronomical.
The total could go as high as $800 billion. A significant portion of
that would be born by the Government lenders. My guess for the taxpayer
tab is $500 billion. I do not see any realistic alternative however. If
we let the problem fester it will cause us to lose a decade of growth.
Better we deal with it now.
A muse of all of this is that the money to accomplish a half trillion
dollars of debt relief has already been made available to the D.C.
mortgage lenders. Mr. Geithner saw to that on Christmas Eve when he did
the ‘Sneaky Pete’ announcement of a virtual blank check for the
Agencies. For me, that was a much more serious offense than the
disclosure issues with AIG. That was then, this is now. I thought that
this, by itself, would have proved to be a significant enough gaff to
take him down. As it turns out, that straw on the camels back may well
prove to be the critical step that insures that the next Treasury
Secretary will have the ‘Bazooka’ that is necessary to address the
problem. Funny how things work. It almost looks like it was planned.
Notes:
-I do think that Sheila Bair would make an excellent T.
Secretary. She has the skills and experience. She also has a vision
that we desperately need. She is no lightweight. She will fight very
hard and she has a lot of ‘chips’ in her pocket. The fact that she is a
woman is helpful. In my opinion it is high time that a woman took this
job. Lets face it. The ‘Guys’ have screwed this up for decades.
-If all this happens and Tim G. ends up at PIMCO or with Wilbur Ross
structuring investments in “Distressed Debt” as Neel Kashkari and James
Lockhart have, I am just going to puke.
»
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Disagree with this. She already has the visibility and respect that is required, More than TG ever had.
Sheila's going to be part of a RICO sweep as soon as the investigations get going. Right after the 2010 elections.
I'm curious whether anyone has seen any $FRN with Tim Geithner's name on it. I haven't
Think he is afraid of all those "Tax Cheat" stamps? Maybe Treasury knows he is on his way out so why bother.
I just pulled 15 crisp 20's from ATM...no Geitner on 'em.
that's an excellent point actually...i haven't.
i keep seeing the old rubin & summers bills circulated tho.
and i got some crisp ones out the ATM this week, circa 2008.
that would be delicious irony wouldn't it, cuz u know timmy's had a couple wet dreams about seeing his name on a benny.
Bruce
Not an American so going to be cautious with my opinion, but I have to say I think your imaginary speech sounds very close to what I'm expecting to hear. Except I doubt Obama will dare to mention the word 'mortgages' in his speech lauding Sheila Bair (or anyone else he appoints).
Overseas media will applaud this if it happens. I won't. When I think of the huge zombie banks that Bair allows to continue to leech off the US economy, and when I think of the FDIC losing so much money on the banks they have taken over that they're broke now too - I'm sorry but from here she just looks incompetent. Better than a criminal like Geithner, though. The day he was appointed was the day I started to lose faith in the Obama administration.
Just one foreign perspective, FWIW, and recognising that it's easy to be an armchair critic when it's not one's own country.
Latest AIG Revelations: One More Reason Why Geithner's Got to Go
For five reasons, Geithner must go:
* Geithner was directly responsible for the most appalling corporate bailout in U.S. history, in which tens of billions of taxpayer dollars were secretly funneled to some of the richest corporations in the world. The terms of this bailout, and the associated cloak of secrecy under which it was conducted (the details of which continue to leak out) have undermined the public's confidence in the government at a time when the country needs it most.
* Geithner's ongoing decision to save banks at any cost was predicated on the theory that this would keep the banks lending. This policy has failed: The banks have not continued to lend. What the banks HAVE done is coin billions of dollars of profits risk-free at taxpayer expense, fueling even more public outrage.
* Geithner's policy of "too big to fail" has created a banking system whose bets are guaranteed by the US taxpayer, and it has distorted lending and market forces across the entire economy. This policy, which has now been all but written into the Constitution, is grossly unfair. Big banks can do whatever they want with no concern about the consequences; small banks have to hunker down or they'll get taken over and shut down.
* Geithner's role in the AIG bailout, which the current administration bears no responsibility for, continues to destroy confidence in his current boss, President Barack Obama. If AIG stays in the headlines, and Geithner does not accept responsibility for what happened. Obama's agenda and influence will continue to suffer.
* Geithner's consistent decision to put Wall Street first has helped fuel a populist rage that will make it very difficult for the government to do anything more to help the financial system. If the recovery continues, such help might never become necessary. If it falters, however, Geithner's policies will have severely curtailed the government's ability to do anything about it.
http://tinyurl.com/y8q8ur2
+1,000,000.00
Bruce -- I want what you're smoking. And if you're right, I'll buy you a pound of reefer.
Let me clarify that-- legalized reefer.
I have been steadily clearing 10 bucks a day as a blogger, so that deal sounds swell to me. If I am right, this happens before the end of the month. It depends very much on how much 'heat' Geithner takes on the weekend talk shows.
What a system....
0x144fg NSA_trigger_schedule_C {
; I'll buy you a pound of reefer;
; http://www.zerohedge.com/comment/reply/52985/187533
; Action: logged 52985/187533
}
The FDIC is broke & broken. Ask around - see how asset managers like the way troubled assets are being handled. See what grade they give shiela & the FDIC. My buddies did appraisals for the FDIC through their contracted appraisal management firm, PGP, going back months into 2008.... They still have not been paid. That's right, they have not been paid on a SINGLE job.
Turbo tax Tim was in over his head from the start,he has been nothing but an ass kisser of JPM,DSBK,and GSCO. This guy "sat on his hands" while at the NY FED while the banks/brokers under his jurisdiction decided to become super charged hedge funds.I was,and am still suprised they let LEHM go under,since ole Dickie Fuld was on the board of the NYFED.I guess someone had to take the bullet,and now it's Timmy's turn.Dont worry though,he'll end up at JPM before year end,after all what are friends for ? Right Jamie
I am sure most of you remember this piece from last year
http://www.economicpolicyjournal.com/2009/03/australias-keating-geithner-is-gigantic.html
Why should those of us who were smart enough NOT to buy houses we couldn't afford be forced to eat the lenders' losses? If the government is going to mandate this, why shouldn't the equity (and, if necessary, debt) holders of the lenders be forced to eat this? This would accomplish the same thing, without enhancing the "moral hazard" issue. Your way (having the taxpayers eat the losses) would just crowd out private spending, anyway. Besides, the taxpayers would already be subsidizing this, via the lenders' tax loss write-downs.
yes yes a thousand times yes. the stock and bondholders and the grossly incompetent executives of the financial sector should have been the very first to taste the market's discipline. that they (especially the last two) haven't is where obama lost even the pretense of his soul.
+1000
However, I would be willing to consider a reduction in mortgage principal if the Fed promised to kill ZIRP and stop manipulating interest rates. Pay me 3.0% on my tax-free money market and I'll agree to help subsidize the mortgage losses.
a quid pro quo is still manipulation.
Not a quid pro quo. Short-term interest rates set by the market (NOT the Fed) in arm's length transactions would not be zero, but closer to 2-3%. Hence, my money market / bank savings account would pay around 3.0% in an unmanipulated market.
I like this.
I was in favor of principal reduction a year ago. Nothing else can work, but the hit to bank balance sheets will trigger CDSs, and who knows about all the IRSs. This is why they haven't done it yet.
Regardless, the American people know how wrong this was: socialize losses, privatize profits (and bonuses). This is the real motto of the Fed and should be printed on every FRN.
But we have to blame somebody, and Geitner is it. That turbo tax thing didn't help. One has to be skeptical that this will change anything. But they do want to be reelected, so who knows, all we can do is hope.
Mr. Krasting -- excellent piece -- I enjoyed both the read itself and the logic you cite, as these are the barometers that influence D.C. decision making.
Another name I've heard for second choice as Treasury Secretary -- Byron Dorgen.
I have no opinion on these matters other than Geithner must be held accountable, and fired.
Cris Dodd too. That would result in a 5% drop in the dollar.....
Here's Hot Air's pick-up of the Chris Dodd rumor for Treasury Secretary as posited by Roll Call:
http://hotair.com/archives/2010/01/06/awesome-awesome-rumor-chris-dodd-for-treasury-secretary/
Dodd is a non-starter. And that isn't me saying so -- that's that staff not wanting to repeat rationalizations for nominating a mortgage whore when they still are grimacing from the tax cheat issue (Geithner was the first and the last -- all other tax dodgers were nixed).
I googed Dorgan and Treasury Secretary -- lo and behold, firedoglake was already on top of it: http://seminal.firedoglake.com/diary/22747
Now there's a frightening thought...
... "only" thing is that sheila has little, if any, actual experience and damn near no practical knowledge of the internal machinations of the market, let alone the idiosyncrasies of the position.
though she would make a great "tangiers casino president" (like baby Bush) while the "real" folk (think DeNiro from Casino or Hanky Panky Paulson from the farm at 85 Broad) run the "real" operation and do the actual work outside of photo-op press conferences.
women are 'all the rage' within bear markets. always have been, always will be. simply can't wait to hear the idiotic Meg Whitman for Repub. candidate. in 2012; tick tock.
if you really care for someone the very last thing you would want for them is to be running for public office, now.
like BO, no one has a snowball's chance in hell of out-running / -lasting /-maneuvering this bear and what lays immediately ahead.
2 words: poison chalice
In light of the instincts demonstrated by the last two Treasury Secretaries, I'm starting to think the salient feature of a lack of market experience is that it equates to a lack of favors owed and integrity compromised. Bair's smart, has good political instincts, is nobody's bitch (recall she wouldn't roll over in that meeting with Geithner, infuriating Timmy to the point that he resorted to public obscenity to try to shut her up. Didn't work.) and actually appears to take the public trust seriously. I hope she gets the job, though I agree with Renfield's succinct characterization of this plum. Anybody who'd want it at this point probably deserves to have their sanity questioned
I'm personally sick of the Sheila Bair love fest... and don't think she'd be any better than Timmay... She's a self avowed "Teddy Roosevelt republican" - the idea sends shivers down my spine.
the current national republican party would be magnitudes more dangerous to the democrats' hegemony if they evinced the (domestic) policies of teddy roosevelt. alternatively, the democrats' hegemony would be far more durable and encompassing if they did.
The WaMu incident alone will prevent her from being nominated, the calls for investigations on the FDIC's actions in that situation are picking up, my guess is she might end up indicted for it at some point.
What about Harry Markopolos? Too many vowels in his last name?
Sorry, missed your point.
The white-shoe WASPs are said to consider people with lots of vowels in their name(s) to be too "ethnic" for appointment to positions at the top.
I see. Well I'm not a WASP, nor do I think "Sheila Bair" has a lot of vowels in her last name... so again...
Nice letter except you forgot to blame Bush. You'll never get a job as an Obomba speech writer without blaming Bush or Cheney at least once per paragraph.
Good point. Bush and Cheney did completely suck, after all. The sole point of their 8 years of horseshit was to put the finishing touches on oligarchic rule. What, this all happened when Obama showed up? Spare me.
Principal debt relief in the form of 500-800 billion dollars doesn't sound so bad anymore after pumping $16.5 trillion in "stimulus" over the past two years.
As I said to many others back in 2008, we should've just bitten the bullet and gave everybody $25,000 for "stimulus" and left it at that. Debt problem solved, crisis averted. For a whole lot cheaper than what we've done so far.
If you think debt relief would stop at 800B, you are about $1T off.
See, we who post on ZH are problem solvers in a populist sense, but you have to think like one of the crooks at the top. Sure, they could have done this, and maybe it would have kicked off some serious price inflation, but "they" were never going to implement such a policy because recovery for mom and pop isn't the goal--the goal is to help themselves first by looting the US as much as possible; extract wealth in every possible manner and especially sock it to savers and those who live off of past success. And that is what makes their ongoing looting policy so damn dangerous--it is very much designed to gut any remaining pockets of wealth outside of the inner "protected class" sphere.
And don't underestimate one other factor here--the banks are all zombies because of the unregulated CDS market and by rights, every one of those banks and investment firms, including Goldman is deep underwater right now and if we had a government that was not captured by them, they would all have to be liquidated. Thus, the immediate tendency to try and rescue themselves from the black hole of insolvency.
Bank of the Living Dead
Street of the Living Dead
City of the Living Dead
Code of the Living Dead
Stripper Spokesmodels of the Living Dead
Knights of the Living Dead
Lord of the Living Dead
Planet of the Living Dead
Wife of the Living Dead
Children of the Living Dead
Stepmother of the Living Dead
I choose:
Night of the Living Dead
The hero is appropriately named "Ben."
Newscaster (Not CNBC):
"All persons (read: Banksters...) who die during this crisis from whatever cause will come back to life to seek human victims..."
Ben:
"I ought to drag you out there and FEED you to those things!"
Was Ben talking to Timmay played by Barbara the shell shocked blonde bimbo terrorized by the original zombie bank? Even though Ben looks like Obama and Mr. Cooper looks like Bernank-ster...
Best way to fix a zombie bank:
Sheriff McClelland:
"Well, there's no problem. If you have a gun, shoot 'em in the head. That's a sure way to kill 'em. If you don't, get yourself a club or a torch. Beat 'em or burn 'em. They go up pretty easy."
"Good shot! OK, he's dead; let's go get 'im. That's another one for the fire"
+1. An anony on target.
Turbo Tax Tim was doomed from the start,well over his head--He has been a kiss ass for JPM,DSBK and GSCO for years.He "sat on his hands" while the banks under his jurisdiction decided to be super charged hedge funds,and did nothing.I was,and am still shocked he didnt try to bail out LEHM,since ole Dickie Fuld was on the board of the NY FED--oh well guess someone had to take the bullet,now it;s Timmy's turn--dont worry,he'll end up at JPM by year's end--After all,what are friends for,right Jamie
Nothing surprises me anymore in this "comic-book" version of America...
Great post. Shiela will/would be great. But when are you all going to drop this sexism. She is a competent person. Why bring sex into this at all????? Are you a dyke?
the right thing to do is to liquidate fannie and freddie and make the equity holder and creditors take the full fall...tax payers do not deserve a dime's worth of loss...the end result will be massive defaults all over the place....
and to the point that people were saving the almighty system from collapse i can only respond with bullshit....the faux collapse was contrived.....life would have continued...the only war being waged at the time was against the american people to transfer trillions of dollars to the already filthy rich plutocrats....
True fact. The only crisis was the threat of loss of billions by the few, who therefore declared an emergency, demanded of their duly purchased political representatives their bailout, and stuck the undeserving masses, those beholden to these great leader elites for their daily bread, with the tab. If they had collapsed, life would have gone on, and a whole lot better, for the rest of us.
Ned - There is more than one middle class that is evaporating away into nothing. I believe that this is why so many normally divergent points are meeting making some strange alliances possible.
great points ned and miles!
miles...very strange bedfellows indeed on some of these matters, particularly as to the wall street, banking mess.