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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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Bruce, skills and experience have nothing to do with meeting the goals of the oligarchy. She will bend like a willow. But, in the long run, she will have her name printed on about a trillion dollars worth of FRNs.
STOP THE SPENDING---
STOP THE LOOTING OF AMERICA---
STARVE THE BANKING BEAST!
The government needs to do one thing. STOP interfering in the correction of Real Estate prices, and let the damn chips fall where they MAY!!
We don't care if banks fail, we don't care anymore WHAT the cost is for firms that made BAD BETS.
A recession has a purpose---To cleanse out the bad debt so we can begin healing. Our children should NOT HAVE TO PAY for this unmitigated corruption!
Imagine how much money people would have to spend if housing were actually AFFORDABLE??
Timmy....
Is GOING TO CASH IN EARLY ON....
Why wait around like a Greenspan...to make $....????
Fiscal restraint is what is needed, and that is outside of the power of any Sec. of Treasury.
Everything else is fluff.
perhaps legally, fiscal being the specifically enumerated power of congress, but not practically as the recent underwriting of essentially all losses that move fannie and freddie into negative net worth originated in the executive, broadly defined to include the constitutional netherworld of the fed.
Timmy did his job while heading up the New York Fed, making sure Goldman Sachs got paid the full dollar on those AIG counterparty trades. Even if he resigns, a nice cushy job is waiting for him, making a hell of lot more money on Wall Street. That's American casino capitalism at its best!
Why didja left out the thank-you's for learnin' ever-buddy 'bout them Cayman a-counts?