Tim Geithner

Based on media reports over the past few weeks, there are two clear front-runners in the competition to be named Ben Bernanke’s successor as Fed chairman. Current Vice Chair Janet Yellen sits in one corner, former Treasury Secretary and National Economic Council (NEC) Director Larry Summers in the other corner, and pundits are actively placing their bets. Yellen is "soft-spoken, even-tempered, 100% mainstream academic economist who boils the world down to simplistic concepts," so similarities between Bernanke and Yellen are far stronger than the differences. A hand off from one to the other would be about as eventful as a rainy day in Seattle. Compared to Yellen, Summers has a longer history as a heavyweight policymaker but as Charles Ferguson wrote, “rarely has one individual embodied so much of what is wrong with economics, with academe, and indeed with the American economy." And that’s what it seems to be coming down to: a choice between a yawn and a hiss. Why not appoint someone with a track record of getting things right, you ask? Well, that would require a culture of accountability in the White House. Does anyone remember when we last had that?

Federal Reserve Chairman Bernanke's term expires January 31, 2014. While his continuation as Fed chair cannot be ruled out, he has given no public indications that he plans to seek another term and most market participants - as well as many members of Congress in last week's Humphrey-Hawkins hearings - seem to believe he will retire from public service early next year. As Goldman notes, the announcement of the next Chair of the Federal Reserve seems most likely to come in October, though nominations for Fed Chair have been announced as early as five months before the current term expires and as late as less than a month before expiration. There does not appear to be much risk to the Senate's ultimate confirmation of whomever the President chooses, though the Fed nominations have become more politically controversial over the last few years, which is likely to lengthen the confirmation process. Following previous confirmations, financial market volatility has typically increased slightly, though whether this occurs following the upcoming transition will of course depend on who is nominated.

Overnight newsflow (which nowadays has zero impact on markets which only care what Ben Bernanke had for dinner) started in Japan where factory orders were reported to have risen the most since December 2011, retail sales climbed, the unemployment rate rose modestly, consumer prices stayed flat compared to a year ago, however real spending plunged -1.6% significantly below the market consensus forecast for +1.3% yoy, marking the first yoy decline in five months. This suggests that households are cutting utility costs more so than the level of increase in prices. By contrast, real spending on clothing and footwear grew sharply by 6.9% yoy (+0.6% in April) marking positive growth for a fourth consecutive month. Simply said, the Japanese reflation continues to be limited by the lack of wage growth even as utility and energy prices are exploding and limiting the potential for core inflation across the board.

There is no greater crime in Washington today than speaking truth about the US economy in public.  This is why Ben Bernanke is not being reappointed for another term as Fed Chairman.

"Don't be afraid of the tapir. It's not scary"

The first time we wrote about the Volcker-led Group of 30 recommendation to crush Money Markets in January 2010 by effectively imposing capital controls and fund "gates", whose purpose was simply to scare investors out of the $2.6 trillion liquidity pool and force said capital to reallocate into a much more "reflation friendly" asset classes such as stocks, many were concerned but few took it seriously. After all, such a coercive push into a "free" market at the time seemed incomprehensible (if, in reality, turned out to be just a few years ahead of its time). Fast forward two years to July 2012 when the same proposal of "risk-mitigation" by allocating a portion of the balance to a "loss-absorption fund", which would "create a disincentive to redeem if the fund is likely to have losses" was not only re-espoused by Tim Geithner, and the NY Fed but the SEC put it to a vote and the proposal would have almost passed had it no been for a nay vote by Commissioner Luis Aguilar opposing Mary Schapiro in the last minute. Still, once more many largely unconcerned about the implications behind this urgent push to intervene and establish pseudo-capital controls in this major source of potential stock buying "dry powder." Today, with a brand new leader, Mary Jo White, now that the clueless and co-opted Mary Schapiro is long gone, the $2.6 trillion Money Market Fund industry is one step closer to finally being gated. But don't it call it that - the SEC prefers the term "protecting investors"

How Another Housing Bubble Was Blown … And Why

The last time Hilsenrath was relevant was two weeks ago (in a flashback to those days before QEternity when infinite QE was not assured and Jon's input was actually relevant), when following an article of his, and due to his "proximity" with the New York Fed, many assumed that the Tapering suggested by Hilsenrath was being telegraphed by Bernanke to the market. Turns out it was nothing but yet another baffle with bullshit headfake by a central planning regime that is now merely engaged in observing market responses to indirect stimuli: if reduce monthly flow by $20 billion then X (-1%); if cut QE off entirely then Y (-50%?), and so on. Moments ago the same Hilsenrath just released another piece, which effectively refuted everything his previous piece suggested, and in fact made his position as Fed mouthpiece absolutely irrelevant, courtesy of the following disclosure: "this time, when the Fed shuts off bond buying, it won't be... predictable." He goes so far as to say that the term "tapering" is no longer even applicable! Funny that, considering on May 11, none other than Hilsenrath said: "Federal Reserve officials have mapped out a strategy for winding down an unprecedented $85 billion-a-month bond-buying program meant to spur the economy."

The IRS conservative targeting scandal is going from bad to worse. Following the Friday revelations that despite all prior appeals to the contrary, the IRS did in fact apply political bias and prejudice in targeting conservative groups who had applied for exempt status (and who knows what other prejudice when targeting non-liberals entities - perhaps it is time to do an analysis of what the ratio of conservatives to liberals audited each year is?), culminating with the farcical response by an IRS official during the Friday press meeting, this may be just the beginning of a major political scandal which in additon to tangential fallout crushing the alleged "impartiality" of the Obama administration, additionally validates many of the heretofore right-wing "conspiracy theories." And as Zero Hedge has shown time and again, it is not a conspiracy theory if it is a conspiracy fact.

We recently asked:"are there really unpredictable market shocks or are investors paid not to care? To us, all signs point towards the next currency reset. We think monetary authorities are compulsively destroying the current global monetary system; they simply have no choice if they are to keep it afloat in the short term." With Bernanke not attending Jackson Hole, we think the choice for next Fed Chair may have profound economic implications, and that it would not require expertise in econometric modeling, credit policy management, and maintaining the public perception of economic stability. We think the next Fed Chairman will oversee a conversion of the global monetary regime. Neither growth nor austerity nor gloom of night will stay these currencies from their appointed devaluations. Bank balance sheets must be preserved; ergo sufficient inflation must be manufactured. We think the dull but persistent economic malaise amid increasingly aggressive monetary intervention policies will soon engender fear among the not-so-great washed – net savers. We think all should question whether we are 100% wrong. If not, then prudence dictates some allocation to properly held precious metals. (Presently, it is less than 1% of all global pensions.)

The man who is the chief advisor to the US Treasury on its debt funding and issuance strategy was just promoted to the rank of second most important person at the biggest commercial bank in the US by assets (of which it was $2.5 trillion), and second biggest commercial bank in the world. And soon, Jamie willing, Matt is set for his final promotion, whereby he will run two very different enterprises: JPMorgan Chase and, by indirect implication, United States, Inc.

And that, ladies and gentlemen, is how you take over the world.

Ever since Moody's head economist Mark Zandi, together with Princeton's Alan Blinder, authored a paper in July 2010 titled "How We Ended The Great Recession" (which incidentally is wrong on two key counts: i) it is a great depression not recession, and ii) it has not ended) it became clear that the Keynesian sycophant would not rest until he somehow found a way to penetrate deep inside one or more of the darkest administrative orifices of the Obama regime. Surely, Zandi must have been heartbroken when it was not him but Jack Lew picked to replace Tim Geithner - a post the Keynesian had a desperate craving for. Yet his recent appointment to head up the ADP "payroll" joint venture, which was nothing more than a test of his propaganda skills, should have given us advance notice something was cooking. Further notice should have emerged when the US Department of Injustice launched its rating agency witch-hunt campaign only against S&P, not Moody's, where the abovementioned Zandi still officially works. Last night all of this finally fell into place, when the WSJ reported that Zandi has emerged as the leading candidate to head the FHFA - the regulator in charge of the two zombiest of zombie US institutions: the still insolvent Fannie and Freddie, in the process kicking out current FHFA head Ed DeMarco who recently emerged as Obama's persona non grata number 1 for his stern refusal to espouse socialist practices and wholesale debt forgiveness and principal reduction.

We will release the full list of named recipients once we get it, but here is what we now for now, via BBG and CNN:

• EMPLOYEES AT GOLDMAN SACHS, BARCLAYS, JP MORGAN, CITI, NOMURA, UBS, HSBC RECEIVED FED MINUTES EARLY YESTERDAY
• MOST OF THE BANK EMPLOYEES APPEAR TO WORK IN GOVERNMENTAL RELATIONS (Lobbies)
• ABA, SIFMA, SENATE STAFFERS RECEIVED FED MINUTES EARLY
• FED NAMES 154 RECIPIENTS OF EARLY RELEASE OF FOMC MINUTES
• FED MINUTES SENT EARLY TO BANKS, LAW FIRMS, PRIVATE EQUITY
• FED EARLIER SAID RELEASE WENT MAINLY TO CONGRESS, TRADE GROUPS
• NONE OF THE PEOPLE ON THE LIST ALERTED THE FED THAT THEY RECEIVED NONPUBLIC INFO A DAY EARLY

In other words: absolutely everyone who trades risk assets for a living.

The long-awaited tell-all is coming soon to an ebook near you soon - well in 2014. AP reports that none other than 'Turbo' Tim Geithner has an agreement with Crown Publishers (Random House) to publish his 'behind-the-scenes' account of the financial crisis. From his tenure at the NYFRB to his stint under Obama's wing, we can't wait for all the gossip - ...and then I said, "yes sir, whatever you want sir..." As Crown adds in its PR, "Secretary Geithner will chronicle how decisions were made during the most harrowing moments of the crisis, when policy makers faced a fog of uncertainty, risked catastrophic outcomes, and had no institutional memory or recent precedent to guide them." Should be a thriller... as he answers the all-important question of why (or not) but rest comfortably as he intends to "provide a 'playbook' that future policy makers can draw on." Given the success of Obama's odyssey, we humbly suggest Tim title the as-yet-untitled book, 'The Oddacity Of Hype'.

When it comes to generating near-apocalyptic financial crises, there are few men quite as qualified as the former NY Fed and US Treasury head Tim Geithner. Which is why it is not at all unexpected that while he is drafting his tell all memoirs, which may or may not include details on why he leaked confidential market moving Fed information to Wall Street's banks, the TurboTax expert is set to take the university circuit by storm and teach young and impressionable minds about how not to do anything he did. As WSJ reports, "Former Treasury Secretary Timothy Geithner plans to hit the university circuit in the coming months, conducting a series of seminars on financial crises. Mr. Geithner, who left the Obama administration last month after four eventful years at Treasury, should have unique insights on such crises. He was president of the Federal Reserve Bank of New York and then Treasury secretary during the 2008-2009 financial meltdown. Mr. Geithner has committed to seminars at Harvard University, the Massachusetts Institute of Technology, Northwestern University, Princeton University and the University of Michigan." Surely, the future central planners of the world are already shaking with anticipation.