Tim Geithner

About a year after Tim Geithner literally top-ticked the economy with his first Op-Ed, "Welcome to the Recovery", which came days ahead of the QE 2 announcement, he has just released his Op-Ed #2 "A Rescue Worth Fueling" in the WaPo, in which he praises the administration for using billions in taxpayer capital to save a few hundred thousand union jobs. His bottom line: "The domestic automakers are getting stronger. For the first time since 2004, each has achieved positive quarterly net income." Perfect release timing: just as both GM and Ford announce a drop in monthly sales, and GM discloses record channel stuffing. If there is one call to fade and short all the US automakers, this is it.

In a glowering example of humanist magnanimity, the tax expert, who also on occasion pens missives describing in detail the destruction that would ensue should dealers be hindered from perpetuating the US Treasury ponzy, known as Tim Geithner, just advised China that its low exchange rate impairs China's ability to curb inflation. This, coming from the man under whose watch the dollar has gotten pounded eight ways to Sunday. The announcement came as part of the semi-annual report issued to congress, which was due originally back in April, yet which as everyone knew was delayed for no other reason that more theatrics. And just to confirm how utterly toothless US game theory bluffs have become, Geithner, contrary to much bristling rhetoric to the contrary, decided not to name China a currency manipulator, a move that is sure to require the CME to promptly issued five margin hikes of Chuck Schumer's blood pressure. But lest someone accuse Tiny Tim of being not only a tax fraud, and a liar, but also a coward, he did add that the Yuan is "substantially undervalued." And so the USDCNY revaluation debate has been pushed back for at least one more year. And to those who experience a feeling of deja vu upon reading this, worry not: Geithner had exactly the same conclusion 3 months ago. Bottom line: China 2; US 0.

Not even 24 hours after Stanley Druckenmiller said to ignore all threats by the kleptocratic kartel [sic] of a world collapse should the debt ceiling not be hiked, as if on cue the tax-troubled treasury secretary has released another letter, this time to Michael Bennet, D-Colo, in which he rehashes all the usual threats that Hank Paulson pulled out of his sleeve when he presented his 3 page term sheet demanding congress give him unlimited powers to do anything Goldman, er, he saw fit to preserve the banker status quo. Nothing new in the letter, just more of the same: “A default would inflict catastrophic far-reaching damage on our nation’s economy, significantly reducing growth and increasing unemployment...Even a short-term default could cause irrevocable damage to the economy. A default on Treasury debt could lead to concerns about the solvency of the investment and financial institutions that hold Treasury securities in their portfolios, which could cause a run on money market mutual funds and the broader financial system. A default would call into question the status of Treasury securities as a cornerstone of the financial system, potentially squandering this unique role and the economic benefits that come with it." It is sad that the Treasury has succumbed to another bout of fearmongering because as Zero Hedge has been claiming since late 2009, and as Gross and Druckenmiller have recently reaffirmed, the only threat to the "confidence" of the US is if (or more correctly "when") the legislative bodies of the US succumb to this latest round of completely flawed, irresponsible and wrong mutual assured destruction rhetoric, and once again hike the debt target, this time to a total that is about 115% of US GDP.

Jonathan Weil hits another one out of the ballpark.: "Geithner says the chance of a downgrade is zero. S&P says the odds it will cut its rating might be greater than one out of three. So who are you going to believe? Geithner? Or the people at S&P who actually will be deciding what S&P will do about S&P’s own rating of U.S. sovereign debt? It would be one thing to express the view that a downgrade would be unwarranted, or that the chance of it happening is remote. Either of these positions would be defensible. Geithner went beyond that and staked out an absolutist stance that reeks of raw arrogance: There is no risk a rating cut will occur. He left no room for a trace of a possibility, ever."

The flashing fuchsia elephant at the core of our economic, and thus budget problems – remains the response to the financial homicide imparted by the big-banks and abetted by the Federal Reserve and the Treasury Department. There was a choice to be made in Washington in the fall of 2008 - smack Wall Street into place, do a good-ole free-market – you fail if you deserve to fail, we’ll protect consumer assets and that’s it maneuver - and deal with possibly intense, but definable fall-out for a short period. Or - lavish bailout upon guarantee upon subsidy upon asset purchase upon the lowest rates in our nation’s history on Wall Street, and wring the very possibility of a recovery out of the general economy from the get-go. Of course, the brilliant minds of our exceedingly-privileged, out-of-touch, economic leadership decided on the former, and are acting their asses off to pretend that that decision, in itself, wasn’t the cause of the economic problems that followed, from Main Street anemia, to commodity inflation to international disdain and a weak currency that has no right to even have the purchasing capacity it still does. And, yet Tim Geithner had the audacity of job-security to take his debt ceiling ‘plea’, on the Sunday Morning talk show circuit – really, we will be in crisis and other countries will think poorly of our ability to pay our debts if we don’t raise the ceiling and increase our debt. In truth, it is Tim Geithner’s ego on the line, while his boss, through staggering absence of mention, is fine with assuaging it. Federal Reserve Chairman, Ben Bernanke remained silent about the topic, not least because between the Fed and the Treasury department, more debt has been racked up and issued in the past two years than ever before. Of course, the debt cap will get raised, just as it got raised under Treasury Secretaries Paul O’Neil, John Snow and Hank Paulson.

Anyone remember the scaremongering tactics used by the kleptocracy when TARP was passed and when the Fed tried to hide its discount window borrowings (oh yes, the market really plunged on Thursday)? If not, here is a reminder, courtesy of a letter just released by the boy who not only cried wolf on so many different occasions, but continues to do so today: "The longer Congress fails to act, the more we risk that investors here and around the world will lose confidence in our ability to meet our commitments and our obligations. If Congress does not act by May 16, I will take all measures available to me to give Congress additional time to act and to protect the creditworthiness of the country....Defaulting on legal obligations of the United States would lead to sharply higher interest rates and borrowing costs, declining home values and reduced retirement savings for Americans. Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover....defaulting on legal obligations of the United States would lead to sharply higher interest rates and borrowing costs, declining home values and reduced retirement savings for Americans. Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover. Nor is it possible to avoid raising the debt limit by cutting spending or raising taxes. Because of the magnitude of past commitments by Congress, immediate cuts in spending or tax increases cannot make the necessary cash available. In order to avoid an increase in the debt limit, Congress would need to eliminate annual deficits immediately. " We are now, thusly, screwed.

Presented without comment

GEITHNER SAYS `LOTS OF UNFAIRNESS' IN U.S. TAX SYSTEM

Now that Tim Geithner has put the bond issuance machinery on autopilot, and all future bond auctions will be eventually monetized by Bernanke (and then some: after all a fiscally united Europe is expected to start bond issuance soon), he has decided to branch out into the next best thing to destroying the once greatest country in the world - blogging. And, sure enough, that titanic scion of the blogging world, Barry Ritholtz takes some time away from his busy schedule which lately involves a daily stint on CNBC's Fast Money, to share some brilliant insights with Tim Geithner on how to create a killer blog. We present this without commentary, because after one reads such words, and what can one say but... Ritholtz.

SigTarp Neil Barofsky has just released the most scathing critique of all the idiots in the administration, with a particular soft spot for Tim Geithner. If after all this disclosure Geithner does not resign, well, America truly will have the Treasury Secretary, not to mention administration, it deserves.

As America slowly digests the empirical evidence that both our judicial (SEC settlement) and legislative (FinReg farce) branches are now dead and buried (we all know how the executive branch is faring), the only thing left is humor. In continuing with our deep throat screen captures of executive level individuals (Ben Bernanke here previously), we present Tim Geithner's desktop next, courtesy of a Zero Hedge reader.

Are these people insane? Have they all really bought Tim Geithner's Kool Aid that somehow because they conduct doctored stress tests, which incidentally find that insolvent banks like STD are at the top of the healthy list, that all will be well? Do they rally think that investors are idiots and can not see behind this farce, let alone put together a 5 minute excel model and discover that all Spanish banks are now in runoff mode? So much propaganda, so little answers.

BN   8:43 *ZAPATERO SAYS STRESS TESTS WILL SHOW RUMORS UNTRUE
BN   8:43 *ZAPATERO SAYS SPAIN WILL PUBLISH STRESS TESTS FOR ALL LENDERS
BN   8:43 *ZAPATERO SAYS THERE IS NOTHING BETTER THAN TRANSPARENCY TO RESOLVE RUMOURS
BN   8:48 *MERKEL REJECTS GERMAN BANKS' CRITICISM ON STRESS TESTS
BN   8:50 *TRICHET SAYS `HAPPY' WITH CONSENSUS ON BANK STRESS TESTS

One of the events that received absolutely no mention last week was the sneakily announced Treasury annual report on public debt this past Friday, alongside the horrendous NFP report. Luckily, courtesy of Congressman Dave Kamp, we have managed to obtain this report which shows the unprecedented level of delusion that exists at all levels of our administration. In a nutshell, the attached report pretends to forecast US debt and GDP levels. What it doesn't pretend to do, is to be the work product of a variety of pathological liars. Even as Geithner anticipates US total debt to hit $19.6 trillion by the end of 2015, somehow, in some parallel universe, he also anticipates US GDP will rise at a 5% CAGR for the next five years! Total US GDP, which was at $14.2 trillion for 2009, is expected to ramp up by 2.7% in 2010, and then really put on the afterburners in 2011 through 2015, averaging almost 6% each year, and hitting a stunning $19.2 trillion in 2015. The ridiculousness of this assumption is beyond comprehension. And even so, total debt/GDP will still be over 100% per the government's baseline assumptions. Alternatively, if one assumes, as PIMCO does, a GDP growth rate of 1.5% for the next 4-5 years courtesy of the 10% unemployment "new normal", total debt-GDP will hit 126% in 5 years. And this obviously excludes GSE, SSN and Medicare off balance sheet debt. Lastly, the Treasury assumes that even with 100% Debt to GDP, the funding cost on US market debt in 2015 will be only 4.7%, compared to the 1990-2009 average of 5.9%.

Alan Grayson storms back to the stage by asking just why is Tim Geithner, who has the biggest conflict of interest when it comes to Fed matters, even be allowed to have an opinion on Fed transparency issues. In today's ABC Top Line, Alan noted, “when Tim Geithner says that he doesn't want to see the Fed audited, what he's really saying is he doesn't want to see Tim Geithner audited,” Grayson said. “He was the head of the New York Fed for years and years. This audit would apply to him. And the actions he took -- which he can now take in secret and, when this bill passes, will no longer be secret -- we'll be able to see and understand the decisions that he made that among other things put huge amounts of bailout money into the hands of private interests.” Grayson added: “It's one of the biggest conflicts of interest I've ever seen.” Keep in mind that this is the same Fed that when it took over Bear via ML1 said it would have no losses on the collateral it assumed, only to see its Red Roof Inn holdings be foreclosed upon last week as Zero Hedge first discussed. How the Fed's opacity is still a topic of discussion simply does not compute. And that Obama is doing all he can to prevent the Fed transparency initiatives by Paul and Grayson from passing at this point certainly means that should the Fed's dirty laundry be made public that the administration would certainly collapse in a smoldering heap of 0% approval.

Whew. That was fast. It didn't take long for Wall Street to figure out how to game Obama's new mortgage modification program, did it? The plan was hyped as help for "struggling homeowners", but it turns out, it's just another stealth bailout for pudgy bank-execs. It's funny, the program hasn't even kicked in yet and, already, bigtime speculators are riffling through their filing cabinets looking any garbage paper they can find to dump on Uncle Sam.

At 10:00 AM Tim Geithner will take the podium to pretend he has some clue of how to reform the GSEs (which is funny, because he doesn't). Those who want to watch Geithner live and commercial free can do so here. As we posted yesterday, here is a copy of Tim Geithner's prepared remarks.