Yesterday, Geithner sat down with the WSJ to categorically set the record straight over rising unwashed populist concerns regarding skyrocketing Wall Street compensation and profits.
Some notable excerpts:
"I don't think the financial system is reverting to past practice, and we won't let that happen," Mr. Geithner said. "The big banks are running with much less leverage now, much more conservative liquidity cushions, there's been a significant shrinking of their balance sheets, getting rid of bad assets and cleaning up. And the weakest parts of the system don't exist anymore."
Translation: we have wasted trillions of taxpayer dollars in propping up the balance sheets of zombie banks. We have also printed lots of fresh money to give the big banks a safety cushion for when their next malinvestment (i.e., CRE) black holes come to light. We are paying banks lots of money to not lend money to the bankrupt American home owner or over-leveraged corporations.
Ergo, the financial system has stabilized.
Oh and don't worry about future inflation, we will soak up all the excess money and lending capacity by paying banks even more money not to lend money.
"Some banks, including those that received government bailout money, are earning record profits, increasing pay and ramping up risk. Goldman Sachs Group Inc., for instance, recently recorded its most profitable quarter ever and boosted its degree of risk-taking as measured by how much money it could lose in a single day."
Translation: My buddies have been successful in selling the 'reinflation trade' to the stock market and have wildly profited off trading the volatile swings that have been produced by my other buddies at the Fed.
Mr. Geithner said a functioning and profitable financial system was a "necessary precondition to a stronger economy."
Translation: Although placing a long bet on Financials and a short bet on general equities would have yielded an annualized 16% return between 1986 and 2006, I am positive that a widly profitable financial system remains a precondition of a strong economy. Surely, subsidizing the hell out of an already dominating financial industry will result in future gains for a rapidly deteriorating "main street," right? Come to think of it, we should all become bankers and just lend money to each other. Imagine how many green shoots that would fertilize.
"Mr. Geithner said the financial-services sector needs better oversight and tougher rules if the U.S. is to avoid a repeat of the financial crisis. He said the administration's proposed regulatory revamp would offer better protection with the Federal Reserve overseeing the country's largest financial firms, a new regulator for mortgages and credit cards, and tougher oversight of credit derivatives and hedge funds, among other things."
Translation: Once Obama and I manage to implement most of the health care, auto industry, alternative energy and housing takeovers debacles chicanery highway robbery action plans, we will try to push our now-floundering and probably ineffective Wall Street regulation legislation through a jaded congress.