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Geithner thinks government and economy are so much better now??????

19 November, 2009

When I read this post at Big Government this morning, it caught me by surprise. I was initially stunned. Timothy Geithner claims that our economy is so much better than it was when Obama became president. “What planet does this man live on?”, I thought. But then, I realized that his statement should come as no surprise to those of us who have watched him in action since Obama was elected.

Remember last March when Geithner claimed not to know that bonuses where being handed out by recipients of the “Stimulus Gifts.” What? How could he not have known? He was Treasury Secretary. He was on the transition team. He was at the NY Federal Reserve Bank. Chris Dodd even said it was the president and the treasury department who told him not to interfere with the bonuses when he introduced his tax on bonus bill. I said at the time that Geithner was part of the “big ‘thank you’ gift to AIG and others.”here

Then we have learned that Goldman Sachs was one of the “others” and that they had heavily invested in AIG derivatives. AIG was “too big to fail” because other banks had risked too much in their swap schemes. Henry Paulson, an alumnus of Goldman Sachs, and Timothy Geithner set about shaping the “bailout” that “saved” AIG by insisting first that they pay 100% of the value of their swaps when they were trying to offer less. It was a special bonus for Goldman Sachs that their chief rival Lehman Bros. had already been liquidated.

We have also learned that Geithner has a close relationship with GS CEO Blankenstein here as well as with the president’s favorite banker, Jamie Dimon of JP Morgan Chase. Morgan Chase is also one of “the three mega-banks” with whom Geithner had the most conversations according to the story cited above. Not really a surprise, though.

Mr. Dimon and Mr. Geithner know each other well from the Federal Reserve Bank of New York, where Mr. Geithner was president and, as such, a JPMorgan regulator. Mr. Dimon sits on the New York Fed’s board. The two men spent untold hours negotiating in 2008 when the government enlisted JPMorgan to buy some of Bear Stearns’s assets and Washington Mutual to prevent their collapse. Mr. Dimon said the two had spoken by phone perhaps 10 times this year. here

Take a look at how those deals went down.

The company was in a good position to move quickly when Bear Stearns came face to face with bankruptcy in March 2008. Known as a tough negotiator, Mr. Dimon struck a bargain that had Wall Street gasping when it was announced on March 16, buying Bear Stearns for a mere $2 a share — a tenth of its closing price — together with a Federal Reserve loan for $30 billion secured by Bear Stearns’s shaky portfolio.

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Federal regulators called a familiar number: James Dimon’s. The head of the Federal Deposit Insurance Corporation told him the F.D.I.C. was about to seize WaMu — and then sell it to JPMorgan. JPMorgan paid $1.9 billion to the F.D.I.C. to acquire all of WaMu’s assets, branches and deposits. here

Wow. Lucky for Dimon that the FDIC had his phone number.

The third bank on Geithner’s most-frequently called list was Citi. Here is what Wikipedia has to say about it.

Over the past several decades, the United States government has engineered at least four different rescues of the institution now known as Citigroup.[17] During the most recent tax-payer funded rescue, by November 2008, Citigroup was insolvent, despite its receipt of $25 billion in federal TARP bailout money, and on November 17, 2008 Citigroup announced plans for about 52,000 new job cuts, on top of 23,000 cuts already made during 2008 in a huge job cull resulting from four quarters of consecutive losses and reports that it was unlikely to be in profit again before 2010. Many senior executives were fired[18] but Wall Street responded by dropping its stock market value to $6 billion, down from $300 billion two years prior.[19] As a result, Citigroup and Federal regulators negotiated a plan to stabilize the company and forestall a further deterioration in the company’s value. The arrangement calls for the government to back about $306 billion in loans and securities and directly invest about $20 billion in the company. The assets remain on Citigroup’s balance sheet; the technical term for this arrangement is ring fencing. In a New York Times op-ed, Michael Lewis And David Einhorn described the $306 billion guarantee as “an undisguised gift” without any real crisis motivating it.[20] The plan was approved late in the evening on November 23, 2008.[4] A joint statement by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp announced: “With these transactions, the U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy.”  here

Good thing the government has so much money to lend to the banks.

Let’s face it, Geithner looks after his friends and unfortunately, despite his assertions and sarcasm, his best friends are not outside the sphere of politics and banking.  He may say he cares about the working men and women of this country, but I don’t believe him.

The taxpayers are already over-burdened in this country and our economy is in a big mess; Geithner’s way is not going to help us out of it, however. But calls for Geithner to resign don’t really accomplish much, do they?  What about Paulson?  What about all the senators and representatives who curry favor with the financial institutions and profit financially by it?

What we really need is to separate the ties that bind government and finance, allowing the rich and wanna-be-richer to use taxpayer money to meddle in the economy and burden us with unsustainable debt.  I don’t mean that bankers and rich folk should be able to do what they want; I mean that the government should not be their partners ever in any way.

Alexander Hamilton was wrong; we don’t need a Federal Bank.

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