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from Rolfe Winkler:

Geithner’s faulty apologia

Tim Geithner's appearance in front of Congress today was another embarrassment, perhaps more for the people's representatives than the Treasury Secretary. Still, Geithner offered a clumsy defense for paying out 100¢ on the dollar to AIG's counterparties, which included more than Goldman Sachs.

What they lacked in knowledge and nuance, Congress made up for in volume and OUTRAGE. The worst moment I saw was the utterly bogus comparison by Rep. Stephen Lynch between AIG's payout to Goldman (100¢ on the dollar!) and the bailout offer for Bear Stearns shareholders (only $2 per share). 100 is a bigger number than 2, you see.

Geithner was lucky to be doing battle with such an unprepared, unimpressive group.

His defense, such as it was, amounted to the following:

Had the Fed imposed haircuts on AIG counterparties, it would have led to AIG's credit rating being downgraded and the company (and consequently the economy) would have collapsed.

from Rolfe Winkler:

The Ascent of Volcker

So, wow, the Obama administration has reacted very quickly -- perhaps too quickly -- post the Massachusetts Senate election. After proposing a tax on bank liabilities, Obama is taking an even tougher line, adopting recommendations from Paul Volcker that banks be limited in their size and scope.

Before getting to specifics, it's worth noting how Geithner and Summers appear to have lost favor. In the preamble to the proposal, Obama mentions neither of them. And when he announced the plan he did so with Volcker and Bill Donaldson standing behind him...Geithner and Summers were off to the side. Could the duo be headed for the exit?

from Rolfe Winkler:

Morning Links 1-7

Tim Geithner covered up AIG's payments to counterparties (DealBook) Timmy G. knew it looked bad for AIG to pay out 100¢ on the dollar to counterparties like Goldman. So he told AIG to shut up.

Obama buget will raise "carried interest" tax (Comstock, Business Insider) Awesome proposal from the Prez. Recall that hedge-funders and PE guys can treat their partnership income as capital gains. As a result they're only taxed at 15% instead of normal income tax rates of 35%. Last time this came up, Chuck Schumer killed it. This time it's likely to happen.

Calling Geithner

Good work by the AP in getting a copy of Treasury Secretary’s Tim Geithner’s phone log, which shows that he was quite busy during the first-half of the year speaking to Wall Street bankers. These stories are fun reads and I recently did one based on FDIC Chairwoman Sheila Bair’s datebook.

To me, the most interesting thing to come out of the Geithner call list is the revelation that he spoke several times with both Citigroup Chairman Dick Parsons and Citi CEO Vikram Pandit. Now, given the dicey situation Citi is in, that’s not surprising. But compare this to Bair’s dealings with Citi–in which she all but kept Pandit at arms length this summer.

Geithner of Oz

Photo

Earlier today I wrote that Sheila Bair is one of the few financial regulators who gets it. And by getting it, I mean not sucking up to the banks and the big money interests on Wall Street. You know, the guys (and most of them are guys), who got us into this financial mess. Tim Geithner, on the other hand, is a regulator who just doesn’t get it.

It’s not that the Treasury secretary isn’t smart–he is. And it’s not that he’s not up to job–he is. It’s that Geithner is too much of a politician and his views have been molded by people who work on Wall Street.

from Rolfe Winkler:

Sheila Bair not cowed by Geithner tantrum, criticizes Obama

Last week Tim Geithner dropped multiple F-bombs in a meeting with regulators unenthusiastic about his plan to concentrate oversight of the financial system at the Fed.  Sheila Bair was one of his targets, but today she held her ground.  In testimony before the Senate Banking Committee this morning, she had this to say about concentrating regulatory power at the Fed:

...we do not see merit or wisdom in consolidating federal supervision of national and state banking charters into a single regulator for the simple reason that the ability to choose between federal and state regulatory regimes played no significant role in the current crisis.

Geithner: Look forward in anger

So Timothy Geithner went ballistic and started throwing around some obscenities during a meeting at the Treasury over the slow pace of financial regulatory reform.

Well, good for him. It’s about time someone in the Obama administration got a little red in the face over the financial crisis.

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