Financial Regulatory Forum

from MacroScope:

Spitzer: NY Fed “an absolute sinkhole”

To say former New York Governor Eliot Spitzer is no fan of the Federal Reserve Bank of New York would be an understatement.

After arguing financial regulatory reform proposals being discussed in Washington fall short, he said:

"One institution needs to be completely overhauled: The New York Fed," he said.

At a panel in New York,  Spitzer lambasted the  New York Fed as "an absolute sinkhole when it comes to what went on over the past ten years."

"There wasn't a single person there who knew what was going on because this was all one club," Spitzer said.  "Every member of that club wanted to protect what was going on," he said.

SCENARIOS – Reshaping Fannie Mae and Freddie Mac

WASHINGTON, March 22 (Reuters) – Treasury Secretary Timothy Geithner is expected to lay out the Obama administration’s broad vision for restructuring mortgage finance giants Fannie Mae and Freddie Mac on Tuesday in congressional testimony.

Geithner has said that any specific legislative proposals will not come until 2011 at the earliest. His testimony before the House Financial Services Committee on Tuesday is expected to be the first step in a long journey to make changes to the existing housing finance system.

The government seized Fannie and Freddie at the height of the financial crisis, in what at the time was said to be a temporary measure to ensure credit remained available for homebuyers.

US’ Geithner repeats call for financial reform bill

    WASHINGTON, Feb 24 (Reuters) – U.S. Treasury Secretary Timothy Geithner on Wednesday repeated his call for Congress to pass financial reform legislation that curbs risk-taking by big financial firms and ensures they can absorb their own losses. (more…)

US’ Geithner pushes for independent consumer agency

WASHINGTON, Feb 22 (Reuters) – The Obama administration is still fighting for a single, independent consumer financial protection agency, U.S. Treasury Secretary Timothy Geithner said on Monday as lawmakers haggled over a financial reform bill. (more…)

US’ Geithner says bank fee can recoup AIG bonuses

By David Lawder

WASHINGTON, Feb 3 (Reuters) – U.S. Treasury Secretary Timothy Geithner on Wednesday said insurer AIG’s contracts to pay hundreds of millions of dollars in bonuses were “outrageous” and appealed to Congress to help recoup the payments.

Geithner said Congress could help recover the “deeply irresponsible” bonuses by passing an Obama administration proposal to levy fees on large financial firms.

“Those contracts were outrageous. They should never have been permitted,” Geithner said in testimony to the U.S. House of Representatives Ways and Means Committee.

Build America Bonds expansion needed-Geithner

WASHINGTON, Feb 2 (Reuters) – U.S. Treasury Secretary Timothy Geithner told a Senate panel on Tuesday that expanding the popular stimulus program known as “Build America Bonds” would help state and local governments at no cost to the federal government.

The taxable bonds, which give issuers a large federal rebate, have been a “remarkably effective program,” he said.

“It is one of the most effective per dollar of taxpayers’ money that we’ve seen out there. That’s a good case for making it permanent, but we think there’s also a good case to look at the scope of applicability,” he added.

U.S. lawmakers turn up heat on Geithner over AIG

By Glenn Somerville and David Lawder

WASHINGTON, Jan 27 (Reuters) – U.S. lawmakers turned up the heat on U.S. Treasury Secretary Timothy Geithner over his role in the bailout of insurer AIG, challenging his claim he did not influence a decision to keep quiet AIG payments to big banks.

Both Democrats and Republicans questioned whether Geithner, who led the New York Federal Reserve Bank at the time, could have been in the dark over the decision not to disclose details of $62 billion AIG paid to banks to settle swaps contracts.

One Republican said he should resign.

Geithner held firm to his defense that he had withdrawn from decisions by the New York Fed after he was nominated to the Treasury post in late 2008. He forcefully defended his role in helping rescue American International Group Inc.

US’ Geithner, NY Fed defend actions on AIG payments

By David Lawder and Glenn Somerville

WASHINGTON, Jan 26 (Reuters) – U.S. Treasury Secretary Timothy Geithner denied any role in disclosures about American International Group’s payments to banks and defended his decisions as New York Federal Reserve chief to pay full price to retire AIG credit default swaps.

Geithner, in prepared testimony for a much-anticipated congressional hearing on Wednesday, said protracted demands for concessions from banks in late 2008 could have triggered devastating credit rating downgrades and brought AIG down, with “catastrophic” consequences for the U.S. economy.

Geithner’s testimony is widely seen as important for his future as Treasury chief. He has denied acting in the interests of specific institutions.

FACTBOX-One year on, US’s Geithner faces big challenges

WASHINGTON, Jan 26 (Reuters) – U.S. Treasury Secretary Timothy Geithner is in the eye of a political storm as he tries to deflect congressional inquiry into his role in bailing out insurer AIG and battle a perception that his influence is diminishing.

The White House on numerous occasions in recent weeks has reiterated its support for Geithner, a former New York Federal Reserve Bank president sworn in as Treasury chief one year ago.

A decision last week by President Barack Obama to start a fight with banks by limiting their size seemed to highlight an expanding policy role for Obama economic adviser and former Fed Chairman Paul Volcker, with Geithner less visible.

BREAKINGVIEWS – Copying U.S. bank tax will be tempting, but hard

By Peter Thal Larsen

LONDON, Jan 15 (Reuters Breakingviews) – Tim Geithner has changed his tune. Just two months ago, the U.S. Treasury Secretary dismissed Gordon Brown’s call for a global financial tax as “not something we would be prepared to support”. But now the United States has unveiled its plan to tax bank liabilities, Geithner is keen for others to do the same. He may be disappointed.

Other governments are bound to be tempted. The U.S. levy, designed to raise at least $90 billion over ten years, provides valuable tax revenue. It allows President Obama to demonstrate that he is being tough on banks just as they prepare to pay out large bonuses. And by penalising big banks that rely on wholesale funding, it imposes an explicit charge on those institutions that are deemed too big to fail.

But the United States is one of a very small group of countries that could impose such a tax on its own. It has a large domestic banking industry, and is home to many of the world’s major financial institutions. Only China and, perhaps Japan, are in the same category.