Financial Regulatory Forum

BREAKINGVIEWS-Geithner needn’t pack his bags — yet

– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –

By James Pethokoukis

WASHINGTON, Jan 11 (Reuters Breakingviews) – U.S. cabinet members tend to lose their support the same way a person goes broke — slowly, then all at once. Timothy Geithner, the embattled U.S. Treasury secretary, still has President Obama’s confidence. Still, he has bled enough that this year could well be his last.

The rap against Geithner is that, as New York Federal Reserve president in 2008, he worked with former Treasury boss Henry Paulson and used AIG  as a conduit to pass bailout money to struggling financial firms such as Goldman Sachs  and Deutsche Bank. Critics also say that since joining Team Obama, Geithner has pushed an impotent financial reform package that fails to limit the size or complexity of U.S. financial institutions.

Emails from the New York Fed’s outside lawyers add to the impression that the bank tried to keep significant details of the AIG bailout from becoming public knowledge. But Geithner — already at the time looking ahead to the Treasury — wasn’t in the loop, according to the Obama administration and the New York Fed.

And even if that sounds like a cop-out, there’s an alternative Geithner narrative espoused by the White House. He helped fashion the plan that brought the U.S. financial system back from the edge of the abyss and laid the foundation for economic recovery. To insist on his departure now would eviscerate that message and probably unnerve markets. It would also set back Obama’s legislative agenda — and the search for a replacement would provide a forum for Republican attacks in the run-up to November’s midterm elections.

Unlimited credit for Fannie, Freddie seen as backdoor U.S. bailout

By Corbett B. Daly

WASHINGTON, Jan 5 (Reuters) – At a hearing last fall, U.S. Treasury Secretary Timothy Geithner told lawmakers that he and his team were working to put the $700 billion financial bailout fund “out of its misery.” But some in Washington now see a second, backdoor bailout in its place.

On Dec. 24, the Obama administration announced it was extending an unlimited credit line to mortgage finance agencies Fannie Mae and Freddie Mac, which would keep them afloat no matter how high their losses.

Representative Dennis Kucinich, an Ohio Democrat who was an early opponent of Obama in the 2008 presidential race, thinks the move is backdoor way to help banks, and a congressional subcommittee he leads is investigating the Treasury’s decision to cover unlimited losses at the housing finance companies.

U.S. extends bailout fund,sees economic challenges

By David Lawder

WASHINGTON, Dec 9 (Reuters) – U.S. Treasury Secretary Timothy Geithner on Wednesday extended the government’s $700 billion financial bailout fund to October 2010, saying it was still needed for “significant challenges” in the economy.

Geithner, in letters to congressional leaders, pledged to deploy no more than $550 billion from the Troubled Asset Relief Program, allowing the remainder to reduce budget deficits.

The extension, opposed by many Republicans, will allow the Obama administration to tap the financial rescue program for further efforts to fight home foreclosures and to ease credit for small businesses in the hopes of spurring job growth.

House tax chief to press Geithner on corporate tax

By Kim Dixon

WASHINGTON, Dec 8 (Reuters) – The head of the tax-writing House of Representatives Ways and Means Committee will press Treasury Secretary Timothy Geithner this week to back a plan to cut corporate tax rates and pay for it by closing offshore tax loopholes.

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UK gives impetus to global banks tax, U.S. doubtful

Britain's Prime Minister Gordon Brown addresses the G20 Finance Ministers meeting at a hotel in St. Andrews, Scotland November 7, 2009. A tax on financial transactions to fund future bank bailouts should be considered with urgency, British Prime Minister Gordon Brown told G20 policymakers on Saturday, a significant departure from London's line to date.      REUTERS/Andrew Winning (BRITAIN BUSINESS POLITICS)   By Huw Jones
ST ANDREWS, Scotland, Nov 7 (Reuters) – Britain urged world governments on Saturday to consider a levy on banks to fund future bailouts, departing from long-held opposition, though there was little sign of the consensus needed to make it fly.

British Prime Minister Gordon Brown raised the idea at a weekend meeting of Group of 20 financial leaders in Scotland — ending London’s resistance to such moves on behalf of its huge financial sector.The United States, key to the success of any global initiative, rejected a tax on day-to-day transactions, though it left the door open to other ways to protect taxpayers from losses. Canada was also lukewarm.

“A day-by-day financial transaction tax is not something we are prepared to support,” U.S. Treasury Secretary Timothy Geithner told reporters.

WRAPUP 1-Obama financial reforms advance in U.S. Congress

Onlookers gather outside the historic Federal Hall where U.S. President Barack Obama is speaking in the heart of Wall Street in New York September 14, 2009. Obama, marking a year since Lehman Brothers collapsed, urged financial firms Monday not to fight regulatory reform and urged Congress to pass his proposals by the end of the year. (File Photo)     REUTERS/Larry Downing (UNITED STATES BUSINESS POLITICS)   By Kevin Drawbaugh
WASHINGTON, Oct 27 (Reuters) – The Obama administration made gains on Tuesday in its push for U.S. financial reform, unveiling a landmark bill to tackle systemic risk in the economy and winning congressional committee approval for a measure to expose hedge funds to more government scrutiny.The systemic risk bill would grant vast powers to a new systemic risk regulatory council, the Federal Reserve and the Federal Deposit Insurance Corp to monitor and address risks to economic stability posed by shaky financial holding companies.

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ANALYSIS-U.S. TARP bailout fund may outlive expiry date

US Treasury Secretary Timothy Geithner (R) engages with reporters during the 2009 Reuters Washington Summit in Washington, October 20, 2009.  REUTERS/Jonathan Ernst    (UNITED STATES POLITICS BUSINESS) By Glenn Somerville
WASHINGTON, Oct 21 (Reuters) – The Obama administration appears to want to keep an inherited $700 billion financial rescue fund going past its scheduled expiry at year-end, but is retooling the program to focus on more than just banks.

That would be a major shift from its original purpose as a vehicle for propping up big banks — now seen as neither needing nor deserving a taxpayer-supported helping hand — and may set up a battle with Congress over the program’s fate.

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Reuters Summit-Geithner: Obama team to toughen ‘Too big to fail’ fix

By Karey Wutkowski
WASHINGTON, Oct 20 (Reuters) – The Obama administration is planning to send lawmakers a fresh, tougher proposal that would give the government more tools to wind down troubled financial firms and reduce the idea of “too big to fail,” U.S. Treasury Secretary Timothy Geithner said on Tuesday.

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Reuters Summit-Geithner says core U.S. TARP programs ending

US Treasury Secretary Timothy Geithner (R) engages with reporters during the 2009 Reuters Washington Summit in Washington, October 20, 2009.  REUTERS/Jonathan Ernst    (UNITED STATES POLITICS BUSINESS) By Glenn Somerville and David Lawder
WASHINGTON, Oct 20 (Reuters) – The Obama administration will shutter programs at the heart of a $700 billion financial bailout but remains focused on supporting a fledgling economic recovery, Treasury Secretary Timothy Geithner said on Tuesday.

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China wants IMF to fix world monetary system, U.S. sees surveillance role

By Simon Rabinovitch and David Lawder
ISTANBUL, Oct 6 (Reuters) – The IMF needs to fix “intrinsic defects” in the world’s monetary system, China said on Tuesday as officials from around the globe wrestled with how best to ward off future financial crises.

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