Timothy Geithner – Protect Your Own.

Right From the Start

Right From the Start

When history is written the catch phrase that will best describe President Barack Obama’s two terms will be “Protect Your Own.” In a previous column I wrote about Attorney General Eric Holder’s recurring decisions to protect the Wall Street officers and directors of errant, and often times criminal, enterprises – choosing instead to impose the entirety of the burden on shareholders who neither knew of or participated in the offending conduct. I noted that these actions had little deterrent effect because the miscreants suffered nothing while the innocent bore the full brunt of the offenses.

And now, another former member of President Barack Obama’s administration feigns deep concern over the very people he failed to protect in deference to his friends and business associates on Wall Street. Former Treasury Secretary Timothy Geithner has released his version of the economic collapse now appropriately labeled the Bush/Obama recession. Mr. Geithner was one of the principals in the government’s response to the economic collapse. While Lawrence Summers and Federal Reserve Chairman Ben Bernanke shared responsibility in crafting solutions, in the end the levers to pull belonged almost exclusively to Mr. Geithner as Secretary.

Highlighted in his memoirs, Stress Test, Mr. Geithner summons up his crocodile tears and exclaims his biggest regret:

“I wish we had expanded our housing programs earlier, to relieve more pain for homeowners.” Baloney! Mr. Geithner was so busy ensuring that his former Wall Street colleagues did not suffer financially or criminally that he had little time, and even less concern, for the fate of hundreds of thousands of homeowners who lost everything. Mr. Geithner had the authority, he had the bully pulpit, and he had a quiescent Congress available to provide whatever additional authority and/or funds necessary to ease the burden on working men and women whose principle asset was their home.

It was Mr. Geithner who argued for rescuing the major trading houses from certain bankruptcy. He even opposed the decision to force Lehman Brothers into bankruptcy as a “lesson” for others. He defended the decision of his hand picked executive, Edward Liddy, at AIG to provide multi-million dollar bonuses to the very people who were instrumental in creating the instruments that led to AIG’s near collapse.

Andrew Ross Sorkin wrote in the May 19 addition of DealBook:

“Mr. Geithner’s critics may latch on to this anecdote: He says he felt uncomfortable deriding Wall Street, so much so that when he was handed talking points for a press statement he was supposed to make while sitting next to President Obama in the White House to express outrage at banker bonuses, he refused ‘I skimmed the outrage I was expected to express. I’m not very convincing as an angry populist, and I thought the artifice would look ridiculous. ‘I’m not doing this,’ he wrote ’Instead, I sat uncomfortably next to the president while he expressed outrage.’”In a February 9, 2009 New York Times article, Steven Labaton and Edmund L. Andrews captured the essence of Mr. Geithner’s efforts.:

“In the end, Mr. Geithner largely prevailed in opposing tougher conditions on financial institutions that were sought by presidential aides, including David Axelrod, a senior adviser to the president, according to administration and Congressional officials.”Mr. Geithner continuously whined about how difficult the problems of underwater mortgages were and about all the barriers to solutions. And yet not once did he recount those barriers or potential solutions to those barriers. Not once did he put a price tag on resolving the issue for the benefit of homeowners. He was simply too busy Taking Care of His Own. But like other Washington insiders, he wants others to believe that his heart was with the “little people.”

There was a solution, or at least the outline of a solution, available but it was a last priority instead of a first. Simply stated it would have required:

  1. Mortgages were granted by banking and non-banking institutions, including Fannie Mae and Freddie Mac that were insufficiently vetted at their inception – those that were made in excess of their appraised value and those that were made to people without then-current financial resources to make payments. Those loans should have been segregated and allowed to fail and foreclose.
  2. Other mortgages were made to those who had then-current resources to make payments but, due to the Bush/Obama recession lost employment and the ability to keep current. In such instances the interest payments could have been suspended and monthly payments reduced to an amount sufficient to amortize the principle of the debt over the term of the original mortgage. In such instances the lenders would recover their principle as originally contracted. Each such reduction would be reviewed annually to determine the ability of the mortgagee to pay. During the period of disability the lenders would recover from the government an amount equal to the then-current rate at which the federal reserve provided banks.
  3. Other mortgages were made to those who still had resources to make payments as originally contracted. Even though their equity had shrunk to zero or even to a negative figure, they still had the home for which they originally contracted and, therefore, they would be required to pay their contracted amount. The assumption would be that over a period of time, the underlying value of the home would appreciate to, or exceed, their original purchase price and the market would have made them whole. It might have been appropriate to have required the originating mortgagor to adjust the rate to reflect current market rates, much like an “adjustable rate mortgage (ARM) that would have provided some relief to homeowners. People should not be immunized from their own economic decisions.

The problem was that any such program would have cost money – lots of money. But Mr. Obama and his Democrat colleagues in Congress had already wasted nearly a Trillion Dollars on the phony stimulus program that basically rewarded political cronies and gave raises to public employees. As Mr. Obama’s chief of staff, Rahm Emanuel so eloquently put it:

“There’s no more f— money!” In the end, Mr. Geithner’s colleagues on Wall Street were protected. Mr. Obama’s political allies were rewarded and America’s working class lost everything.

So please, Mr. Geithner, be satisfied with the riches you have and will accumulated as a privileged insider and quit trying to portray yourself as caring for a public that you have rarely encountered.

  

 

 

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Posted by at 05:00 | Posted in Bailout, Economy, Federal Government, Geithner, Government Waste, President Obama, Public Employee Unions | 6 Comments |Email This Post Email This Post |Print This Post Print This Post
  • .

    Timothy Gagger, a symbiosis unto his home run mjRoney high brouse.

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