Who’s Watching the Money?

legislation may be necessary to force Treasury to hand over the information she needs to do her job
.
Why are heads not rolling right now? How do these people throw $700 billion down the weasel hole and think, “I may have to pass a law to find out where that went?”

KT-Any law passed ought to allow Ms. Warren to go around through and over Treasury and look directly at the banks books. Whatever is necessary. Enough is enough. Geithner and is predecessor are one if the same. If it smells like they have something to hide its because they do. I am fed up with Geithner and Obama’s nonsenscial support of him.

In situations like this, I find published copies of letters and communication to be immensly useful. Is she being stonewalled? Perhaps, but her simply asserting so doesn’t strike me as very convincing. Especially since closer look reveals that her complaint seems to be that no one’s calling her back.

It should take about one Blackberry message from England, shouldn’t it?

I know I’m going to be in a serious minority when I take this contrarian view, but there are some things when exposed to the light of the day may not bode well for the let’s make a deal process. At this point we need treasury to make a deal so that we can get back those $700 billion in loans and Congress has already proven how irresponsible they can be with confidential information. And while I get that Warren was appointed to do oversight, frankly, she spends a little too much time on the cable news/talk show circuit for my comfort.

Dee, I don’t get your argument at all. Oversight is the bare minimum the taxpayer should expect when investing this kind of money. Would you have had the same attitude if it were the Bush Administration Treasury Department? I doubt it.
.
BTW, I have asked Treasury for a response to these charges. I will post the answer when I get it.

Dee:
.
I understand your points, and I’m afraid that I disagree.
.
I’m not certain what other recourse Warren has, other than to go public with her concerns. It’s not like she has any authority to stop anybody from doing anything, or even delay any transactions. It seems as if she may not have the authority to get anybody at Treasury to leave her a message that they received her calls.
.
Much more important than that, though is the notion that the disadvantages of public exposure to back-room dealings between Treasury, the Federal Reserve and the recipients of TARP largesse (whether on the bidder or seller side of the auction) outweigh the benefits.
.
Since I think that the Treasury’s plan as described by Geithner is deeply, significantly flawed, I’m not in any hurry to let the details of it be kept in the dark, so that the deal can hurry up and get done.
.
It strikes me that Treasury’s dread (or disdain, as you like) of exposure smacks of the same catch-22 we were subjected to during the Bush Administration’s illegal spying programs. Treasury’s claim is that the banks need secrecy in order to protect their assets’ value from the market, and so public exposure voids the effectiveness of the program. How similar that is to the Bush Administration’s claim that secrecy was necessary in order to protect the public from the “terrorists” whose phone calls they were supposedly intercepting, since public exposure would void the effectiveness of that program.
.
If the “let’s make a deal process” is truly in the interests of a majority of citizens, then there should be no issue. In fact, markets would benefit from the stability of less uncertainty. If the process is really to keep the magnitude of banks’ horrendous management from regulatory and public scrutiny, the smoke-filled back-room nature of it is much more understandable.
.
At this point we don’t need Treasury to “make a deal”, we need them to make the right deal. So far it doesn’t look like that’s what they’re doing, and less light on the subject won’t help correct anything, IMO.
.
Thanks for reading and considering this, Dee.

How is Treasury supposed to do oversight when Geithner’s practically the only one there?

http://www.political-buzz.com/

Matt: That occurred to me, too. But if anything, that’s even more worrisome. As I said, I await a response from Treasury. A spokeswoman traveling with Geithner emailed me that they had just landed in London, and referred my question to someone back here in Washington. So maybe I’ll hear something. Or maybe I’m getting the Elizabeth Warren treatment…

The point is this is the path that we are on and as much as we don’t like the idea that there is a so much secrecy involved in financial dealings, the fact of the matter it is the world that exists. Now that we have committed trillions of dollars in loans and guarantees our only way out is for these deals to successful. Now you may not agree with the path they have chosen, but the constant assault on the plan in place can’t be helpful.
.
Warren seems like a decent person but I don’t think it’s her job to be all over cable every time I look up saying the sky is falling, especially not when confidence is the name of the game. Now I don’t expect others to agree, but I’m just saying there are other things to consider.
.
BTW, I would be saying the same thing if it was Bush, in fact I have been one of those individuals who believes that something is not wrong simply because the right says it. Now lately they are devoid of any kind of integrity, and they are acting solely out of self interest, but they are right about the way Congress acted over the AIG bonuses was beyond absurd and succeeded only in devaluing a property of which as a taxpayer I own 79%.

BTW, SZ, I can’t disagree with anything you’ve said but that doesn’t mean these other points aren’t warranted. I would not have compared financial dealings with illegal spying, however. While I did not disagree with the Bush premise that fighting terrorism required a certain amount of secrecy, I objected that he thought that should include breaking existing laws since he already had at his disposal the legal means to conduct secret surveillance.
.
Now I’m all for having to accounting for the deals once they are done, but immature press coverage during every aspect of negotiation is a non-starter. Sorry, KT but you know that your industry focuses solely on conflict instigation and would not be helpful if we engaged in a public micro-management model.

Warren seems like a decent person but I don’t think it’s her job to be all over cable every time I look up saying the sky is falling, especially not when confidence is the name of the game.
.
For once we agree, Dee. This is a confidence game. What? That’s not what you meant?
.
Your naivete would be rather touching if we weren’t talking about my money. Unfortunately, I have no interest in throwing good money after bad. Hank Paulson needs to be in prison. Tim Geithner needs to be fired. Barack Obama needs a slap to the face. And every Democrat in Congress that isn’t shouting from the rooftops in horror should be Primaried out of office. Confidence in the system? Sorry, I’m fresh out.
.
Does the stupidity, gullibility, and cowardice of the American public no no limits?

know…know….I know.

Dee:
.
Now that we have committed trillions of dollars in loans and guarantees
.
Respectfully:
.
1) this is the path that we are on
.
– you’re assuming that the Geithner plan as is is a done deal, and I don’t think that it is.
.
2) the constant assault on the plan in place can’t be helpful
.
– challenging the plan’s premises, specifics and effects doesn’t constitute an “assault”, unless you view such criticism in purely political or partisan terms. Otherwise, it’s not just helpful, it’s necessary
.
3) not when confidence is the name of the game
.
–”confidence” is not necessarily “the name of the game” if the banks’ problem is insolvency, not confidence. Geithner and Summers assert that confidence is the source of the banks’ lending issues; others assert that insolvency is the real issue
.
3) something is not wrong simply because the right says it
.
– I totally agree, although it’s difficult to get decent criticism from Republicans, since their criticism is mixed up in a whole lot of other really stupid and pointless fictions
.
4) the way Congress acted over the AIG bonuses was beyond absurd
.
– I’m with you there too, especially since it took our eye off of the ball, the “ball” being what Warren is complaining about
.
.
I wrote a letter to Joan Walsh at Salon about her latest piece, in which she expresses grave doubts about the Geithner plan. Should I post it here?

Dee:
.
I would not have compared financial dealings with illegal spying
.
You’re absolutely right that there is no comparison between the folly of the former and the illegality of the latter.
.
I meant to compare the way that both the Geithner plan and the NSA program have a built-in catch 22 that premises the success of the plan upon nobody knowing anything about it other than technocrats and untrustworthy politicians.

The problem is SQR1 its not just your money. Now you can call me naive but too assume that the financial community doesn’t have an incentive to regroup and make money from the reset they are being given is as shortsighted as someone who says that if you make a mistake at age 17 that your life is over because you must now carry that burden around for the remainder of your life. Okay we succeeded in punishing them and we’ve branded them unworthy, but now we can never recoup our investment because they can never become a contributing member of society.
.
Sorry folks but if you think we are going to wake up tomorrow and no longer be capitalists that’s just absurd. This is our system and we will regain our economic strength or not through the art of the deal, not some right wing imaginary socialistic redistribution of tax and wealth.
.
Maybe the system will be a little fairer once they have a little more regulation, but its not going to be some utopian system devoid of all inequity.

Dee:

What we have learned, however, is that the financial system, left to operate without oversight, goes for short-term gains at the expense of long-term stability. That’s what a bubble is all about. So how do you guarantee that they are investing prudently this time?

Anyone who works in a busy office knows that everyone is the center of their own universe. I’m still operating under the impression that Geithner is thoroughly preoccupied and that Warren is feeling slighted but that neither of these have anything to do with the actual amount of oversight that Treasury may be subject to. My advice to Warren: Hang up the phone and send a detailed e-mail. If you don’t get a good repsonse, then publish everything you DO have and read it into the Confgressional Record.

“Would you have had the same attitude if it were the Bush Administration Treasury Department? I doubt it.”
.
Wow, back to that again?

SZ — on that we agree so in the mean time we find ourselves reliant on the good character of our leadership, unfortunately, we don’t spend much time investigating the character of those we elect.
.
Going forward we can create regulation to help prevent those in power from going astray but again we are reliant on the integrity of those we elect to be watch dogs.
.
Of course there was a time that we relied on a free press to fulfill this function, however those days have long past. They are not very useful beyond providing the latest gossip on Brittany and Paris.

P-NNTO: See Dee (#20). If you guys can default to “it’s all the media’s fault,” I can default to “Would you be saying this if it were Bush?”

BTW, I’m still waiting for a response from Treasury. After two handoffs, I’m now being promised an answer by a third spokesperson.

KT — I don’t disagree that on my part this is a leap of faith based on the character of the leadership team I have put in place. But how is it any other way. I don’t know much about Warren, I don’t have anything on which to judge whether her assessments of what is happening is reliable.
.
The media, excuse me but that is a laugh, with their only concern is carrying water for the GOP, who is unworthy to call loyal opposition. I have no one other than the leadership I trust on which to rely.
.
And PD, as for the Bush regime they had my good will until they proved unworthy. While I didn’t vote for him he had my good will until he proved inadequate for the job, I believe I’ve gotten in trouble here before for admitting that my problem with Bush was his incompetence not his intentions.

Ha KT-of course your construction was personal and “the media” is general. And we KNOW you aren’t a media critic so you won’t take it personally.
.
Thanks for staying on top of Treasury.

If you guys can default to “it’s all the media’s fault
.
http://swampland.blogs.time.com/2009/03/31/terrors-next-wave/?apage=1#comment-54238

Gosh, KT – if only I could…
.
P-NNTO: See Dee (#20).
.
Since I last complained, I can see a tantalizing sliver of a number, but can’t begin to relate when they move to double digits. If the High Sheriffs could make the column a teensy bit wider please???

And I know I’m going to get blasted for this, but if Warren was really concerned with oversight then should stay off cable, which only succeeds in raising her profile (I’m sure at the end of this there will be a book).
.
I’d like to see her get with Frank or Dodd and set up closed door oversight hearings with Treasury and find out everything they need to know and the they can decide what info is too sensitive to release and the limited number involved would help to pinpoint the source for any leaks. They can even sign the confidentiality document they use for national security — this is a economic war right?

Sorry PD that was PNNTO I was referring to.

OK, I’m going to do it.
.
Please, please forgive me if this is tedious:

Link to the letter
.
Why Geithner’s Toxic Asset Auction Plan Troubles So Many
.
Thanks for this piece Ms. Walsh.
.
There are many (some fairly technical) reasons why Geithner and Summers’ plan is a highly questionable enterprise at best, amongst which are:
.
1) the plan’s premise that there is a confidence problem, and not a solvency problem for banks like Citi and B of A
.
2) the plan’s enormous reliance on FDIC loans to make up the vast majority of the cash that actually purchases toxic assets from the banks, even with the provision for private capital to invest –just slightly enough for the plan to bear the label “private-public”
.
3) the capital investors will bid on the toxic assets using minimal interest, “no recourse” FDIC loans– which means that if they can’t (or won’t) pay the loans back, they are only required to give the toxic assets back to Treasury, and they’re done (while Treasury owns the worthless assets outright)
.
4) the obvious likelihood that the investors will seek to hedge their investments using Credit Default Swaps (the insurance policies on the toxic assets that bankrupted AIG) sold to them by the very banks that they’re bidding on –the banks could use the immediate premium money from the investors, and if the investors default on the FDIC loans, they still get the payout from the banks in the form of TARP money
.
5) the dishonest sales pitch from Treasury, an example of which would be Geithner on Meet The Press telling a bedazzled David Gregory that it’s either “do nothing” or do his plan –a rather obvious false choice that went unquestioned by the barely-keeping-up Gregory
.
Finally, there is one really troubling aspect to this plan: almost overnight, Treasury has changed the definition of what’s wrong with the banks. Much has been made of CDO’s or “mortgage-backed securities”, which are the stocks in pools of loans from many different lenders that were supposed to be the untangle-able mess burdening the banks’ balance sheets.
.
The premise used to be that, since nobody could really link the shares in these pools of loans back to the original loans (which were probably in default or close to default), the banks couldn’t evaluate how much these stocks were worth, and capital investors would only pay 8 to 30 cents on the dollar for them. That’s what was supposed to be auctioned off, so that the banks would have cash, and the toxic assets full of these debt-stocks would go to investment houses to deal with (using FDIC money, mostly). Then the banks would have guaranteed money to meet fractional reserve requirements, and the loan offers would come pouring out of them again.
.
This was all the case until, according to Massimo Calabresi’s piece in Time last Monday –the day the plan officially came out– a Treasury-related official relayed:
.
For all the focus on complex securities based on bad loans, the bad loans themselves pose the greatest threat to banks’ balance sheets, according to the Treasury department.
.
So in one day, the rationale for the TARP auction changed from getting rid of bad debt-stocks (for which we don’t know the value) to BAD LOANS. This means that the banks know exactly how much their loans are worth, because loans aren’t shares –they’re tied directly to the properties. This means that these giant banks have essentially admitted that they are insolvent in a way that’s completely removed from having the FDIC evaluate their balance sheets (which would mean at least temporary FDIC management) but guarantees them Treasury and FDIC money, while still maintaining the pose that confidence is the primary issue.
.
Worse than that, the Geithner plan calls for these bad loans to be wrapped up in more pools of loans, and sold to these capital investment bidders as NEW MORTGAGE-BACKED SECURITIES –except this time, everybody will know that the new stocks are bad before they even buy them. This is a separate auction from the old, bad mortgage-backed securities the banks already have (which follows a similar bizarre process).
.
What this means is that the likelihood of some or all of the investors defaulting on their no recourse FDIC loans is rather high. The toxic assets will quietly end up on the books of the government over the next year or so, and Treasury will sooner or later assume all the bad debt for Citi, B of A, B of NY, Chase, etc.
.
This is a really, really bad plan –unless your primary concern is to never, ever admit that the largest banks in the world are insolvent, and your primary goal is to never, ever restructure them down from their gigantic, world-threatening size.
.
This is why there’s so much opposition from knowledgeable people to Geithner’s plan. It’s more than a little frustrating to watch Treasury’s sales pitches go on largely unchallenged and misunderstood from a helpless political media that doesn’t seem to do policy very well. It’s (remotely) analogous to watching the Iraq war happen, actually.
.
Thanks for reading and considering this, Ms. Walsh.

In case there was any doubt, that was my letter to Joan Walsh at Salon about her latest piece.

.
KT: What we have learned, however, is that the financial system, left to operate without oversight, goes for short-term gains at the expense of long-term stability.
.
And here I thought we knew that already.
.
That’s what a bubble is all about.
.
Not exactly. This bubble is not only about every-man-for-himself greed…that was the one that burst just after 2000, when the tech boom went thud. Where we are at right now is also about three decades’ worth of laissez-faire economic theory, ‘government is the problem’, and a failure on the part of the media to promote a well-informed (and truthfully-informed) population.
.
If you guys can default to “it’s all the media’s fault”…
.
Pesonally, I’m not saying ‘all’…but there are quite a few mea culpas that need to be said (and remedied) on the part of media organizations.

GC: But there was a housing bubble in there somewhere …

“That’s what a bubble is all about. So how do you guarantee that they are investing prudently this time?”
.
KT-With all due respect I don’t think investing is what they are hiding. And yes I say “hiding”. It’s about making the good ole boys in the club whole again. 100% whole with our friggin money by any means necessary. No loss to them what’s so ever as long as they are a member of a certain club they get theirs. That’s what they don’t want us to see. Them using our money to pay 100% for 100% of worthless bullsh*t.
.
And for those that say this is about confidence how in the world can anyone have confidence when you don’t know what’s in and on the books? How can you?
.
Warren was appointed to do a job. Either let her do it and give her the power to do, real weapons, fire her or don’t appoint her in the first friggin place. A paper tiger guarding your gate will be found out rather quickly by anyone who wants to game the system.

KT-Wasn’t yelling at you in my last. Sorry. I’m just frustrated as hell over this entire sorry ordeal.

I still think we are witness a Drudge-siren blowup of a simple miscommunication.
.
And by the way, I’m a huge fan of Congressional oversight!

KT:
.
The Credit Default Swaps –insurance policies on shares in pools of risky mortgages– that ultimately bankrupted AIG were deregulated largely at the behest of Bill Clinton’s Treasury Secretary Bob Rubin (beginning in 1997), with the rhetorical help of Al Greenspan, and the academic help of one Larry Summers –now top economic adviser to President Obama.

During the California energy crisis of 2000, then-Treasury Secretary Summers teamed with Alan Greenspan and Enron executive Kenneth Lay to lecture California Governor Gray Davis on the causes of the crisis, explaining that the problem was excessive government regulation.[8] Under the advice of Kenneth Lay, Summers urged Davis to relax California’s environmental standards in order to reassure the markets.[9]
.
Summers hailed the Gramm-Leach-Bliley Act in 1999, which lifted more than six decades of restrictions against banks offering commercial banking, insurance, and investment services (by repealing key provisions in the 1933 Glass-Steagall Act): “Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century,” Summers said.[10] “This historic legislation will better enable American companies to compete in the new economy.”[10] Many critics, including President Barack Obama, have suggested the 2007 subprime mortgage financial crisis was caused by the partial repeal of the 1933 Glass-Steagall Act.[11]

The real real estate bubble –the bubble in real estate backed financial products– goes all the way back to Clinton’s term.
.
Hmmm…”relax…standards to reassure markets”…sounds strangely familiar, doesn’t it?

PD: Re the siren: I wouldn’t be at all surprised. Which is why I don’t understand why it is taking Treasury so long to respond to this — even if it is just to vow to do better.

“I still think we are witness a Drudge-siren blowup of a simple miscommunication.”
.
PD-Not me. I bet is just like Warren says it is. Way too many of the players here are too friggin connected to each other.

Sort of OT, but I know my audience:
.
Am I the last person to hear about this report?
.
http://www.mediabistro.com/fishbowlDC/on/missing_journos_in_dc__112579.asp

.
Karen Tumulty: But there was a housing bubble in there somewhere..
.
Yup. And I’m pretty sure that the greed of the financial industry was abetted by a slavish devotion to free market principles, a philosophy of government non-intervention, and a lack of critical examination on the part of news orgs who forgot the part about operating in the public interest, not their advertisers’ or shareholders’…Forgot to mention negligence and apathy on the part of Joe Six-Pack, as well.
.
Throw a rock, and you’ll hit someone you can blame.

Now you can call me naive but too assume that the financial community doesn’t have an incentive to regroup and make money from the reset they are being given is as shortsighted as someone who says that if you make a mistake at age 17 that your life is over because you must now carry that burden around for the remainder of your life.
.
Good God, Dee, did you really fall off of the turnip truck? Do you understand what banking is? It is where people who HAVE MONEY lend it to other people for a profit. Now, the key to being a banker is that you either have to (a) have money or (b) convince other people that you are trustworthy enough to invest their money with you.
.
In the case of the major Wall Street banks, they have (a) blown all their money — they are insolvent — and (b) have proven themselves completely unworthy of anyone’s trust. So sorry for them. Too bad.
.
Now, what you and Geithner are asking me to do is to agree to simply hand Wall Street bankers — who have proven themselves incompetent — my tax dollars so that they can loan the money back to me with interest. That is the stupidest plan on the face of the Earth and I say “NO!” a thousand times over.
.
This is isn’t about the plan “working” or not working. Of course if you ship Goldman Sachs billions of taxpayers’ dollars then they will “make money from the reset”. If you measure success purely by the bottom lines of these banks then naturally Geithner’s plan will “work” better than the alternatives.
.
The irony of Obama’s preferential treatment of the bankers relative to the auto industry is that the auto industry is actually irreplaceable. If you give me $100 billion to start an auto company, I won’t be immediately producing any vehicles, but if you give me $100 billion to start a bank today, I will be banking by tomorrow. There is absolutely no point in bailing out a bunch of losers from their idiotic gambling losses when we can simply pump more cash into the hands of responsible bankers and businesses.

“But there was a housing bubble in there somewhere..”
.
Sure was and it was as fake as a hollywood movie set. fake bubble, fake profit, but real losses.

Completely OT- The Minnesota election court has published its order.
Perhaps an ending a week from today.
.
“Order for delivery of ballots to office of the Minnesota Secretary of State for Review by the Court.”

The syllabus at the top of the order commands:

That the absentee ballot materials for a bunch of voters listed in the (long) Exhibits A-C be delivered to Ritchie’s office;
That the ballots determined by the Court to be legally cast will be opened and counted on April 7–one week from today;
That this Order go out to the county auditors;
Ritchie’s office (a.k.a. “OSS”) will be opening, sorting and counting the legally cast absentee ballots in open court;
Memorandum (lotsa reading ahead–sorry) attached; and
“Any other relief not specifically ordered herein is DENIED.”
.
http://old.theuptake.org/documents/Ruling090331.pdf
.

Dee, I also have to ask, how the f— can you question Warren’s motives by suggesting that she might be swayed by something as petty and insignificant as a book deal, when players like Geithner, Paulson, etc. are conflicted to the tune of billions of dollars?
.
Do you honestly believe that a potential book deal and some face time on cable TV are more corrupting than HUNDREDS OF BILLIONS OF DOLLARS? What planet are you living on?

sqr1:
.
did you really fall off of the turnip truck?
.
Is that necessary? This isn’t your political enemy that you’re talking to, it’s somebody who needs convincing –not browbeating or shame. The problem is that Obama has given his implicit imprimatur to the entire thing, and she trusts him more than anybody else.
.
The important thing is to help her understand that what’s going on isn’t a done deal, and that she’s not required to support something out of the mistaken notion that criticism guarantees Obama’s failure with respect to the bank crisis.

Heading home now. Am sure that Treasury response will be here any minute.

Your cite to the C-Span tape is very much appreciated and I wish everyone would do it. Hopefully, you are starting something here. Yay.

Your cite to the C-Span tape is very much appreciated and I wish everyone would do it. Hopefully, you are starting something here. Yay.

-
I personally am anxiously awaiting the next installment of “Why God Created C-SPAN”!