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The Geithner Way

By Big Tent Democrat, Section Economy
Posted on Fri Apr 03, 2009 at 12:38:05 PM EST
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An interesting article about Tim Geithner as head of the NY Fed. Geithner admits his failings, which is good, but I think the article raises questions about what he is doing now as Treasury Secretary:

That same year [2006 Geithner] initiated a Fed-wide review of how well the financial giants were able to measure their ability to survive the stresses of a market downturn. William Rutledge, the New York Fed's executive vice president for bank supervision, said the reviews turned up several weaknesses. They found that banking companies were pretty good at measuring the risks to specific parts of their businesses but had little understanding of the dangers to the institution as a whole. The firms also failed to account for the kind of worst-case scenarios that would later cripple several banking giants.

[More...]

The New York Fed followed up the study of the stress tests by holding private discussions with bank managers. The Fed officials sought among other things to "encourage" firms to improve their "credit risk-management practices" and to engage in "careful reflection" of their assessment of the global economy's health. . . GAO auditors who recently reviewed the confidential Fed study said the banks pushed back against the idea of expanding their stress tests. . . . Orice Williams, the director of financial markets at the GAO said that regulators "did not take forceful action" to correct the risk-management deficiencies "until the crisis occurred." . . .

(Emphasis supplied.) Does anyone really think Geithner will be more "forceful" now? Is there any evidence that he will? The Geithner Plan to me is strong evidence of just the opposite.

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    The Geithner Way | 19 comments (19 topical)

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    The only thing that comes to my tired mind (5.00 / 1) (#3)
    by Militarytracy on Fri Apr 03, 2009 at 01:19:12 PM EST
    Row, row, row your boat,
    Gently down the stream.
    Merrily, merrily, merrily, merrily,
    Life is but a dream.


    Sugeon General candidates... (5.00 / 1) (#4)
    by Dadler on Fri Apr 03, 2009 at 01:19:20 PM EST
    ...get their nominations quashed over sex ed. opinions and the like, yet treasury secretaries with histories of being, ultimately, incompetent at the most important moments, somehow get nominated, confirmed, and just seem to float right along no matter how useless they are.

    We are one very backass nation at the moment.  As well as at many others, both past and, sadly it seems, future.

    And with all due respect, Tent (none / 0) (#6)
    by Dadler on Fri Apr 03, 2009 at 01:27:54 PM EST
    I don't see his regrets about "failures of supervision" to be any kind of great confession of his own culpability except in the very lightest sense.  A real man, A REAL MAN, would stand up and simply say, "wow, I have certainly learned a painful but invaluable lesson from that experience, from my dismal failure of supervision, and it's now time to put that learned knowledge into practice and light a genuine fire under the system that is at this point, obviously, nothing but kindling."

    The fact that he downplayed his own role to the extent he did, simply lumping himself in with "supervision" is very ominous evidence of worse to come from him and for the nation.  He does not possess the real, deep, evolved chops necessary.

    They're all like Fonzie from HAPPY DAYS, who could not physically speak the words "I was wrong".  Remember?  He'd start to say it, but then slur and fade out of it: "I was wrrr...wrrrr...wrrrr..."  More pathetically, we'd be better off with Fonzie running treasury.

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    You see anyone on the American (none / 0) (#7)
    by jondee on Fri Apr 03, 2009 at 01:30:16 PM EST
    political horizen with deeply evolved chops, Dadler?

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    Ayyyyy (none / 0) (#8)
    by Big Tent Democrat on Fri Apr 03, 2009 at 01:31:44 PM EST
    A Fonzie reference? does this constitute "jumping the shark?"

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    If you know the Fonzie bit... (none / 0) (#9)
    by Dadler on Fri Apr 03, 2009 at 01:38:21 PM EST
    ...you'll know how utterly accurate it is when it comes to pols.  Just strikes me as perfectly absurd.

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    I watched the Fonz (none / 0) (#10)
    by Big Tent Democrat on Fri Apr 03, 2009 at 01:43:37 PM EST
    I remember the bit.

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    thought you were younger (none / 0) (#14)
    by Dadler on Fri Apr 03, 2009 at 03:00:54 PM EST
    don't know why.  but i duly note the timespan of your pop culture chops.

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    Fonzie as Treas. Sec (none / 0) (#16)
    by jbindc on Fri Apr 03, 2009 at 03:20:19 PM EST
    would at least be "cool".

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    I give them (none / 0) (#12)
    by Catch 22 on Fri Apr 03, 2009 at 02:45:29 PM EST
    credit for at least instituting stress tests and increased Tier I requirements. Those are important and both well talked about in both government and banking circles.

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    Simple answers to simple questions (none / 0) (#1)
    by Romberry on Fri Apr 03, 2009 at 12:51:11 PM EST
    Will Geithner be more forceful now? If past is prologue, then no.

    No one has any answers (none / 0) (#2)
    by SOS on Fri Apr 03, 2009 at 12:53:22 PM EST
    and solutions are a long way off. I suppose when this odd sensation of floating on air ends with a thud perhaps reality will then force the appropriate change upon us.

    I think I like this line in the article (none / 0) (#5)
    by inclusiveheart on Fri Apr 03, 2009 at 01:27:38 PM EST
    the best:

    "The development of credit derivatives," Greenspan said in a May 2005 speech, "has contributed to the stability of the banking system by allowing banks, especially the largest, systemically important banks, to measure and manage their credit risks more effectively."

    One of the few times Greenspan says something intelligible and it is completely wrong - but I suspect he knew that.

    Factors In Geithner's Favor.. (none / 0) (#11)
    by santarita on Fri Apr 03, 2009 at 02:40:37 PM EST
    1.  Geithner was working in a period where the banks had powerful allies against regulatory interference - Bush and Greenspan.  It may be that he couldn't  accomplish much more than  he did at the time in that regulatory environment.

    2.  He was confirmed despite the fact that people like Senator Reed  and Wyden both knew about his record.

    I'm still reserving judgment on Geithner.

    Re: your "1. Geithner was working..." (5.00 / 1) (#13)
    by Catch 22 on Fri Apr 03, 2009 at 02:51:29 PM EST
    The article also said"

    ""Geithner privately "was pushing the system to reform." But because of limited resources, Geithner was reliant on the big banks for information about their activities, Cohen said.""

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    Then you resign and make a stink (5.00 / 2) (#15)
    by Dadler on Fri Apr 03, 2009 at 03:03:23 PM EST
    How many average Joe/Joanne whistle-blowers have to fry before ONE asshat in power will blow even the faintest breath into a whistle?  

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    It's not the kind of work (none / 0) (#18)
    by jondee on Fri Apr 03, 2009 at 03:57:25 PM EST
    idealists and romantics gravitate to.

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    Have You Ever... (none / 0) (#19)
    by santarita on Fri Apr 03, 2009 at 03:58:43 PM EST
    heard of working within the organization in order to change it?

    There is room for both whistleblowers and people trying to change the system from within.  

    Maybe Geithner could have done more.  But if he had quit at any time before March, 2008, people would have paid zilch attention.

    The relationship between bankers and regulators is difficult.  The regulators have a lot of power and the bankers know it.  But the bankers also know that the regulators are reluctant to bring down the heavy hammers - civil money penalties, enforcement actions, etc. unless they are unable to persuade or cajole the bankers to do the right thing.  When the FDIC takes over a bank, it does so at the end of a process of warnings that become more  and more stringent.  So I see what Geithner doing back in 2006 as consistent with the then existing regulatory environment and good regulatory practices, i.e. telling the banks where they are falling short, what they need to do and seeing if they can fix it themselves before the government steps.

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    Geithner is a Kissinger, Greenspan, (5.00 / 1) (#17)
    by inclusiveheart on Fri Apr 03, 2009 at 03:44:17 PM EST
    Summers, Rubin protege.  He was as much hostage to the worship of the perfection of the market as anyone else he was working for at the time.  The Bush crowd would have fired him otherwise.  He trusted that the too big to fails would never endanger themselves to the point of coming dangerously close to being obliterated.

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    The Geithner Way | 19 comments (19 topical)

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