Banksters on the DC Hot Seat, More On The Geithner Fiasco, How Goldman Got The Gold

January 12th, 2010 - by: danny

Financial Times Monday Night: Obama to target banks with new tax

The Obama administration, under increasing pressure from Democrats in Congress to take punitive action against banks, is readying a new levy on the finance sector that will form part of the budget to be presented in February.

How real is the Administration’s concerns or is this just a symbolic gesture for perception’s sake? NakedCapitalism.com is very skeptical:

“With its talk of new taxes on banks, is Team Obama reverting to its now well established pattern of crony capitalist giveaways with the occasional phony populist reform as an increasingly ineffective disguise? The extraordinarily unenthusiastic, perhaps inept by design, discussion of its plans to tax banks in some yet undetermined manner certainly says so.

First, let’s consider Exhibit 1: the truly piss poor job the Obama Administration did of selling its health care reform plan. Recall the remarkable disconnect of people saying they did not want “socialized” health care, yet they also did not want Medicare touched. It does not take Madison Avenue credentials to see the sales pitch: “We already have successful, popular, government funded health care in the US. It’s called Medicare. We want to build and improve on that. Here’s how.” Did we see anything like this from the Administration message-meisters? And where were the President’s famed communication skills? Funny how he seems unable to articulate a vision that will actually shift public opinion.”

Sheila As Savior?

There are also reports that Sheila Baer of the FDIC will announce new compensation regulations. Meanwhile, Dylan Ratigan, formerly of CNBC endeavors to explain just how Goldman Sachs made all that money.

FED IN THE MONEY: Ben’s Bets Pay Off

AP: WASINGTON — The Federal Reserve made record profits last year of about $45 billion that will be returned to the coffers at the U.S. Treasury, The Washington Post reported on Monday.

The Post said the figure, which it said was according to its own calculations based on public records, would be the highest earnings in the Fed’s 96-year history.

The newspaper noted that much of the profits came about because of the Fed’s program of buying bonds with the aim of driving down interest rates and fueling growth in the hobbled U.S. economy.

Release: Financial Crisis Inquiry Commission Announces Full Witness List for First Public Hearing

(Washington, DC) — The Financial Crisis Inquiry Commission (FCIC), the bi-partisan 10-member panel established by Congress to examine the causes of the financial crisis, today announced the details of the Commission’s first public hearing.

The Commission will begin its thorough examination of the root causes of the crisis, hearing testimony on the causes and current state of the crisis from top leaders of both private and public sector entities.

When: Wednesday, January 13, 2010: 9:00 a.m. ET

Thursday, January 14, 2010: 9:00 a.m. ET

Where: 1100 Longworth House Office Building, Washington, DC

Panel 1: Financial Institution Representatives

Mr. Lloyd C. Blankfein, Chairman of the Board and Chief Executive Officer Goldman Sachs Group, Inc.

Mr. James Dimon, Chairman of the Board and Chief Executive Officer PMorgan Chase & Company

Mr. John J. Mack, Chairman of the Board, Morgan Stanley

Mr. Brian T. Moynihan, Chief Executive Officer and President
Bank of America Corporation

Panel 2: Financial Market Participants

Mr. Michael Mayo, Managing Director and Financial Services Analyst

Calyon Securities (USA) Inc.

Mr. J. Kyle Bass, Managing Partner

Hayman Advisors, L.P.

Mr. Peter J. Solomon, Founder and Chairman

Peter J. Solomon Company

Panel 3: Financial Crisis Impacts on the Economy

Dr. Mark Zandi, Chief Economist and Co-founder Moody’s Economy.com

Dr. Kenneth T. Rosen, Chair, Fisher Center for Real Estate and Urban Economics

University of California, Berkeley

Ms. Julia Gordon, Senior Policy Counsel, Center for Responsible Lending

C.R. “Rusty” Cloutier, President and Chief Executive Officer

MidSouth Bank, N.A. and Past Chairman of the Independent Community Bankers Association

Dean Baker: How Do You Talk About the Deficits Without Mentioning the Wars and The Housing Crash?

In the real world this would be difficult, but not on NPR. Morning Edition had a lengthy segment on the deficit with David Walker, the president of the Peter G. Peterson Foundation, an organization founded by Peter G. Peterson, the billionaire Wall Street investment banker and Commerce Department secretary in the Nixon Administration. Walker was allowed to give his account without any alternative perspectives.

Walker explained the shift from the large surpluses at the end of the Clinton era to the deficits the country is now seeing without reference to the wars in Iraq and Afghanistan and Iraq that have already added more than $1 trillion to the debt, the housing crash which has increased the debt by more than $1 trillion in 2009 alone, and the stock market crash which through the country into recession in 2001 and cost the country more than $500 billion in capital gains tax revenue.

While these developments explain the vast majority of the deterioration in the budget situation in the last decade, they were not mentioned once by either Walker or the reporter conducting the interview. Instead, Walker blamed an irresponsible Congress that allowed the money to burn a hole in its pocket. Even if it does not fit reality, this story fits with Mr. Walker’s political agenda of creating a special commission that will issue a proposal to cut the deficit that is fast-tracked so that it does not follow normal congressional procedures.

MORE ON WHY GEITHNER HAS TO GO

NYPost: “The damning string of mess ups stretch back 16 years and include:

* Geithner claiming he was unaware that millions in bonus payments were being made to some of the same AIG execs that presided over investing in risky derivative securities. Sen. Richard Shelby (R., Ala.) complained that Geithner was “out of the loop” on the bonus matter — a position he should not have found himself in as a high-ranking financial official.

* Overseeing a much-maligned stress test that many view as not being “stressful” enough.

* In May 2007, as NY Federal Reserve Bank President he worked to reduce the capital required to run a bank — helping to set the stage for the credit crisis in the first place.

* His proposal to expand a lending program that would spend as much as $1 trillion to cover the decline in the issuance of securities backed by consumer loans — so far the program has gone through numerous iterations but hasn’t actually been a blockbuster.

* The failure to pay $34,000 in federal taxes over several years early in the decade, and questions about the employment papers of a former household employee.

* A failed plan, pieced together with the New York Insurance Superintendent, to bolster bond insurer ratings. The plan never got off the ground and some insurance companies are still stuck with shoddy insurance contracts on their books.

Ã¢â‚¬Â¢ His first big flap, over the selling-out of taxpayers, came during the disastrous collapse of the Mexican peso in 1994-95, when the US and the intercontinental Money Fund provided a controver sial $50 billion bailout for the mess. Geithner at the time was a globe-trotting as sis tant deputy Treasury secre tary: He helped then-boss, Larry Summers, then the No. 2 Treasury official, engineer the US bailout.”

Comment: “surely You Jest” by Charles Lingenfelser

“Geithner is doing the job he was appointed to do. Do you see any difference between what he’s doing and what Paulson did? Why don’t you ask the question: why did Obama appoint Geithner and Summers to such important positions in the first place? Robert Rubin, Larry Summers, and Alan Greenspan started this downward spiral under Clinton; Geithner was the Chairman of the New York Federal Reserve Bank during that time. Why is Obama doing absolutely nothing meaningful about creating jobs?

The answer, to both questions, is Obama is doing what he is instructed to do by the money masters. I’m talking about the international banksters who own the Federal Reserve and all of the other central banks abound the globe. The Federal Reserve actually runs this country. You want proof; take note of how Congress was excluded from the bailout of Wall Street during both administrations. It doesn’t matter who’s in the White House or in Congress; they’re just puppets, and it’s been that way since 1913, the year that Congress dubiously passed the Federal Reserve Act. So quit trying to bullshit people about regime change; it doesn’t work.

The Fed as The Anti Regulator

Former Bank Regulator William Black calls the Federal Reserve an Anti-regulator on todays NakedCpitalism.com (A Must read.)

The first decade of this century proved how essential effective regulators are to prevent economic catastrophe and epidemics of fraud. The most severe failure was at the Federal Reserve. The Fed’s failure was the most harmful because it had unique authority to prevent the fraud epidemic and the resulting economic crisis. The Fed refused to exercise that authority despite knowing of the fraud epidemic and potential for crisis.

The Fed’s failures were legion, but five are worthy of particular note.

1. Greenspan believed that the Fed should not regulate v. fraud

2. Bernanke believed that the Fed should rely on self-regulation by “the market”

3. (Former) Federal Reserve Bank of New York President Geithner testified that he had never been a regulator (a true statement, but not one he’s supposed to admit)

4. Bernanke gave the key support to the Chamber of Commerce’s effort to gimmick bank accounting rules to cover up their massive losses – allowing them to report fictional profits and “earn” tens of billions of dollars of bonuses

5. Bernanke recently appointed Dr. Patrick Parkinson as the Fed’s top supervisor. He is an economist that has never examined or supervised. He is known for claiming that credit default swaps (CDS, a.k.a the financial derivatives that destroyed AIG) should be unregulated because fraud was impossible among sophisticated parties.

Each error arises from the intersection of ideology and bad economics.

The Fed’s regulatory failures pose severe risks today. Three of the key failed anti-regulators occupy some of the most important regulatory positions in the world. Each was a serial failure as regulator. Each has failed to take accountability for their failures. Last week, Dr. Bernanke asserted that bad regulation caused the crisis – yet he was one of the most senior bad regulators that failed to respond to the fraud epidemic and prevent the crisis. As Dr. Bernanke’s appointment of Dr. Parkinson as the Fed’s top supervisor demonstrates, the Fed’s senior leadership has failed, despite the Great Recession, to learn from the crisis and abandon their faith in the theories and policies that caused the crisis. Worst of all, the Fed is an imperial anti-regulatory seeking vastly greater regulatory scope at the expense of (modestly) more effective sister regulatory agencies. The Fed’s failed leadership is setting us up for repeated, more severe financial crises.

MAIL & GUARDIAN: APARTHEID ON TRIAL

A US court on Monday heard an appeal by major corporations attempting to stop a lawsuit over their role in South Africa’s apartheid-era regime.

The US Court of Appeals for the Second Circuit in New York will now rule whether the appeal can go forward or whether the class-action lawsuit against the corporations, which include Daimler, Ford and IBM, should go to jury trial.

“The plaintiffs says the appeal is not proper,” said Maria LaHood at the Centre for Constitutional Rights, which specialises in human rights legal issues and supports the South African plaintiffs in the landmark suit.

“The court was very engaged and they will take it under submission and decide first whether they have jurisdiction to appeal. If they don’t have jurisdiction to hear the appeal, it will go back to district court.”

The corporations are accused of complicity in human-rights abuses during the years they did business in apartheid South Africa.

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