Tags: Tim Geithner

Schieffer Gives Geithner Softest Interview in History


Face the Nation host Bob Schieffer treated former secretary of the treasury Tim Geithner to a very special sendoff for his book Stress Test Sunday. After praising Geithner for his success in “bringing the country back from the worst recession since the 1930s,” the longtime CBS fixture lobbed a series of “did you like the ice cream“-style questions to the longtime media favorite. Schieffer’s line of inquiry:

Was Geithner hurt by his habit of putting truth-telling above public relations? (In part, though Schieffer graciously adds that he always found Geithner an impressive young man.)

Did the Obama administration pressure him to sugarcoat news? (No.)

What advice does he have for President Obama on the Veterans Administration scandal? (Geithner is confident in the president’s handling of the problem.)

What does Geithner think of left-wing Democratic senator Elizabeth Warren’s critique — not of Geithner himself but of the banking system? (The U.S. economy is very innovative.)

What did Geithner learn on the job? (Washington is a very tough place.)

What does Geithner think of the state of the U.S. economy? (Will take time to heal after the worst crisis since the Great Depression.)

Geithner also took the opportunity to reiterate some of the apocalyptic rhetoric that underscored the big spending of the Bush and Obama administrations (necessary to “protect people from the consequence of collapse,” “protect people from mass unemployment,” and “keep the lights on in the economy”) and to point out that economic “rescue” packages “are deeply unpopular because it looks like you’re giving aid to the arsonists.”

Tags: Tim Geithner , Sunday Shows May 18 2014

Geithner Book Rekindles Barofsky Hatefest


Tim Geithner has a new book coming out, and one character in it is already fired up about the former Treasury Secretary’s nasty comments.

Geithner, who was president of the New York Federal Reserve Bank when the partial correction of the real estate market began in 2006 and became President Obama’s first Secretary of the Treasury in 2009, will hit bookstores Monday with Stress Test: Reflections on Financial Crises. The Dartmouth alum, whose skills schmoozing powerful people on the tennis court have always exceeded his abilities as an economic central planner, is getting the same puff-piece treatment from the media he has enjoyed throughout his career.

But at least one of his former associates — former Special Inspector General for the Troubled Asset Relief Program Neil Barofsky — is giving Geithner a raspberry. In a LinkedIn post, Barofsky starts off with two points that are not on the top of anybody’s priority list: whether SIGTARP employees should have been allowed to be armed and armored, and an estimate of how many trillions the bailout of the big banks might eventually cost taxpayers. (For what it’s worth, his worst-case estimate of $23.7 trillion seems unrealistically high, but the night is young.)

But the meat of Barofsky’s complaint is a conceptual attack on the $700 billion TARP itself:

Mr. Geithner also apparently calls me a number of names and claims that I lacked the necessary financial knowledge or experience for the job. I take great pride in the professional and skilled team that we assembled and the detailed and widely respected reports detailing the bailout that we issued. Indeed, they have widely been heralded as the most complete record of the government’s efforts. Mr. Geithner also ignores the facts when he suggests that we failed to report on the returns on TARP’s investments and that we criticized him without suggesting alternatives. In fact, we issued reports every single quarter that detailed how much money came back to Treasury and that included dozens of recommendations to improve the programs.

Mr. Geithner apparently concludes that our relatively unknown agency was “damaging” to his efforts to persuade the American people to support his program. While I take it as a compliment that he thinks that our team had such a disproportionate impact, I suspect that the truth is slightly different. The American people considered TARP an unfair giveaway to the largest banks and a failure for Main Street because, in fact, that is exactly what it was.

I would trust Barofsky over Geithner any day — though he is theoretically on the “left” of the economic dream team. His belief that the government should have bailed out “troubled homeowners” as generously as it embiggened the banks (a fixation he shares with Massachusetts Senator Elizabeth Warren) amounts to a philosophy that once you’ve been robbed by your rich neighbor you have a duty to be robbed by your poor one. (The actual populist position — that taxpayers should not have been forced to bail out either of these numbskulls — never gets voiced by anybody in power.)

But Barofsky (who became SIGTARP shortly before Obama’s inauguration and left in 2011) was notably if not uniquely honest in the Obama brain trust. He correctly pointed out in 2010 that the design of federal housing efforts was to re-inflate the housing bubble — not exactly a Newtonian discovery, but something few people in government were willing to say outright. He consistently threw water on bogus claims that the TARP was on the verge of turning a profit. Despite or because of his soft spot for bad mortgage borrowers, he was unusually willing to admit [pdf] that the whole federal apparatus of trial loan modifications was a form of cruelty, dragging out the pain and false hope for people who would have been better off just getting foreclosed and moving on with their lives. He made an earnest effort to perform an essentially impossible task: safeguarding the taxpayers’ interest in a program that was designed to rip off the taxpayers. (Like most of the big players in the recession, Barofsky has his own book, 2012’s Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street.)

Barofsky’s commitment to getting at the truth is in fact the source of the hatred between the two men. During a markedly unfriendly 2009 investigation of Geithner’s role in the New York Fed’s “Maiden Lane III” bailout of American Insurance Group (which mysteriously got paid out at 100 cents on the dollar at a time when everybody in the country was taking some kind of haircut), Barofsky made short work of Geithner’s claim that he was trying to prevent “systemic risk” rather than just protect AIG’s powerful counterparties:

Geithner and the [Federal Reserve Bank of New York] General Counsel told SIGTARP that the financial condition of the counterparties was not a relevant factor in the decision to create Maiden Lane III and pay counterparties effectively at par…

Then-FRBNY President Geithner and FRBNY’s general counsel deny that this was a relevant consideration for the AIG transactions. Irrespective of their stated intent, however, there is no question that the effect of FRBNY’s decisions — indeed, the very design of the federal assistance to AIG — was that tens of billions of dollars of Government money was funneled inexorably and directly to AIG’s counterparties…

FRBNY did not develop a contingency plan; when private financing fell through, FRBNY was left with little time to decide whether to rescue AIG and, if so, on what terms… Not preparing an alternative to private financing, however, left FRBNY with little opportunity to fashion appropriate terms for the support, and believing it had no time to do otherwise, it essentially adopted the term sheet that had been the subject of the aborted private financing discussions… In other words, the decision to acquire a controlling interest in one of the world’s most complex and most troubled corporations was done with almost no independent consideration of the terms of the transaction and the impact that those terms might have on the future of AIG.

Again, it didn’t take a genius to figure this out. How could Geithner simultaneously believe there was “systemic” risk from AIG’s failure but not believe there was “relevant” financial risk to firms that were dealing with AIG directly? Would the risk somersault over Goldman-Sachs and land directly in an ATM at First Bank of Podunk? I’m not the first to point out that Geithner bears a physical resemblance to Leave It To Beaver’s Eddie Haskell, but the personality resemblance — precious and overly polite when adults are present; scheming and smart-mouthed as soon as the grownups leave the room — is even stronger. Cutting through Geithner’s mushmouthed obfuscations was a full-time job.

Nobody’s doing that job anymore, and Obama’s entire first-term brain trust has been replaced by a new cast of non-entities. Stress Test is festooned with blurbs about the author’s candor and insight, and about the great debt our nation owes him. For younger readers: They’re talking about the official narrative that the TARP, the Fed’s monetary expansion, bailouts like AIG’s etc., “rescued” the economy from a hyperpocalyptic catastrogeddon that was always very vaguely described but, we were assured, sure to destroy us all unless the government spent trillions on bold, persistent experimentation.

You’d think seven years of economic anemia would cause even the blindest believer to wonder: Was it really a good idea to put off a much steeper credit contraction and rapid arrival at the bottom of the market in exchange for nearly a decade (so far) of stagnation and the apparently permanent hobbling of the American economy? But that argument is long over, for the same reason history will record that Obamacare was a success. By definition, every government action is the right one, irrespective of the outcome.

Tags: Tim Geithner , TARP , Great Recession

How Dare Standard & Poor’s Tell Us What We Hate to Hear!


Plenty of bad news to chew over in the Morning Jolt

[Standard and Poor's offered] a thoroughly depressing, and no doubt brutally honest, assessment.

Naturally, the Obama administration did what it does best in response: They blamed their political opponents.

This was a “tea party downgrade,” said [Obama chief strategist David] Axelrod on CBS News’ Face the Nation.

Axelrod said S&P’s decision was “largely a political analysis.” “And that’s what we should focus on because what they were saying is they want to see the political system work. They want to see a sense of compromise. They want to see the kind of solution that the president has been fighting for, a large solution that will deal with the problem, that will be balanced, that will include revenues.”

Instead, said Axelrod, conservative, Tea Party-influenced Republicans “played brinksmanship with the full faith and credit of the United States. And this was the result of that.”

“It was the wrong thing to do to push the country to that point” he said. “And it’s something that should never have happened. And that clearly is on the backs of those who were willing to see the country default, those very strident voices in the tea party.”

Of course. Nothing’s ever their fault.

 In fact, in the full statement, you’ll see, “Standard & Poor’s takes no position on the mix of spending and revenue measures that Congress and the Administration might conclude is appropriate for putting the U.S.’s finances on a sustainable footing.” It is revealing that Axelrod can look at this and declare, “they really agree with us!”

I like Ed Morrissey’s analysis: “S&P didn’t say anything yesterday that was not common knowledge and common sense.  If you had to rate a potential investment that had an income of, say, $22,000 a year but had costs of $37,000 per year, a standing debt of $143,000, and contracted future debt that exceeded $1 million, would you give that investment a gold-plated AAA rating and buy their bonds at the lowest interest rate possible, or at all?  Of course not, but that’s exactly the fiscal situation of the US, at a 100,000,000:1 scale. The anger is mainly misdirected.  The media wants to blame the Tea Party, but the Tea Party wants to solve the actual problem — overspending and over-commitment to entitlement programs.  The Tea Party wants to blame the Obama administration, and it deserves some blame for refusing to address the real structural problems of the US fiscal condition.  But that fiscal structure far predates Barack Obama, both as President and as human being, and Congresses and White Houses of both parties have done little to address the real problems in Medicare, Medicaid, and Social Security. Why?  Because as soon as people try to do so, demagogues accuse them of wanting to push Grandma over a cliff.  Voters respond by punishing the reformers and rewarding the demagogues.”

Nonetheless, the reckoning is at hand, and we can see who sees this depressing fiscal development as another crisis to not be wasted, another opportunity to demonize the opposition. It’s what they’ve been doing since Day One.

I’m reminded of Daniel Hannan’s remarks to former U.K. Prime Minister Gordon Brown, and can’ resist paraphrasing: “Soon the voters too will get their chance to say so. They can see what the markets have already seen: that you are the downgraded president of a downgraded country.”

TurboTax Timmy: The Administration’s Indispensible Man

By the way, back on April 19 of this year: “U.S. Treasury Secretary Timothy Geithner today said there was “no risk” that the United States would lose its prized AAA credit rating, saying political prospects for long-term deficit reduction were improving. “No risk of that,” Geithner told Fox Business Network when asked if the United States would see a downgrade after Standard and Poor’s on Monday slapped a negative outlook on its Treasury debt rating.”

Hey, Nostradamus is sticking around at Treasury: “Treasury Secretary Timothy F. Geithner has told President Obama he plans to remain in his job through the fall of 2012, keeping in place Obama’s longest-serving economic adviser after the first-ever U.S. credit downgrade and renewed fears of a second recession. White House press secretary Jay Carney said: ‘The president asked Secretary Geithner to stay on at Treasury and welcomes his decision.’”

“There’s still more downgrading to be done, apparently,” quips the JammieWearingFool.

Tags: Barack Obama , Tim Geithner

Tim Geithner Inoculates Republicans on All Future Job Losses


Remember this comment from this morning, and cite it, and repeat it, the next time you hear some Democrat argue that the debt ceiling deal somehow hurt the economy:

GEORGE STEPHANOPOULOS: So this won’t cost us jobs?

TIM GEITHNER: No, it will not.

From the beginning, I expected that one of Obama’s goals in the debt ceiling negotiations was to get the Republicans to take as much ownership of the economy as possible – or at least begin to set up that narrative – so that he has a scapegoat for economic woes until November 2012. “I wanted to spend more on job creation, but Republicans would rather leave tax rates low on corporate jets. I wanted to do more to help struggling families, but they felt it was more important to help out hedge fund managers.”

Of course, there’s a glaring flaw in that argument: The debt ceiling deal was so harmful and destructive to the recovery that Americans have no choice but to reelect the president who signed it into law.

Either way, Treasury Secretary Tim Geithner just got the Republicans off the hook for job losses in the coming months. If Obama, or David Axelrod, or Debbie Wasserman Schultz, or some other Democrat attempts to blame the high unemployment rate on the debt ceiling deal, they’re contradicting the administration’s chief mind on economic matters.

Tags: Barack Obama , Tim Geithner , Unemployment

‘If Obama wants the Social Security checks to go out, he and Michelle can scramble eggs for the girls.’


The always-animated Prof. Peter Morici, of the Robert H. Smith School of Business at the University of Maryland, was on SiriusXM’s POTUS this morning, even more fired-up than usual.

He noted that life without a debt-ceiling deal after August 2 would be comparable to a government shutdown, inconvenient for some but not unprecedented and by no means the economic Armageddon some in the administration have suggested. And he insisted that the U.S. default is entirely avoidable even if no deal is reached in the next week.

“There is absolutely no possibility that we have to default on our debt,” Morici said. “We will only default if Secretary Geithner chooses to default to give the president political advantage.”

A fuller version of Morici’s argument can be found in his column from this morning:

Be clear, the U.S. doesn’t have to default on its bonds. After Aug. 2, it still will collect taxes and other revenue exceeding $180 billion per month; and interest payments on the national debt eat up less than $30 billion. If the Treasury prioritizes expenditures — as the state of Minnesota did during its recent shutdown — it could pay interest on bonds, roll over bonds coming due, and pay Social Security recipients and many other obligations, but it would be late to many vendors until the debt ceiling was raised or new sources of cash were found. The U.S. would not be insolvent but rather in a political crisis.

This morning on the radio, Morici elaborated, “The markets are starting to recognize this. I went to CNBC this morning with a stellar cast — you’ve never seen the green room so crowded at 4 in the morning. Because everyone thought the Asian markets were starting to panic. Guess what? They didn’t.”

He noted that the state of Minnesota just endured a government shutdown that represented a short-term irritation, but by no means an economic crisis: “There were still state troopers on I-35 and the prisons had guards and the welfare checks went out. Now, granted, they had the money and their shortfall was much less, more like 10 percent than 45 percent. But the reality is, this looks a lot like a government shutdown. Different things may get shut down. For example, in a normal government shutdown, the White House chef continues to work,” Morici said. “Well, maybe if Mr. Obama wants the Social Security checks to go out, he and Michelle can scramble eggs for the girls.”

Tags: Barack Obama , Peter Morici , Tim Geithner

‘Extraordinary Measures’ Have Already Reduced Debt $2.63 Billion in Two Months


As noted in the post below, the past few months have actually seen a very, very, very slight improvement in the national debt. So how did that happen?

According to U.S. Treasury figures at Debt to the Penny, the Total Public Debt Outstanding has actually shrunk from $14,345,537,505,802.45 on May 16 to $14,342,898,467,069.07 on July 19.

That’s $2,639,038,733.38 smaller, or a reduction of $2.63 billion.

During that time, the debt held by the public — regular old borrowing from anybody willing to lend to Uncle Sam, foreign or domestic — actually increased, from $9,717,694,227,528.65 to $9,753,904,328,297.12.

That’s an increase of $36,210,100,768.47, or $36.2 billion.

So how did the total debt shrink? Because the numbers improved in the category of intergovernmental holdings — money the government owes to itself, i.e., the Social Security Trust Fund. (You know that when you pay into Social Security, the money doesn’t actually go into any “trust fund” or Al Gore’s “lockbox.” The government takes that money and spends it, and writes itself an IOU to be paid back later. This is how one government account can owe another government account money.)

The national debt in the category of “intragovernmental holdings” shrank from $4,627,843,278,273.80 on May 16 to $4,588,994,138,771.95.

That’s a reduction of $38,849,139,501.85, or $38.8 billion.

The $38.8 billion improvement in one category of debt is greater than the $36.2 billion worsening in the other, thus the $2.63 billion knocked off the $14.3 trillion debt.

So what changed in May?

The federal government will start using “extraordinary measures” this week to juggle its finances to avoid hitting the nation’s debt limit this month, Treasury Secretary Timothy F. Geithner told congressional leaders.

Starting Friday, the Treasury will stop issuing State and Local Government Series securities, which count against the debt limit. The securities are used by governments to manage their expenses on tax-exempt bonds, and the move will deprive them of “an important tool,” Geithner said.

Geithner said that on May 16, he would suspend issuing new federal debt for the Civil Service Retirement and Disability Fund, which would allow Treasury securities held by the fund to be redeemed. The government also would suspend the daily reinvestment of securities held by the investment fund for the Federal Employees Retirement System’s Thrift Savings Plan.

Geithner may not like those “extraordinary measures,” but they’re actually getting the numbers moving in the right direction. It’s like watching an obese man skip his first dessert and do his first bit of exercise and see the slightest of improvements in his weight.

And you thought all of this posturing and all the hardline stances were bad for America’s financial future!

The Debt Ceiling Debate: Already helping America’s bottom line!

Tags: Barack Obama , National Debt , Tim Geithner

Our Tax Code Is Corrupt


What General Electric has in common with the guy who runs Obama’s IRS: not paying taxes. That New York Times report on G.E.’s remarkable ability to avoid paying U.S. taxes has been getting a lot of attention today, but there was one paragraph that reminded me of why I’m a flat-tax guy:

G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.

As government extends its reach over every aspect of the economy, this sort of corporatism will only become more deeply entrenched in fields like health care and energy. What G.E. has done with taxes, the insurance giants will do (and have done) with Obamacare. Everything looks  like ethanol.

But I’ll take a little bit of issue with Ezra Klein’s response:

So patriotic! It really explains why President Obama tapped Jeffrey Immelt, GE’s CEO, to lead the President’s Council on Jobs and Competitiveness. If this isn’t the sort of corporate behavior America needs more of, what is?

I’m sort of creeped out by this particular usage of the word “patriotic,” as though the alternative to the profit-maximizing corporation were the Great People’s Patriotic General Electric Corporation. (I also intensely dislike the proposition that paying taxes is an expression of patriotism, as though the state were the nation.) But I’ll say this: Yes, this is exactly the sort of corporate behavior America needs more of, inasmuch as our corporate-tax regime is kind of dumb, and also kind of corrupt, and one way of cleaning that up is to abolish it.

In spite of our having the second-highest nominal corporate-income tax rate in the developed world (Hello, Japan!), the rates actually paid by businesses vary wildly according to their political clout. Progressives look at that and see the evidence of businesses’ having undue influence on Washington; I look at that and see evidence of Washington’s undue influence on business. But it’s a two-way street, and the end product smells the same.

There are many arguments for a flat tax: Compliance costs are lower, it’s easier to understand, it doesn’t create a divide-and-conquer dynamic with regard to the tax brackets, it aligns taxpayers’ incentives, etc. But there’s a practical moral argument, too: The tax code is corrupt. Using the tax code as a cookie jar full of special favors for friends and supporters is corrupt. It does not matter that it’s legal, it is immoral. The purpose of taxes is to raise revenue for the government, not to repay political favors or to bribe voters with their own money. I do not think our tax system probably is really salvageable: Obamacare is not the only thing that should be repealed and replaced.

While everybody else was filling out their college-basketball brackets, I was working on my fantasy federal budget (I know, I know, I’m a lot of fun on dates), which is not yet complete, but which I will share when it is. (I’m planning a fantasy-budget reader contest.) My revenue side assumed a true flat tax on all forms of personal income — salaries, benefits, bonuses, dividends, inheritances, capital gains, etc. — and, once I’d trimmed the federal government back as small as I think we could realistically get it, figured that I could fund it with a flat rate of about 20 percent, and no corporate income tax. (I think this might be good for investment.)

The upside of the fiscal crisis that our country insists on marching toward is that it will give us the opportunity to enact radical reform of some of our most important institutions, and the tax code should be high on the list. A federal/state/local system that produces a $3.2 billion tax benefit for G.E. but taxes the pants off of poor people to fund useless schools that do their children very little good (and a great measure of harm, in many cases) is an unbearable burden. It has to go.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

Tags: Barack Obama , Debt , Deficit , Despair , General Shenanigans , Tim Geithner

Taxes for Thee, Not for Me


From the RNC this morning:


Senator John Kerry Is Avoiding Paying $500,000 In Taxes On His Yacht.

Obama’s First Nominee For HHS Secretary, Tom Daschle, Failed To Pay $128,000 In Taxes.

Treasury Secretary Tim Geithner Failed To Pay $34,000 In Taxes.

HHS Secretary Sebelius And Her Husband Had To Pay $7,000 In Back Taxes.

Labor Secretary Hilda Solis’ Husband Had A Tax Lien On His Business For 16 Years.

Nancy Killefer, Slated To Be The White House Chief Performance Officer, Had A $900 Lien On Her House For Failing To Pay Unemployment Taxes For Household Help.

Lael Brainard, Obama’s Nominee For Undersecretary Of The Treasury For International Affairs, Was Late In Paying Property Taxes.

Tags: Barack Obama , Charles Rangel , John Kerry , Kathleen Sebelius , Tim Geithner

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