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Obama’s Geithner Problem

November 17, 2009

On November 1, 2009 President Obama’s Secretary of Treasury, Timothy Geithner appeared on “Meet The Press” arguing that American banks, many of whom received billions of dollars in bail outs from U.S. taxpayers, should be allowed to engage in more risky financial transactions. Considering the overwhelming consensus that the repeal of The Glass-Steagall Act in 1999 by then President Bill Clinton led directly to the economic downturn of 2008 by allowing commercial banks to act as investment banks, the realization that Obama’s most important voice on financial affairs desires more dangerous speculation should ring alarms for all Americans.

As stated here:

“Ten years ago to the day, the government reversed one of the key elements of the Depression-era banking laws, knocking down the firewall between commercial banks, which take deposits and make loans, and investment banks, which underwrite securities.

But 10 years later, the end of Glass-Steagall has been blamed by some for many of the problems that led to last fall’s financial crisis. While the majority of problems that occurred centered mostly on the pure-play investment banks like Lehman Brothers, the huge banks born out of the revocation of Glass-Steagall, especially Citigroup, and the insurance companies that were allowed to deal in securities, like the American International Group [AIG], would not have run into trouble had the law still been in place.”

Thus far, the Obama administration under the direction of Geithner at the Treasury Department has been unwilling to bring back the important protections of Glass-Steagall to preclude commercial banks from the same dangerous speculation that Geithner advocates in the above video. Much to the dismay of the Administration’s own adviser, former Chairman of the Federal Reserve Paul Volcker, as illustrated on this blog here, Obama and his financial team have made no effort to stop commercial banks from playing with customer deposits as if they were gambling in Vegas.

Now comes a revelation that further undermines the trust Americans can put in the Obama administrations financial advisors. Its been discovered that Sec. Geithner, while chairman of the New York Federal Reserve, oversaw billions of taxpayer dollars being funneled erroneously to AIG backers like Goldman Sachs.

As this piece in the Huffington Post indicates:

“A brutal report issued Monday by a government watchdog holds Timothy Geithner — then the head of the Federal Reserve Bank of New York and now the nation’s Treasury Secretary — responsible for overpayments that put billions of extra tax dollars in the coffers of major Wall Street firms, most notably Goldman Sachs.

Instead of bargaining with AIG’s numerous counterparties to resolve its billions of dollars in souring derivatives contracts, Geithner’s team ended up paying top dollar for toxic assets — “an amount far above their market value at the time,” the report notes.”

How much longer are Americans going to stand for the fleecing that took place due to these huge financial bailouts when we now realize that some of the responsible parties for the meltdown were rewarded wrongly with hefty pay offs by the head of Obama’s financial team?

If President Obama has any interest in maintaining the trust of the American people in his ability to guide us through the current financial crisis, it would behoove him to look closley at his financial advisers and inquire if they represent the spirit of “hope and change” that inspired so many Americans to vote for him. It would be unfortunate if the  heralded “First Black President” ended up being nothing but a lackey for Wall Street instead of a leader with vision simply because of poor choices in his cabinet.

But in the end….its only money. Right?

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3 Comments leave one →
  1. Nirad permalink
    November 17, 2009 2:48 pm

    Since the rise of Reaganomics, US financial regulation has consisted of little more than hiring the foxes to guard the hen house. Geithner continues that tradition. This has to end. It’s certainly not the “change” I voted for.

  2. November 18, 2009 1:58 am

    I don’t believe those in charge during the biggest financial collapse should be trusted to ‘ make it better’. I believe he’s a tax-evading crook. I believe that he should have never been appointed. And, I don’t believe he’s serving the President’s best interests. I definitely know that the policies he approves of aren’t good for ‘ MAIN STREET’.

    • November 18, 2009 9:29 am

      rikyrah:

      Good to see you. I know I took a long break, but I’ve been back for a while and really missed your comments.

      My biggest problem with President Obama stems directly from his economic team. I find their advise beyond problematic. They will be a consistent focus of this Blog.

      President Obama was given a horrible political hand when he came to office. However, I think he’s surrounded himself with too many stale left over Clintonites and DLC types. His Presidency is showing none of the creativity and dynamism illustrated by his campaign. Unfortunately, hope and change has turned into politics as usual, and sometimes even worse.

      Hopefully he can find some way to turn this around. Sadly, if he doesn’t make serious changes to his advisers and cabinet, I think he’s in for a rocky road.

      Please come back and comment more frequently.

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