In Monday’s NY Times, Paul Krugman joins a rather lengthy (and growing lengthier) list of folks recently ripping former Treasury Secretary Tim Geithner a new one for his obvious penchant for revisionist history in his new autobiography, “Stress Test: Reflections on Financial Crises.”
Springtime for Bankers
New York Times
MAY 19, 2014
By any normal standard, economic policy since the onset of the financial crisis has been a dismal failure. It’s true that we avoided a full replay of the Great Depression. But employment has taken more than six years to claw its way back to pre-crisis levels — years when we should have been adding millions of jobs just to keep up with a rising population. Long-term unemployment is still almost three times as high as it was in 2007; young people, often burdened by college debt, face a highly uncertain future.
Now Timothy Geithner, who was Treasury secretary for four of those six years, has published a book, “Stress Test,” about his experiences. And basically, he thinks he did a heckuva job…
…where is the rebound in the real economy? Where are the jobs? Saving Wall Street, it seems, wasn’t nearly enough. Why?
…fiscal austerity wasn’t the only reason recovery has been so disappointing. Many analysts believe that the burden of high household debt, a legacy of the housing bubble, has been a big drag on the economy. And there was, arguably, a lot the Obama administration could have done to reduce debt burdens without Congressional approval. But it didn’t; it didn’t even spend funds specifically allocated for that purpose. Why? According to many accounts, the biggest roadblock was Mr. Geithner’s consistent opposition to mortgage debt relief — he was, if you like, all for bailing out banks but against bailing out families…
… In the end, the story of economic policy since 2008 has been that of a remarkable double standard. Bad loans always involve mistakes on both sides — if borrowers were irresponsible, so were the people who lent them money. But when crisis came, bankers were held harmless for their errors while families paid full price.
And refusing to help families in debt, it turns out, wasn’t just unfair; it was bad economics. Wall Street is back, but America isn’t, and the double standard is the main reason.
Krugman discusses the myth that the Wall Street bailout didn’t cost U.S. taxpayers as much as many feared, among many other aspects of “the Geithner story.” But, I thought I’d turn this aspect of that ongoing saga over to Naked Capitalism’s Yves Smith, in her devastating takedown of Geithner in his feeble attempt to rewrite history…
I’m just scratching the surface of Yves’ extremely well-documented (as usual) reality check on Andrew Ross Sorkin’s (arguably, the most in-the-tank, Wall Street shill in the MSM) Geithner puff piece. Please take the time to read it!
Andrew Ross Sorkin, Timothy Geithner, and the Three Card Monte Model of Propaganda
by Yves Smith
May 12, 2014
Truth be told, I had really wanted to ignore Andrew Ross Sorkin’s artfully packaged Timothy Geithner puff piece in the Sunday New York Times magazine. It’s is a major element in the pre-publication public relations push for Monday’s release of Geithner’s
rewriting of historybook, Stress Test.
I’ve described the Geithner’s repeated claim that the TARP made money as three card monte, since looking at the TARP in isolation from the hidden tax on savers of ZIRP and QE was misleading. ZIRP alone is estimated to have cost US savers over $300 billion a year, more than 10x in a single year of the total “profit” attributed to TARP. And as we’ll discuss shortly, even that claim does not stand up to scrutiny…
…The focus on TARP (and to a lesser degree, Lehman) allows Sorkin to omit mention of actions that were clearly Geithner’s doing, including: his fighting Sheila Bair tooth and nail on resolving the clearly insolvent Citigroup; his decision to pay AIG credit default swaps counterparties 100 cents on the dollar; his defense of the failure to haircut AIG employees’ pay; Treasury’s acceptance of intransigence by AIG’s CEO, Robert Benmosche; his refusal to use $75 billion in TARP that Paulson’s Treasury had courteously left aside for homeowner relief; the clearly too permissive “stress tests,”; Geithner’s Treasury allowing banks to repay TARP funds early rather than rebuild their balance sheets (get this: because they were eager to escape very limited restrictions on executive pay); Treasury letting banks repay TARP warrants at an unduly cheap price until Elizabeth Warren’s Congressional Oversight Panel caught them out; his cynical policy of “foaming the runway,” as in using what were billed as homeowner relief programs merely to attenuate foreclosures and thus spread out bank losses, which had the secondary effect of wringing more money out of already stressed borrowers before they were turfed out of their homes. And this is far from a complete list of Geithner’s actions that favored banks over the public at large…
The same day that Yves published her takedown of Geithner, Pam Martens picked-up on a few other aspects of the overwhelmingly complete Wall Street capture of our philosophically
blind complicit, former Treasury Secretary…
Then there’s the oft-quoted (amongst fellow Democrats) economist Brad DeLong’s huuuge “WTF!” on the entire propaganda trip that Geithner’s now on; just checkout the headlines of an entire series of overwhelming, literary ballistic missiles that DeLong’s fired off over the past week on Timmy: see HERE, HERE, HERE, HERE and HERE. (Truly amazing! Don’t think I’ve ever seen DeLong go off like this before.) Even Jared Bernstein, Vice President Biden’s former economic advisor, agrees with DeLong.
Charges of Lies Swirl Around Tim Geithner’s New Book,
By Pam Martens
Wall Street On Parade
May 12, 2014
Tim Geithner, former head of the New York Fed during the lead up to the Wall Street melt down, then Secretary of the Treasury in President Obama’s first term, is undergoing his own version of a big bank stress test: does he have the capital to survive the storm he has stirred up with his new, revisionist history book, Stress Test: Reflections on Financial Crises.
Geithner’s book has barely made it to the bookstore shelves (it’s slated for official release today) and already he’s been called a liar by R. Glenn Hubbard, Dean of the Columbia Business School; Geithner is effectively calling author Ron Suskind a liar in the book; and the book’s attack on Neil Barofsky, former Special Inspector General of the Troubled Asset Relief Program (TARP) has warranted a strong response from Barofsky where he says he doesn’t believe former Treasury Secretary Hank Paulson made the remarks that Geithner has attributed to him against Barofsky…
…Geithner’s animosity toward Barofsky likely stems from Barofsky’s portrait of Geithner in Bailout: How Washington Abandoned Main Street While Rescuing Wall Street?, the book by Barofsky that was released in 2012.
During the financial crisis, Barofsky was the Special Inspector General of TARP, one of the key bank bailout programs. His official job was to monitor how the hundreds of billions of taxpayer dollars were spent.
According to Barofsky, the Home Affordable Modification Program (HAMP) did not have a goal of keeping struggling families and children in their homes. It’s real goal, according to U.S. Treasury Secretary Tim Geithner, was to “foam the runway” for the banks.
Barofsky explains as follows in his book:“For a good chunk of our allotted meeting time, Elizabeth Warren grilled Geithner about HAMP, barraging him with questions about how the program was going to start helping home owners. In defense of the program, Geithner finally blurted out, ‘We estimate that they can handle ten million foreclosures, over time,’ referring to the banks. ‘This program will help foam the runway for them.’The evidence that this is exactly what the plan was is buttressed by the thousands of homeowners who have reported that modifications were promised, they had completed the paperwork, months or even years went by, then with no warning they were foreclosed on by their bank. They were the foam under the landing gear of a hijacked plane and a lunatic control tower.
“A lightbulb went on for me. Elizabeth had been challenging Geithner on how the program was going to help home owners, and he had responded by citing how it would help the banks. Geithner apparently looked at HAMP as an aid to the banks, keeping the full flush of foreclosures from hitting the financial system all at the same time. Though they could handle up to ‘10 million foreclosures’ over time, any more than that, or if the foreclosures were too concentrated, and the losses that the banks might suffer on their first and second mortgages could push them into insolvency, requiring yet another round of TARP bailouts. So HAMP would ‘foam the runway’ by stretching out the foreclosures, giving the banks more time to absorb losses while the other parts of the bailouts juiced bank profits that could then fill the capital holes created by housing losses.”
In this fascinating interview today with Susan Page at USA Today, Geithner actually uses the plane analogy, but his image of himself is something like that of Indiana Jones, hero to the rescue, defying all odds:“It’s like you’re in the cockpit and the plane’s on fire and smoke is filling the cabin. And you’ve got a bunch of people on the plane — you’ve got some terrorists, or you’ve got some people who built the plane or didn’t design the fire system right — and people want you to come out of the cockpit and put them in handcuffs or beat them up. And it’s understandable, but you’ve got to land the plane safely if you want to protect people from the risk of catastrophe.”The interesting thing about those Wall Street big-bank “terrorists” and the regulators who “didn’t design the fire system right” is that they’ve gained more power and ability to bankrupt the nation since the flaming aircraft landed on the runway foamed with the human suffering of evicted families who were robo-signed out of their homes…
And, most recently, Felix Salmon, over the weekend: “Tim Geithner, unreliable narrator,” “You can’t trust what you read in his book.”
There were many other pundits that had (and are still having) “WTF” moments over the past week concerning Tim Geithner’s fictional autobiography.
As of the publication of Monday’s NY Times, we now know that Paul Krugman’s joined that list, too.
As far as calculating the true costs of our country's bailout of Wall Street's concerned, all I can say about that is: it was and IS about a hell of a LOT more than the just the TARP program. In fact, I don't think we'll even come close to knowing the full answer to that question for at least a generation or two. But, as I've noted it many times in previous posts here, this entire episode in our country's history has facilitated and, concurrently, downright institutionalized the greatest financial pillaging of a society in human history.
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