SIGTARP Calls Out Tim Geithner On Various Violations Including Data Manipulation, Lack Of Transparency, “Cruel” Cynicism, And Gross Incompetence
by ilene - October 26th, 2010 1:53 am
SIGTARP Calls Out Tim Geithner On Various Violations Including Data Manipulation, Lack Of Transparency, "Cruel" Cynicism, And Gross Incompetence
Courtesy of Tyler Durden
SigTarp Neil Barofsky has just released the most scathing critique of all the idiots in the administration, with a particular soft spot for Tim Geithner.
On the failure of TARP to increase lending:
As these quarterly reports to congress have well chronicled and as Treasury itself recently conceded in its acknowledgement that "banks continue to report falling loan balances," TARP has failed to "increase lending" with small businesses in particular unable to secured badly needed credit. Indeed, even now, overall lending continues to contract, despite the hundreds of billions of TARP dollars provided to banks with the express purpose to increase lending.
On TARP’s sole success of boosting Wall Street bonuses:
While large bonuses are returning to Wall Street, the nation’s poverty rate increased from 13.2% in 2008 to 14.3% in 2009, and for far too many, the recession has ended in name only.
On TARP’s failure in general:
Finally, the most specific of TARP’s Main Street goals, "preserving homeownership" has so far fallen woefully short, with TARP’s portion of the Administration’s mortgage modification program yielding only approximately 207,000 ongoing permanent modifications since TARP’s inception, a number that stands in stark contrast to the 5.5 million homes receiving foreclosure filings and more than 1.7 million homes that have been lost to foreclosure since January 2009.
On the Treasury’s scam in minimizing publicized AIG losses, and on Geithner as a Wall Street puppet whose actions are increasingly destroying public faith in the government:
While SIGTARP offers no opinion on the appropriateness or accuracy of the valuation contained in the Retrospective, we believe that the Retrospective fails to meet basic transparency standards by failing to disclose: (1) that the new lower estimate followed a change in the methodology that Treasury previously used to calculate expected losses on its AIG investment; and (2) that Treasury would be required by its auditors to use the older, and presumably less favorable, methodology in the official audited financials statements. To avoid potential confusion, Treasury should have disclosed that it had changed its valuation methodology and should have published a side-by-side comparison of its new numbers with what the projected losses would be under the auditor-approved methodology that Treasury had used previously and will
by ilene - May 14th, 2010 11:25 am
Courtesy of Marla Singer, Zero Hedge
On the 5th of March in 1946, in Fulton Missouri, at Westminster College, Winston Churchill delivered an address (since christened the "Sinews of Peace") lamenting the burgeoning power and influence being slowly but surely gathered up by the Soviet Union. Perhaps the address will be familiar to some of you owing to its most famous passage:
From Stettin in the Baltic to Trieste in the Adriatic, an iron curtain has descended across the Continent. Behind that line lie all the capitals of the ancient states of Central and Eastern Europe. Warsaw, Berlin, Prague, Vienna, Budapest, Belgrade, Bucharest and Sofia, all these famous cities and the populations around them lie in what I must call the Soviet sphere, and all are subject in one form or another, not only to Soviet influence but to a very high and, in many cases, increasing measure of control from Moscow. Athens alone — Greece with its immortal glories — is free to decide its future at an election under British, American and French observation.
Ironic, as I will address, that he should mention Greece.
Much less well known perhaps is this later passage:
Our difficulties and dangers will not be removed by closing our eyes to them. They will not be removed by mere waiting to see what happens; nor will they be removed by a policy of appeasement. What is needed is a settlement, and the longer this is delayed, the more difficult it will be and the greater our dangers will become.1
The "Iron Curtain" came, of course, to signify the cavernous ideological, and eventually concretely physical, divide between East and West. It took some 43 years before it was lifted once more, first and haltingly, in the form of the removal of Hungary’s border fence in mid-1989 and then, of course, finally via the fall of the Berlin Wall in November that same year.
Not to be compared with a production of Italian Opera, the Iron Curtain did not describe a sudden, smooth, abrupt descent over the stages of Eastern Europe. Quite the contrary, its drop was in stutters of discrete, fractional lowerings, such that it was a full fifteen years after Churchill used the term before its ultimate expression, the Berlin Wall, was finally…
by ilene - January 14th, 2010 2:47 am
Karl speaks out again and suggests some sort of taxpayer strike. If you ask people in real estate and lending industries, many will admit knowing that lies and deception were ubiquitous. For example, see my interview with J.S. Kim:
Ilene: What did you learn while working in the banking industry?
J.S.: I was seeing an unsettling picture of industry excesses. I saw problems developing, for example, with mortgages – no document loans or liar loans. If the loan application didn’t support a mortgage, the loan might be denied at first, but then it was sent through a special process to convert it to a no document loan. Every bank did it. This was not specific to Wells Fargo. All the major U.S. banks had this “don’t ask, don’t tell” policy, so they could say they didn’t know. They either should have known from the start that the mortgages couldn’t be paid back, or they didn’t care because they were making huge commissions up front. So they would make the loans and then slice and dice them up and quickly sell them off.
Ilene: The banks knew what they were doing and knew they’d be bailed out as well?
J.S.: Yes, this happened before in the 1920s and I believe they knew it would happen again. The process of taking the clients’ money and making loans that are gambles (heads I win, tails the taxpayer pays) has a history that goes back to the Great Depression. They have the best of both worlds. The reward for risks stays with the banks top executives, but losses are shifted to the taxpayers. [more here>>]
Courtesy of Karl Denninger at The Market Ticker
Jan. 13 (Bloomberg) — Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein testified today that he was never asked to accept a discount on investment contracts his firm had with American International Group Inc….
The New York Fed said it had to make the payments after banks refused to accept so-called haircuts, according to a November audit from Neil Barofsky, the special inspector of the U.S. Troubled Asset Relief Program.
Had to eh? And they had to…. why?
by ilene - January 9th, 2010 3:48 pm
Jesse asks: "Does it seems as though I have barely given this annuitization effort a chance, a fair hearing, the benefit of the doubt, improperly assumed it might not have the best intentions of the American public at heart?" I’d say no. This looks like another wealth transfer device dressed up like the flying lipsticked pig. – Ilene
Courtesy of Jesse’s Café Américain
As a rule of thumb, the worst possible time to convert lump sum savings into a fixed income annuity would be when interest rates are historically low.
Although products may vary, this is roughly equivalent to buying long term bonds at a time when interest rates are likely to increase, substantially reducing your principal in real terms, and eroding your fixed returns through inflation.
For some reason the Obama Administration is promoting the idea now that there should be some encouragement for Americans to start converting their 401K’s and IRA’s into annuities, to provide themselves with lifetime income.
The effort is being spear-headed by Mark Iwry of the Treasury and Phyllis Borzi of the Department of Labor. Here is a paper written on the subject by Mark Iwry when he was at the Brookings Institution.
The essence of this paper is that distributions from IRA’s and 401K’s would automatically be rolled into an annuity providing a monthly income by default.
This concept is known on the Street as the handling fees for meager returns pork barrel pigfest. The Fed likes it because they will undoubtedly get a two year rolling chunk of the people’s retirement cash to play with.
Perhaps just rolling those 401K’s and IRA’s into Social Security or the Long Bond would be what they have in mind. Somehow the panacea of TIPS with inflation defined by the government sounds probable. The drawback perhaps is that this would not generate the highest recurring fees for Wall Street and the FIRE sector, which have to be eyeing that ‘cash on the sidelines’ hungrily.
How about Patriot Bonds that are fully invested in Mortgage Debt formerly owned by the Fed, with some tranches of Commercial Real Estate to add some zest to the recipe? The Treasury can give this option a small tax break, which can be largely consumed by Wall Street fees and mispricing…
by ilene - January 8th, 2010 1:57 pm
Should be interesting, Geithner explaining the AIG bailout, gifting of taxpayer money to AIG’s counterparties, and surrounding secrecy. – Ilene
By Silla Brush, The Hill
The Treasury secretary would be asked about whether government officials improperly pressured AIG during the bailout.
Democratic and Republican lawmakers on Friday called on Treasury Secretary Timothy Geithner to testify about whether government officials improperly pressured American International Group during the bailout.
Geithner has come under renewed criticism this week following concerns that the Federal Reserve instructed AIG not to disclose how billions of taxpayer dollars would be used during the bailout…
Rep. Elijah Cummings (D-Md.) on Friday called for a full investigation into the issue and for testimony from Geithner.
“In all cases, the money provided by the [Federal Reserve Bank of New York] to AIG came from U.S. taxpayers and taxpayers had the right to know at the time the money was being provided how it was to be used," Cummings wrote.
Rep. Spencer Bachus (R-Ala.) urged House Financial Services Committee Chairman Barney Frank (D-Mass.) to schedule a hearing into Geithner’s role. Meanwhile, Issa and Rep. Patrick McHenry (R-N.C.) urged Rep. Edolphus Towns (D-N.Y.), chairman of the House Committee on Oversight and Government Reform, to request testimony from Geithner through subpoena if necessary…
by ilene - November 18th, 2009 8:28 pm
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.
The authoritative new narrative describes how, while bailing out insurance giant AIG last fall, a team led by Geithner failed nearly every step of the way.
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.
"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," the Office of the Special Inspector General for the Troubled Asset Relief Program said.
Wall Street firms like Goldman Sachs, Merrill Lynch and Wachovia got full value for their derivatives contracts with AIG, and taxpayers got the bill. In total, $27.1 billion of public money was transferred to companies that did business with AIG…
As Goldman Sachs put it in a press release last March, the bank had "no material direct economic exposure" to AIG.
Well, it depends on what you mean by "material direct economic exposure."
In a report issued earlier this week, TARP special inspector general Neil Barofsky took a shot at Goldman’s claim that it was insulated against AIG’s demise. While, the report’s language is arcane, the message is simple: if AIG had gone under, Goldman Sachs would have had significant difficulty trying to collect on the the derivatives bets it placed with other banks in order to offset potential AIG losses.
Did The Markit Group, A Black-Box Company Partially Owned By Goldman Sachs and JP Morgan, Devastate Markets?
by ilene - November 18th, 2009 4:57 pm
Courtesy of Mark Mitchell at Deep Capture
Although much attention has been directed at the contribution made by credit default swaps to the financial crisis, most discussion has focused on the companies, such as American International Group (AIG), that posted big losses because they sold these instruments without sufficient due diligence.
Another line of inquiry has not been pursued, however, though it is of equal, and perhaps greater, significance. That line of inquiry concerns the way in which the prices of credit default swaps effect the perceived value of all forms of debt — corporate bonds, commercial mortgages, home mortgages, and collateralized debt obligations — and as a result, the ability of hedge funds manipulators to use credit default swaps in bear raids on public companies.
If short sellers can manipulate the price of credit default swaps, they can disrupt those companies whose debt is insured by the credit default swaps whose prices are manipulated. The game plan runs as follows: find a company that relies on a layer of debt that is both permanent, and which rolls over frequently (most financial firms fit this description). Short sell that company’s stock. Then manipulate the price of the CDS upwards, preferably into a spike, as you spread the news of the skyrocketing CDS price (perhaps with the cooperation of compliant journalists at, say, CNBC).
Because the CDS is, in essence, an insurance policy on the debt of the company, the spiking CDS pricing will cause the company’s lenders to panic and cut off access to credit. As this happens, the company’s stock will nosedive, thereby cutting off access to equity capital. Thus suddenly deprived of credit and equity, the firm collapses, and the hedge fund collects on its short bets.
Moreover, credit default swap prices are the primary inputs for important indices (such as the CMBX and the ABX) measuring the movement of the overall market for commercial and home mortgages. In the months leading up to the financial crisis of 2008, short sellers pointed to these indices in order to argue that investment banks – most notably Bear Stearns and Lehman Brothers – had overvalued the mortgage debt and property on their books. Meanwhile, several hedge funds made billions in profits betting that those indexes would drop.