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Geithner vs Huntsman: Trash vs Truth

Posted by Larry Doyle on July 19, 2012 10:26 AM |

I don’t know about you, but I find myself often every morning discounting much of what I read in financial periodicals as mere noise if not outright trash. Trash? Yes, trash.

In my opinion, the garbage spewed is not a function of a broken sewer line, so to speak, but very much a function of individuals and institutions working hard to disguise or pollute a situation or a reality.

In the midst of the trash, I welcome and embrace commentaries that promote the truth.

I touched both ends of this trash vs. truth spectrum in reading the Financial Times this morning. Let’s juxtapose the following:

Geithner Defends Libor Actions, in which our Treasury Secretary states: > > >

“We acted very early in response to concerns that the processes that set this rate was impaired and flawed and vulnerable to misrepresentation,” Mr Geithner said in his first public comments on the Libor scandal during a CNBC television interview.

“I took the issue to brief the entire US regulatory committee on this at a very early stage,” he added. “We brought it to the attention of the British and took the exceptional step in putting in writing to them a detailed set of recommendations that revealed the extent of the concerns in that context.”

We know the New York Fed learned of the rigging of Libor at least as early as 2007. The scandalous behavior persisted into 2009. We are supposed to believe the New York Fed, the single most powerful banking institution in the world, could not have stopped this manipulative behavior? We would have to elevate our naivete to an ‘off the charts’ setting to accept that premise.  The simple fact is the US Treasury utilized the manipulated rate in launching a number of programs.

When the US launched the Term Asset-Backed Securities Loan Facility – a bailout programme designed to increase liquidity – it used Libor to help set the interest rate.

Where do we put Geithner’s comments? In the TRASH. Let’s step out of Geithner’s cesspool and review comments put forth by former governor of Utah and 2012 Republican Presidential candidate Jon Huntsman, who writes True Conservatives Despise America’s Crony Capitalism:

Elections are a means to an end, not an end in and of themselves. In the face of our present national crisis, merely electing a Republican president and Congress is not ambitious enough. Any Republican victory must be fuelled by a reform agenda that addresses the fiscal, economic, and trust deficits in the US.

The founding fathers’ vision of limited government, one that empowers free markets and creates a level playing field for all citizens, is being replaced by a form of crony capitalism where powerful economic interests blur the distinction between regulators and regulated.

Is there any doubt about that? None here.

We need financial reform so that innovators and entrepreneurs have access to capital without turning our banking system into a public utility. This means creating a world where we are no longer held hostage to banks that are too big to fail.

More truth to power in that statement along with a massive discounting of Dodd-Frank in the process. Give me more.

Structural problems within our political institutions incentivise crony capitalism: the best connected perpetuate their policy preferences, be they outdated weapons systems or subsidies for big bank bailouts.

At the heart of the problem is the “revolving door” through which the overseers and the overseen morph into one another. Wall Street and government have become almost interchangeable.

A healthy serving of ‘sense on cents‘ right there. But what are we to do? Huntsman concludes:

Ultimately, to address the trust deficit between citizens and their government, we must change the incentive structure in our capital city. Term limits for Congress, sensible campaign finance reform and stopping the revolving door for those in Congress and the White House are at the core of these changes.

Without it there is no hope for life, liberty and the pursuit of happiness.

We need leaders. Will we lead and demand these changes and these truths Huntsman puts forth? Or will we choose to wallow amidst the cesspool and allow our children to be dragged down in the process?

What’s it going to be? Trash or truth? It is only the future of America and our children that is at stake.

Larry Doyle 

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

 

 

  • Fever

    I agree, Huntsman certainly appears to speak the truth and Geithner is a pile of trash. What idiot put Geithner in charge of the United State Treasury? In which election can I vote for Huntsman? What party generally agrees with the ideas presented by Huntsman?

    Those questions were meant to alert you that the questions you posed at the end of your post have already been answered.

    • LD

      Fever,

      I hear you. The question begs and the reason Huntsman writes is “will the R’s not only agree but embrace and implement the ideas?”

      • Fever

        In other words, you think there is a chance in hell the D’s might agree, embrace and implement the ideas presented by Huntsman? I didn’t think so.

    • Caliban

      I admire John Huntsman, and I had hoped the Republican party would have the sense to nominate him. As we all know. their top three contenders turned out to be a discredited demagogue from the past, an unelectable religious fanatic who had already been dismissed from government by his own state, and are left now with a classic Crony Capitalist who thinks that American Indians are the Lost Tribes of Egypt.

      Obama is the only sane Capitalist, sane Regulator, and genuine Christian now in the race. And the Republican Party is lost in an economic wilderness of its own making.

      I hear George W. Bush may not be appearing at his own party’s convention. Is today’s Republican Party too embarrassed to invite him or is he too embarrassed to go?

      Vote Obama for four more years.

      • Caliban

        Romney also thinks (more accurately, no doubt) that they are the lost tribes of Israel. But then, sadly, so probably does Huntsman.

      • LD

        With all due respect, I think there would be many in America and here at Sense on Cents, who would take very serious question with your statement,

        Obama is the only sane Capitalist, sane Regulator, and genuine Christian now in the race.

        I think you might be defining those characterizations very, very loosely. As evidence of such, perhaps you may care to review a LOT of the material which I have collectively put under the heading of Wall Street-Washington Incest.

  • LD

    You are right, I did not think so either, but neither has Spencer Bachus or other Rs on the Congressional Banking and Finance committees shown an inclination.

    On these issues raised, the fact is both the Rs and Ds AND the regulators are all on one side of the table and we are on the other.

  • Jeff

    I like the approach Singapore takes – it pays its public servants huge salaries to attract top talent. Maybe we need to up the salaries at our financial regulatory bodies to compete with the folks who sit across the table during audits. Shouldn’t we have equal talent on the side of the taxpayer?

    • fred

      Jeff,

      It’s not always about the difference in talent across the audit table, it’s often about the deals being made by the bosses in the back room.

      Junior g-men (and women), who have uncovered problems/issues have often been told to back off and stand down.

      We went through a period of time where regulators were seen as facilitators rather than enforcers. We need structural and cultural change in Washington because our government just doesn’t get it. People (in Washington) are so out of touch with the simmering public outrage that they continue to act without any sense of responsibility or accountibility.

      The wake up call that went out after the midterm elections was not heeded, a deal here, a deal there, periodic public Congressional hearings, it wasn’t long before it was back to business as usual.

      We continue to weaken as a nation, if we do not change direction, we will be forced to first share then forfeit our position of global leadership.

      While ‘Rome’ continues to burn, our stronger global business partners are marking time and forging other alliances.

      We owe our childen more than an appology!

  • Peter S.

    LD, don’t forget Senator Shelby. I bet his ears are buzzing.

  • GA

    Two problems. One, Geithner needs to be prosecuted for all that he has done, including as Fed NY Pres, letting Henry Paulson spread billions of dollars of crap CDO’s. I agree with Larry there.

    But Larry, truth is, the true conservative does not control the Republican Party. I don’t think true conservatives believe in leaving bankers deregulated. I don’t think they are like Schiff and the Libertarians.

  • Fever

    Let’s rehash, on one side of the debate we have the Treasury Secretary serving under and supported by Barrack Obama labeled “trash”. On the other side, we have a Republican applauded by all the commenters I’ve read.

    I can appreciate the fact Geithner doesn’t speak for all Democrats and Huntsman doesn’t speak for all Republicans. But in November, you will have the choice between a Democrat and a Republican. Stated differently, I guess you can hope Obama will change or actually do something about the current situation. Hope…a common verb required to support Democrats.

  • Bill

    I’m glad to see some advocacy of congressional term limits, which would go a long way toward addressing the nation’s problems in my opinion. Contrary to what the political elites espouse, term limits is not some new concept. George Mason advocated such in the early days of our country, his logic being that those who make the laws should periodically retire to private life so that they may live under those same law. We regularly see examples of the law not being applied to the politically connected, such as Tom Daschle, Charles Rangel, Geithner and most recently John Corzine.

  • fred

    LD,

    Let’s keep the story alive, since Sec. Geithner, the NY Fed Head at the time, said he put together a written, detailed set of recommendations to the British concerning LIBOR, let’s take a look at the written document…

    …and while where at it, how about Sec Geithner and the NY Fed releasing any emails relating to the matter, certainly there must have been many since the NY Fed took the time to develop a detailed list of recommendations.

    Romney should be all over this one, his silence is deafening!

    • LD

      Fred,

      This will be a 15 round fight. . . at least. We are in the early stages of Round 1.

      Settle in …

  • wallstreet69

    I don’t understand. Libor rigged a bp here or there for a firm’s positional gain. Sure. Fraud!!! Bring them to justice.

    Are you arguing the whole system (banks & regulators) should be put on trial and persecuted because governments stepped in, guaranteed the system and rigged the market so it wouldn’t implode in 2008? The alternative, a slow bleed over the next decade with the hopes it doesn’t get out of hand and do away with our current way of life. I feel like this is a self inflected wound. Too big. We are all complicit. Americans as a whole. For 3 decades we’ve all fed and perpetuating a debt fueled economy that resulted in this outcome. Manipulating LIBOR? Symptom. Root cause? Capitalism? Am I am marxist? no. I get sick whenever I see Gspan, Rubin, Sandy W., Komansky on TV. Those are the guys that should be held accountable. Not these JV players who are now holding the bag.

    • LD

      WS69,

      The manipulation that we know of began at least as early as 2005. The banks and regulators would like the focus to seemingly simply zero in on the crisis period of 2008.

      The misappropriation, misallocation, or dare I say theft of funds is untold. This is not some garden variety crime.

      I am arguing that there should be full discovery and exposition of the truth so that the public and investors everywhere can understand what transpired.

      JV Players?

      I do not think so and wrote as much the other day, in my commentary, Libor Scandal: Who’s Really to Blame?

      Are we to believe that a manipulative scheme of this scale is the work of a relatively small number of mid-level execs? Stop it. Talk about taking naivete to a stratospheric level.

      The heads of each desk involved in this mess have/had enormous managerial oversight responsibilities. Included in those responsibilities is the review of e-mails which are flagged to detect questionable activities. Should the blame stop there? Not even close. Those managers would be required to report questionable activities to their superiors and the appropriate people within Compliance. At this point, we are reaching into very senior levels of each and every Wall Street bank. Can we stop digging? Not yet.

      It defies logic to think that at some point the heads of Compliance and Trading would not have mentioned the manipulation of a rate such as Libor to the highest levels of the organization. Not to do so would be to risk career suicide — the very career suicide these individuals now face.

      Root cause? Capitalism? I would beg to differ. The root cause is not capitalism. Capitalism has been abused by what I would define as crony capitalism and continues to be abused. Crony capitalism — and all of its players within the banking and regulatory system, including those you reference — should be exposed and held to account.

      Believe me, America and Wall Street will be MUCH stronger for it.

  • Obsvr-1

    At the heart of the problem is the “revolving door” through which the overseers and the overseen morph into one another. Wall Street and government have become almost interchangeable.

    INDEED — Washington and Wall Street are the modern day equivalents to

    SODOM and GHOMORRAH …. need to tear down and rebuild, with a solid moral and ethical foundation … A good place to start would be to Follow the Constitution — how novel.

  • Obsvr-1

    Oh by the way,

    Mattel should create the Geithner doll, pull the string and out spews the Trash Talk.






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