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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.



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