Self Directed Investor Inc
SDI: "Empowering investors with ideas and education"
Symbol Lookup »  
Topics:ChinaETFsEarningsEconomyEnergyForexGoldIncomeLessonsIdeasTrading

  • Other news: News from PR Newswire
| More

Fiscal Cliff Negotiator Timothy Geithner is the Right Man for the Job

Wed, Nov 28, 10:32 AM ET, by Bob McTeer

The President has designated Treasury Secretary Timothy Geithner to head his administration's team in the fiscal cliff negotiations. In my opinion, this is the most-best or least-worse choice he could have made from the perspective of getting a reasonable deal done. I base that not on my years serving with Tim on the FOMC—which were positive for my thesis—but, ironically, on his being cast as a villain in two books I recently read.

The two books are Bull By The Horns by Sheila Bair, former head of the FDIC, and Bailout by Neil Barofsky, former Special Inspector General in charge of oversight of TARP. The populist subtitle of Bailout is An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street. I enjoyed both books and learned from them despite their rough treatment of a friend of mind.

There is, of course, a natural tension between the head of an organization, in this case the TARP (Troubled Asset Relief Program), and its Inspector General. The boss doesn't like to be bossed, and the cop doesn't want to be disrespected. Even so, Mr. Barofsky made a fairly convincing case that Mr. Guitner doesn't (at least didn't) play well with others. Ms. Bair also made that case convincingly, although she dealt with Mr. Geithner as a fellow regulator on a wider range of issues than just TARP. However, it is the TARP issue that I will address here.

Mr. Barofsky felt that TARP money was being shoveled out the door willy- nilly with inadequate safeguards. Based on personal observation of the other side of that process, I think he overstated his case in that regard. The fact that TARP assistance to banks made a profit for the taxpayer supports my view on that. Barofsky's main complaint, however, shared by Ms. Bair, was that those in charge of TARP were not making the capital injections into banks conditional on the banks using the additional capital to expand lending. I find that charge illogical as well as naĂŻve.

The banks that needed additional capital, as confirmed through a rigorous screening process by their regulators, had a hole to fill. They needed additional capital to fill that hole. The TARP injections of capital were designed to make up a deficiency. The banks couldn't use their TARP capital to make up the deficiency AND expand lending at the same time.

There was admittedly some language used in the run-up to the TARP legislation passing that assistance would be given only to "sound" banks. And, there probably was some talk of needing to augment the ability of banks to lend. However, logic tells you that, if the banks were ALREADY sound, there would be no need for assistance. What "sound" had to mean was that the bank would be sound AFTER the injection of capital. Many banks were denied TARP assistance because their regulators didn't think they met that test.

What Barofsky, and to some extent Bair, did was take the language of "only to sound banks" too literally and too seriously and constantly beat Geithner over the head with it. Barofsky kept insisting that TARP be tied to additional lending when he should have known that was impossible. Of course, Guitner resisted, although he was captive to some of the early misleading language used, and he certainly couldn't acknowledge that TARP was helping "unsound" banks.

What does all this have to do with Geithner as lead negotiator on the fiscal cliff? The connection I make is that he has demonstrated an ability and willingness to resist the extreme positions of his "allies" in order to reach sensible outcomes. He is not an ideologue, and he is willing to compromise. He may well irritate those on his side of the table, but what is more important is that he can work with those on the other side of the table. We'll see.

 


SDI Glossary: "Asset" Definition
SDI Glossary: "TA" Definition
This Article's Word Cloud:   Bailout   Bair   Barofsky   Geithner   General   Guitner   However   Street   TARP   There   What   additional   although   assistance   banks   being   books   capital   case   charge   couldn   didn   doesn   fill   fiscal   former   have   head   language   least   lending   made   make   only   regulators   side   some   sound   table   that   their   there   think   this   those   used   well   were   with   would

| More

Reflections on the Greek Tragedy
Fri, Jul 17, 3:51 PM ET, by Bob McTeer

(This was written on July 8, 2015.) In the late 1980s, I spent about 16 ...

Everything You Should Know about Taxing Carbon
Thu, Jun 25, 10:42 AM ET, by Donald Marron

Climate change is hot. From the popes encyclical to the upcoming United Nations conference in ...

The Fed Should Act on July 29
Mon, Jun 15, 3:41 PM ET, by Bob McTeer

I agree with the consensus view that September 17 is the most likely date for ...

Trade Is Not About Counting Jobs; It's About Making Jobs Count
Fri, Jun 12, 12:41 PM ET, by Bob McTeer

I view the House vote today on trade-promotion authority, a necessary prelude to an important ...

Monetary Freedom
Fri, May 29, 12:31 PM ET, by Bob McTeer

Okay, I confess. I usually drive under the speed limit to avoid getting stopped for ...

Return of the Cicadas
Tue, May 26, 9:42 AM ET, by Donald Marron

The worlds most fascinating insects live in the eastern United States. Periodical cicadas spend most ...

Our Weakening Economy Is Getting Harder To Ignor
Sat, May 16, 2:21 PM ET, by Bob McTeer

We had two decent GDP quarters in mid-2014, and that's about it. The 4th quarter ...

Productivity Is Down: Are U.S. Workers Slacking Off?
Mon, May 11, 12:41 PM ET, by Bob McTeer

U.S. labor productivity fell at a 1.9 percent annual rate in the first quarter, the ...

The FOMC's Cacophony
Sat, Apr 11, 12:51 PM ET, by Bob McTeer

When Buddy Holly was little, he insisted on getting on the stage with his uncle's ...

More on the Euro-Dollar Exchange Rate
Fri, Mar 13, 6:21 PM ET, by Bob McTeer

Nineteen countries now use the Euro as their currency. Fifty states use the Dollar as ...

Dollar-Euro Parity? Let the Market Figure It Out
Wed, Mar 11, 3:11 PM ET, by Bob McTeer

In recent years, in response to those who complained about our "weak" dollar and longed ...

Let 'Er Rip, Janet; Let's Get It Over With
Sat, Mar 7, 3:11 PM ET, by Bob McTeer

"Let 'er rip, let it fly; Come on baby, say it, do you think I'm ...

Three Things You Should Know About Dynamic Scoring
Fri, Feb 27, 10:12 AM ET, by Donald Marron

The House recently changed the rules of budget scoring: The Congressional Budget Office and the ...

Current Monetary Policy: A Keynesian Distortion
Wed, Feb 18, 4:31 PM ET, by Bob McTeer

One amusing thing about watching financial TV these days is that no analyst wants to ...

Todays Retail News Reel
Wed, Feb 18, 9:21 AM ET, by RetailSails.com

Here is what we are paying attention to in today's news:Time To Get Into Dollar ...

Tax Policy and Investment by Startups and Innovative Firms
Mon, Feb 9, 2:32 PM ET, by Donald Marron

Our tax system includes many provisions to boost business investment, particularlyby startups and innovative firms. ...

Inflation Targeting or Deflation Avoidance?
Sun, Feb 8, 4:11 PM ET, by Bob McTeer

. ...

A Strong Dollar Doesn't Attract Foreign Capital - Expectation of a Stronger Dollar Does
Wed, Feb 4, 7:51 PM ET, by Bob McTeer

Whether the dollar is strong or weak matters for our exports and imports because their ...

Fourth Quarter GDP Reverts to the Weak New Norm
Sat, Jan 31, 4:21 PM ET, by Bob McTeer

Real GDP increased at only a 2.6 percent annual rate from the third to the ...

Congratulations to Congress on the Pipeline
Thu, Jan 29, 5:19 PM ET, by Bob McTeer

. ...

Are All QE's the Same?
Mon, Jan 26, 12:11 PM ET, by Bob McTeer

. ...

Is a Strong Dollar a Good Thing or a Bad Thing?
Sat, Jan 24, 5:31 PM ET, by Bob McTeer

You are probably way ahead of me on this, but I'll say it anyway: It ...

Patience
Fri, Jan 16, 6:11 PM ET, by Bob McTeer

She promised us patience in 2015 No premature rush to tighten So, I’ll be patient ...

Rolexes Just Got More Expensive - Or, You Can't Keep A Good Currency Down
Thu, Jan 15, 8:41 PM ET, by Bob McTeer

The Swiss National Bank, Switzerland's Central Bank, surprised the world this morning by removing its ...

New Year's Eve in Terlingua (12/31/03)
Wed, Dec 31, 1:41 PM ET, by Bob McTeer

Another year has come and gone, We're back to New Year's Eve. Getting ready for ...

Give Me Liberty Or Give Me Whole Grain Bread
Thu, Dec 25, 5:11 PM ET, by Bob McTeer

We've come a long wayunfortunatelysince our founding fathers wrote our constitution and tried to sort ...

Five Percent Growth - Wow!
Tue, Dec 23, 6:14 PM ET, by Bob McTeer

Usually when a pretty good GDP number is released, I check to see how much ...

Reserves Won't Save the Russian Ruble
Tue, Dec 16, 8:21 PM ET, by Bob McTeer

What I try to do in these posts is to comment on contemporary issues and ...

Currency Confusion
Fri, Dec 5, 8:11 AM ET, by Bob McTeer

Thursday's WSJ had a front page article titled "Dollar's Rise Causes Pain in Europe, Asia." ...

Productivity is Key for Good Economic Performance
Wed, Dec 3, 3:11 PM ET, by Bob McTeer

Third quarter productivity was revised to 2.3 percent growth in the third quarter, up from ...

Super Mario and the Euro
Sun, Nov 30, 1:11 PM ET, by Bob McTeer

There was a central banker named Mario Who promised to save the Euro. But he ...

No Matter Who Was in Charge, Just Blame the Fed
Fri, Nov 21, 2:41 PM ET, by Bob McTeer

When I was SVP in charge of the Richmond Fed's Baltimore branch and attended Maryland ...

Spin Alert: DOE Loans Are Losing Money, Not Making Profits
Mon, Nov 17, 11:42 AM ET, by Donald Marron

The Department of Energy snookered the media last week with a report that seems to ...

Perception versus Reality - the Median versus the Mean
Wed, Nov 5, 12:21 PM ET, by Bob McTeer

The post-election analysis on TV this morning included a brief discussion of the "disconnect" between ...

Good Bye QE
Wed, Oct 29, 3:11 PM ET, by Bob McTeer

I retired from the Fed on November 4, 2004, which will be 10 years ago ...

A "Normal" Budget Isn’t Really Normal
Mon, Oct 20, 10:22 AM ET, by Donald Marron

Treasury closed the financial books on fiscal 2014 last week. As my colleague Howard Gleckman ...

The $300 Billion Question: How Should Congress Budget for Federal Lending Programs?
Mon, Sep 29, 12:52 PM ET, by Donald Marron

Lending programs create special challenges for federal budgeting. So special, in fact, that the Congressional ...

More Investment and Exports in Second Quarter GDP - Just What We Needed
Sat, Sep 27, 11:31 AM ET, by Bob McTeer

The writer, Gore Vidal, is reported to have said that he didn't have much to ...

Four Myths about Entrepreneurship
Wed, Sep 17, 4:42 PM ET, by Donald Marron

Spoiler: 20-somethings make headlines, but founders in their 30s and 40s are more important. (Disclosure: ...

The Timing Is About Right for King Dollar
Mon, Sep 15, 5:11 PM ET, by Bob McTeer

Earlier in the recovery from the Great Recession, Larry Kudlow and most of his TV ...

"Ignore the Low Inflation and Strong Dollar. The Experiment Isn't Over Until Things Turn Bad."
Sat, Sep 13, 3:11 PM ET, by Bob McTeer

One of my favorite newspaper clippings is an op ed piece in the WSJ by ...

Does the Export-Import Bank Make or Lose Money?
Wed, Sep 10, 12:12 PM ET, by Donald Marron

Suppose your aunt decides to start a business making pizza ovens. She will design and ...

Money Hoarding
Sun, Sep 7, 3:11 PM ET, by Bob McTeer

A recent piece published by the St. Louis Fed concluded that inflation has been low ...

How Economic Insights Shaped the Web Economy
Sat, Aug 30, 8:12 AM ET, by Donald Marron

In this TEDx talk, Bob Litan shows how economic insights shaped the web economy, from ...

Why Has the Texas Economy Outperformed? A Surprising Answer From Paul Krugman
Wed, Aug 27, 4:11 PM ET, by Bob McTeer

Years ago, when I was still at the Dallas Fed and long before Governor Perry ...

Who Owns the Right to Recline? Property Rights in the Sky
Tue, Aug 26, 11:12 AM ET, by Donald Marron

“On Sunday, a United Airlines flight was forced to divert after two passengers got into ...

Todays Retail News Reel
Fri, Aug 22, 10:11 AM ET, by RetailSails.com

Here is what we are paying attention to in today's news:Time To Get Into Dollar ...

JOLTS Are Looking Good
Wed, Aug 13, 12:11 PM ET, by Bob McTeer

Jolts are not an external shock to the economy. Rather, Jolt is an an acronym ...

The Fed's Vice Chairman, Stanley Fischer, States the Obvious and Creates a Buzz
Mon, Aug 11, 9:21 PM ET, by Bob McTeer

In a speech in Sweden, apparently only the second one since becoming Vice Chairman of ...

Central Banker Heaven
Wed, Aug 6, 1:11 PM ET, by Bob McTeer

I have finally reached the point where people are quoting me from the old days, ...

  More articles:  1 2 3 4 5 6 7 next »

ABOUT US »   ADVERTISE »   CONTACT US »   TERMS OF USE & PRIVACY POLICY »

Fiscal Cliff Negotiator Timothy Geithner is the Right Man for the Job | Self Directed Investor | Copyright © 2008 - 2015, All Rights Reserved

Any ideas and opinions presented in Self Directed Investor content are for informational and educational purposes only, and do not reflect the opinions of BNK Invest, Inc. or any of its affiliates, subsidiaries or partners. In no way should any content contained herein be interpreted to represent trading or investment advice. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. All site visitors agree that under no circumstances will BNK Invest, Inc,. its subsidiaries, partners, officers, employees, affiliates, or agents be held liable for any loss or damage caused by your reliance on information obtained. Read Full Disclaimer.

SDI is associated with: ValueForum.com -- a subscription-based online social networking forum of serious individual investors. | MarketNewsVideo.com -- videos appearing on SDI are produced by Market News Video. | TickerTech.com -- stock quote content appearing on SDI is at least 20 minutes delayed and is powered by Ticker Technologies. | GoldStockStrategist.com -- Edited by Scott V. Nystrom, PhD, Gold Stock Strategist provides analysis on gold mining companies.