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Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: sandintoes who wrote (32800)	2/16/2009 1:34:24 PM
From: DuckTapeSunroof	Read Replies (1) \| Respond to of 71588

Re: "the American people are too dumb to handle the truth." A possibility I suppose.... (But count me in the camp of those who say the American public is underestimated far more often then it is overestimated.) Re: "Only Katie Couric and Oprah are smart enough to know how to handle it." Oprah may be 'smart' (she certainly was smart enough to figure out how to become the richest woman in America <g>), but I really wouldn't know... having never met her. However... I've got some serious doubts about the blonde. :-)

To: sandintoes who wrote (32800)	2/18/2009 10:57:49 AM
From: Peter Dierks	Read Replies (1) \| Respond to of 71588

There's Virtue In Geithner's Vague Bank Plan At least he doesn't want to guarantee more bad debt. FEBRUARY 18, 2009 By MATTHEW RICHARDSON and NOURIEL ROUBINI On Jan. 27, Bank of America sold a whopping $6 billion of three-year notes at a yield of 2.2% -- a good 3.5% less than what its other bonds of similar maturity were trading for. How did it manage this feat? For a mere fee of 0.75%, BofA accessed the FDIC's Temporary Liquidity Guarantee Program, which backs all bank debt of less than three-year maturity with the full faith and credit of the U.S. government. In essence, they got to issue debt at government rates. Since the program started last Nov. 25, BofA has gone to the well 11 times for a total of $35.5 billion. Other banks have lined up 91 times for a staggering $168 billion. They include GE Capital ($27 billion), Citigroup ($24 billion), J.P. Morgan ($19 billion), Morgan Stanley ($19 billion), and Goldman Sachs ($15 billion). Feelings about the liquidity guarantee program weren't always so rosy. On Oct. 31, 2008, the law firm Sullivan & Cromwell wrote the FDIC on behalf of nine banks, arguing that the government program to back the bonds of financial firms did not provide strong-enough guarantees. The letter asked that the guarantee cover principal and interest payment obligations as they became due, backed by the full faith and credit of the U.S. government. The guarantee was included three weeks later when the final rule was issued. No prize for guessing which banks signed the letter. The government's motivation for this program is to get banks back in the lending game. But in an economic and financial crisis, we want healthy banks to lend to creditworthy institutions and individuals, not for unhealthy banks to take another flyer on credit spreads. There is, however, a remarkable coincidence between the banks with the largest writedowns -- one measure of sickness -- and those accessing the FDIC program. It's not as if we haven't seen this before. On Sept. 7, 2008, the government put Fannie Mae and Freddie Mac into conservatorship. They were bankrupt because of an accumulated portfolio of $1.5 trillion worth of mortgage-backed securities, of which $225 billion was subprime mortgages and the other $1.275 trillion were illiquid prime mortgages. While some of Fannie and Freddie's portfolios were hedged against interest rate movements using interest rate swaps, the subprime portion was an outright bet on default rates of low quality mortgages. How much cushion did they have? Only $1 of capital for every $25 of debt. What type of crazy creditor would lend to them? Almost anyone, because the debt had the implicit, now explicit, guarantee of the U.S. government. With the economic dangers we now face, do we really want to go down this road again? We don't, and that's why, for all the criticism, Treasury Secretary Tim Geithner's plan -- call it Bailout 2.0 -- does have a silver lining. It stops the madness. Yes, Bailout 2.0 lacks details, but it is clear it won't propose more bank freebies -- no new loan guarantee programs or backstops of losses on their bad assets, or government capital infusions in the form of underpriced preferred shares. Now the banks will have to prove themselves via a "stress test" on their solvency to access new capital. It won't be a pretty picture. And by the way, if banks want Uncle Sam to buy all those "toxic" assets, the government is now going to do it alongside private capital. These investors aren't going to overpay, so that game is up as well. Since Mr. Geithner's plan has been unveiled, the stock prices of the financial sector are off about 19%. This is not necessarily a bad thing. The banks were expecting another handout. While it was not his intention, the reality is that Mr. Geithner is going to confirm the insolvency of the financial system. Once we face this truth, there really isn't much left to do but nationalize. We are not talking about the government operating the banks for the long-term. But, as was done in Scandinavia in the early 1990s, we are talking about orderly clean up, then reselling the banks to private investors. The good news is that much of the risk will be borne by the banks' common and preferred shareholders and their long-term unsecured creditors -- as opposed to by taxpayers. This makes sense since shareholders and creditors were the ones who bet on banks in the first place. We'll also stop repeating the mistakes we made with Fannie and Freddie. Messrs. Richardson and Roubini are professors who have contributed to the NYU Stern School of Business book, "Restoring Financial Stability: How to Repair a Failed System," forthcoming by John Wiley & Sons. online.wsj.com

To: sandintoes who wrote (32800)	2/23/2009 9:12:44 AM
From: Peter Dierks	Read Replies (1) \| Respond to of 71588

Stringent Hiring Rules Leave Treasury in Need of Staff FEBRUARY 21, 2009 (Geithner would never pass these rules) By DEBORAH SOLOMON WASHINGTON -- The Obama administration's tough rules about who it will hire and its increasingly rigorous vetting process are complicating Treasury Secretary Timothy Geithner's team-building efforts, government officials say, at a time when his agency faces a punishing workload brought on by the worst financial crisis in decades. The delay leaves Mr. Geithner without many chief lieutenants while the Treasury is spending hundreds of billions of dollars to try to blunt the financial crisis -- and hustling to stay abreast of unfolding events. Mr. Geithner himself is taking on a bigger workload and relying on a skeleton crew of advisers, including some holdovers from former Treasury Secretary Henry Paulson's staff. As a result, the agency has had only limited communication with Wall Street about the most effective ways to structure the government's bailout plan and maximize lender and investor participation. Mr. Geithner's unveiling of his plan to address the crisis in banking was widely criticized for being shy on details, a problem in part caused by an overstretched team simultaneously grappling with a bailout for homeowners, a giant stimulus package and calls from Detroit auto makers for more aid. The hiring pace at the Treasury is somewhat slow by historical standards. The Bush administration nominated several Treasury officials to serve under Paul O'Neill in February 2001, though Congress didn't confirm most until much later in the year. While Mr. Geithner actually has more troops on hand than many agencies -- most others also lack top deputies, or even secretaries -- it is an especially trying time for the Treasury, given the economy's fragile state and Mr. Geithner's pledge to move quickly and forcefully to confront problems. Treasury spokeswoman Stephanie Cutter said Friday, "The Obama administration has taken an unprecedented level of action toward economic recovery in a very short period of time....There's a significant amount of work being done, regardless of the normal personnel hurdles that happen during a transition in government." After a series of tax-payment issues, which derailed Tom Daschle's nomination to run the Health and Human Services Department and hurt Mr. Geithner as well, the Obama administration has ratcheted up its scrutiny of potential nominees. Lawyers are poring over several years of potential Treasury appointees' tax returns and other financial and personal information, such as the legal status of household help. President Barack Obama also curtailed the ability of lobbyists to work in the administration. The Treasury wants to avoid hiring anyone with ties to a bank that received bailout aid. The tough rules scuttled the agency's hiring of at least one top official. The appointment of John Molot, a well-respected Georgetown University law professor, was undone by his personal financial interests, according to people familiar with the matter. The exact problem couldn't be learned, and Mr. Molot didn't return a call seeking comment. Mr. Geithner has identified several people he would like to serve in top posts, and the nominations could be announced soon. Several are already working for Mr. Geithner in an advisory role, but many haven't yet come on board, including those expected to be tapped for the key posts of deputy Treasury secretary and undersecretary for international affairs. Among those Mr. Geithner has brought on board in a counselor role are Alan Krueger, who is expected to be chosen as assistant secretary for economic policy; Lee Sachs, who is expected to serve as undersecretary for domestic finance; and Mark Patterson, who will be nominated as Mr. Geithner's chief of staff. Mr. Geithner is also relying on a crew of Paulson holdovers, including Seth Wheeler, who helped craft the recently unveiled housing plan; Neel Kashkari, who heads the office running the $700 billion Troubled Asset Relief Program; James Lambright, the TARP chief investment officer; and Steven Shafran, an adviser on financial issues. "There is a need to get staffed up," said Scott Talbott, senior vice president for government affairs at the Financial Services Roundtable. In particular, many banks say they haven't been able to get answers from Treasury about how new executive-compensation limits will apply to banks that get government aid. C. Fred Bergsten, a former Treasury official who is director of the Peterson Institute for International Economics, said the lack of a staff is a particular problem for the Treasury with the approach of the Group of 20 industrial and developing countries meeting in London April 2. "We all know this is a global economic crisis, the response has to be global, the relations for the G-20 summit are proceeding full blast, and the Treasury does not have its international team in place," Mr. Bergsten said. "I have met personally with the top British officials organizing the summit. They are eagerly looking for cooperation from U.S. officials, but they couldn't really get anything until very recently." Write to Deborah Solomon at deborah.solomon@wsj.com online.wsj.com