Sunday, July 18, 2010

Losers Triumph Spectacularly In America: Witness BP & Tim Geithner’s Ninth Political Life

For those not bothering to check in with Simon Johnson at Baseline Scenario every day (like you should if you're really practicing financial self defense (emphasis marks added - Ed.)), we learn today how to "fail up." Something that seems to happen with great regularity in Rethuglican politics and has flowed over to the "conservative-progressive," business-friendly Democrats (or other thugs in disguise)? Maybe it's just because he's got the gift of gab? A true salesman who all in power love? Consider these facts.

(Once again, I'm realizing that my big past life mistake was that my efforts in business were successful. I delivered excellent work on my projects and my companies got paid millions for them. Obviously, I had no idea what I was doing.)

And if anyone thinks anything on Wall Street is getting "re-formed," they should take a long walk off a short pier. To be blunt.

Tim Geithner’s Ninth Political Life By Simon Johnson

with 162 comments In modern American life, Treasury Secretary Tim Geithner stands out as amazingly resilient and remarkably lucky – despite presiding over or being deeply involved in a series of political debacles, he has gone from strength to strength. After at least eight improbabl(e) bounce backs, he might seem unassailable. But his latest mistake – blocking Elizabeth Warren from heading the new Consumer Financial Protection Bureau – may well prove politically fatal.

Geithner was a junior but key member of the US Treasury team that badly mishandled the early days of the Asian financial crisis in 1997 and received widespread criticism (Life #1). He was promoted as a result and thereafter enjoyed a meteoric rise.

As President of the New York Federal Reserve from 2003, and de facto head of the government’s financial intelligence service, he completely failed to spot the problems developing in and around the country’s financial markets; nothing about this embarrassing track record has since stood in his way (Life #2).

He subsequently became Hank Paulson’s Wall Street point person for one of the most comprehensively bungled bailouts of all time – the Troubled Asset Relief Program, TARP, which in fall 2008 first appalled Congress with its intentions and then wasn’t used at all as advertised (Life #3).

TARP and related Bush-Paulson-Geithner efforts were so completely and clearly unsuccessful in October/November 2009 that the crisis worsened and Geithner was offered the job of Treasury Secretary by President-elect Obama; the incoming team felt there was no substitute for “experience”.

Nevertheless, he almost failed in the confirmation process due to issues related to his taxes (Life #4) and then stumbled badly with his initial public repositioning of the TARP (Life #5), which was going to buy toxic assets again but in a more complicated way (perhaps his most complete and obviously personal political disaster to date).

His next Great Escape was the stress tests in spring 2009 – it turned out, supposedly, that there was really no financial crisis. Most of the big banks really did have enough capital; all that had been missing was the government’s endorsement of this fact (this is the story, honest).

If this seems too good to be true, look at the mass unemployment still around you and tell me if the financial sector really looks healthy (Life #6).

Life #7 was expended concurrent with the forceful arrival on the financial reform scene of Paul Volcker. The Geithner-Summers “financial reform” package from summer 2009 was weak to start with and weakened further as it was discussed in the House; the entire effort was rudderless. Volcker’s new proposals helped rescue the reform and restore momentum – but instead of (appropriately) discrediting the Geithner approach in the eyes of the White House, it actually helped the Treasury Secretary climb new pinnacles of influence. Go figure.

Life #8 is the blatant failure of the Geithner strategy to “just raise capital requirements” as the way to deal with distorted incentives and the tendency to take irresponsible risks at the heart of our financial system.

Treasury insisted on “capital first and foremost” throughout the Senate debate this year – combined with their argument that these requirements must be set by regulators through international negotiation, i.e., not by legislation. But the big banks are chipping away at this entire philosophy daily through their effective lobbying within the opaque Basel processas one would expect. The latest indications are that capital requirements will barely be raised in any meaningful sense.

Secretary Geithner likes to say, “Plan beats no planand in some positive interpretations this is the secret of his success. But it turns out that he had no plan really – the stress tests were a grand improvisation (ultimately implying scary sized government implicit guarantees), the initial financial reform proposals fizzled (the Volcker rescue was against Geithner’s wishes), and the much vaunted tightening of capital standards is completely illusory (doesn’t anyone in the White House read the newspapers?).

On top of all this, it now appears that Secretary Geithner will oppose Elizabeth Warren becoming the new chief regulator responsible for protecting consumers from defective financial products – despite the fact that she has led the way for this issue, on both intellectual and political fronts, over the past decade. The financial sector has abused many of its customers badly over the past decades. This simply needs to stop.

Throughout the Senate debate on financial reform, Treasury insisted that complex details regarding consumer protected need to be left to regulators – and thus the Geithner team pushed back against many sensible legislative proposals that would have tightened the rules. Treasury also promised – although in a nonbinding way – that the new generation of regulators would be an order of magnitude more effective that those who eviscerated whatever was left of our oversight system during the Bush years.

With his track record of survival, Geithner and his team apparently feel they can push hard against Elizabeth Warren and give the new consumer protection job to someone closer to their philosophy – which is much more sympathetic to the banking industry.

This would be a bad mistaketrying the patience of already exasperated Congressional Democrats. If the Obama administration can’t even complete the deal they implicitly agreed with Senators over the past months, this will set of a firestorm of protest within the party (and with anyone else who is paying attention).

Financial “reform” is already very weak. If Secretary Geithner gets his way on consumers protection, pretty much all of the Democrats efforts vis-à-vis the financial sector’s treatment of customers have been for naught.

Tim Geithner is sometimes compared to Talleyrand, the French statesman who served the Revolution, Napoleon, and the restored Bourbonsopportunistic and distrusted, but often useful and a great survivor with a brilliant personal career. In the end, of course, no one – including Talleyrand – proves indispensible. And everyone of this sort eventually pushes their luck too far.

If the Democratic leadership really wants to win in the November elections, they should think very hard about the further consequences of Mr. Geithner.

Comments:

Oh, come on. She’s just a school marm, while he’s Timothy F’ing Geithner. Have you SEEN his JUMP SHOT? Nemo

Oh yeah. He's one cool character. And protected. But you already knew you weren't in that club.

I agree with every word written by Stephanie McMillan, who lets the real losers have it at Common Dreams. (Emphasis marks added - Ed.)

The Gulf of Mexico has been destroyed. Immeasurable, irreparable damage has been done to wildlife, the health of the ocean, and people's livelihoods. We have been cursed for years to come. It can not, as BP promises, be "made right." In fact, even after this utter catastrophe, crimes against the planet and its inhabitants continue without pause.

We are told that the government is supposed to guarantee the rights of the people. But when a big corporation decides our rights are not in their interests, then POOF! They vanish into thin air. In a clear violation of our rights to free speech and a free press, government agencies have assisted BP's lies and cover-up by restricting media access, threatening journalists with felony charges and $40,000 fines. Uniformed police officers in Louisiana have harassed photographers at public beaches. BP has threatened workers with firing if they talk to anyone about anything.

We are also told that the government's purpose is to protect the country and us. But instead the government helps big corporations plunder the country and trash our lives. The Minerals Management Service allowed BP to cut corners and violate safety regulations, leading finally to the fatal decision to save a few hundred thousand dollars by not installing a backup valve.

When BP ignored an order by the Environmental Protection Agency to stop using the dispersant Corexit 9500 (a poisonous compound banned in Europe), the EPA did absolutely nothing. Millions of gallons are still being dumped into the Gulf, even as it has been shown to evaporate and fall as toxic rain, and is damaging plants far inland.

BP and its employees have given more than $3.5 million to federal candidates during the past 20 years, with the biggest portion going to Obama. It also spent $15.9 million on lobbying last year alone, for the purpose of controlling energy policy.

What does all this tell us?

The government repeatedly sells us out to corporate interests. It sells out our rights, our health, our safety, our livelihoods, our lives, and the natural world. The government is merely a tool to facilitate the conversion of life into profit.

The BP spill is not an accident. It is an inevitable consequence of a global economic system that values profit over life. The BP spill is not unique. Oil companies have ruined large areas of the Niger Delta, Ecuador and other parts of the world, and they will continue to do so until they are stopped.

The ruthless pursuit of profit has caused 98% of old growth forests to be cut down. 99% of the prairies are gone. 80% of rivers worldwide no longer support life. 94% of the large fish in the oceans are gone. 120 species per day becomes extinct. Now the Gulf of Mexico has been ruined. Clearly, a global economic system based on perpetual growth is unsustainable. Yet those who run this system do not stop, will not stop.

At what point will we stop accepting this?

Couldn't be clearer could it?

Please read on to unbrighten your day.

And begin to take action against this planet-wide criminality. Suzan ______________

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