Advisers to Treasury Secretary Timothy Geithner have “reaped millions working for banks”, Robert Schmidt reports at Bloomberg.

“The cynics, and the lobbyists, and the special interests who’ve turned our government into a game only they can afford to play. They write the checks and you get stuck with the bills, they get the access while you get to write a letter; they think they own this government, but we’re here today to take it back. The time for that politics is over. It’s time to turn the page.” ~then-Senator Barack Obama, announcing his choice to run for president in 2007

Robert Schmidt at Bloomberg reports Treasury Secretary Timothy Geithner’s “closest aides, none of whom faced Senate confirmation, earned millions of dollars a year working for Goldman Sachs Group Inc., Citigroup Inc. and other Wall Street firms, according to financial disclosure forms”, adding:

The advisers include Gene Sperling, who last year took in $887,727 from Goldman Sachs and $158,000 for speeches mostly to financial companies, including the firm run by accused Ponzi scheme mastermind R. Allen Stanford. Another top aide, Lee Sachs, reported more than $3 million in salary and partnership income from Mariner Investment Group, a New York hedge fund.

As part of Geithner’s kitchen cabinet, Sperling and Sachs wield influence behind the scenes at the Treasury Department, where they help oversee the $700 billion banking rescue and craft executive pay rules and the revamp of financial regulations. Yet they haven’t faced the public scrutiny given to Senate-confirmed appointees, nor are they compelled to testify in Congress to defend or explain the Treasury’s policies….

Sperling and Sachs are each paid $162,900 at the Treasury. Along with four others, they hold the title of counselor to Geithner. Sachs, 46, withdrew earlier this year from consideration to be the Treasury’s top domestic finance official, a job that would have required Senate confirmation….

The title of counselor had been generally reserved for those awaiting confirmation. Some of Geithner’s aides now work in that capacity, including Lael Brainard, who has been nominated to be undersecretary for international affairs, and Jeffrey Goldstein, the nominee to be undersecretary for domestic finance….

An exception [from Congressional approval includes Herb Allison, who runs the office that administers the financial rescue. He had been chief executive officer of mortgage finance company Fannie Mae and retirement- services firm TIAA-CREF, and before that was a longtime executive at Merrill Lynch & Co. in New York.

Along with Sperling and Sachs, Geithner’s inner circle also includes counselor Lewis Alexander, the former chief economist at Citigroup; Chief of Staff Mark Patterson, who was a lobbyist at Goldman Sachs, and Matthew Kabaker, a deputy assistant secretary who worked at private equity firm Blackstone Group LP. Patterson’s and Kabaker’s jobs did not require confirmation....

“My sole work for Goldman Sachs was as lead consultant on the creation, design, and initial implementation of ‘10,000 Women,’ their $100 million philanthropic effort to give business and leadership education to poor women around the world,” Sperling said.

His total income of $2.2 million was unusually high, Sperling added.

Tom Braithwaite at the Financial Times adds:

Lewis Alexander, another adviser, was chief economist to Citigroup before joining the administration; he was paid $2.4m in the last two years....

Previous releases of disclosure forms revealed the $5.2m paid to Lawrence Summers, chief economic adviser to the White House, by DE Shaw, the hedge fund, in the two years before he joined the administration.

Mr. Geithner's personal calendar, released under the Freedom of Information Act reveals he had at least 80 conversations with Wall Street bosses in the first six months of this year, Andrew Davis at the London Guardian reports. This included 22 "chats" with Goldman C.E.O. Lloyd Blankfein. Compare this with ten conversations plus meetings with his counterpart in the U.K and JP Morgan Chase C.E.O. Jamie Dimon.

"Mr. Geithner has spoken repeatedly with officials from Citigroup, a company in which the government owns a 34% stake," Deborah Soloman and Damian Paletta report at The Wall Street Journal. "Mr. Geithner has had almost weekly contact with either [Citigroup Chairman Richard Parsons]—his name appeared 17 times on the calendar—or C.E.O. Vikram Pandit.”

“Critics have said this shows the excessive clout wielded by banks, which have largely fought off attempts to impose limits on bonuses or efforts to curb the multi-billion dollar business of trading in esoteric derivatives,” Mr. Davis reports.

The 2009 bonus pool at Goldman doubled to $23bn with a corporate tax rate of 1%. A subsidiary also just received a $3m earmark to stimulate its balance sheet. Colin Barr reports at CNN that Goldman and Chase, both recipients of “lavish government assistance” will likely “more than double last year’s bottom line”. JP Morgan Chase made a net profit of $3.6bn last quarter, adding $2bn to its reserves—”bringing the total to $31.5bn or 5.3 per cent of total loans“.

UPDATE:

The New York Times reports Goldman profited $3.19bn in the this last quarter.

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Daily Links -

Investment Banking

Stampede to Business School Eases

Venture Capital

Altius Education Lands $8 Million

Private Equity

Millions in Fees for Private Equity

Citi’s Parsons to Join Equity Firm

I.P.O./Offerings

Education Management to Sell 20 Million Shares in I.P.O.

by Nicholas Johnston and Catherine Dodge, for Bloomberg, September 14, 2009.

President Barack Obama, speaking a year after Lehman Brothers Holdings Inc.’s collapse, warned against complacency as the financial crisis ebbs and said Wall Street firms must accept a new regime of “common-sense” regulations to avoid another market meltdown.

Obama used the backdrop of Federal Hall in New York City to renew his push for revamping market regulations. The president urged the financial community to support that goal and he emphasized the need for global coordination on financial oversight.

“There are some in the financial industry who are misreading this moment,” Obama said. “Instead of learning the lessons of Lehman and the crisis from which we are still recovering, they are choosing to ignore them.”…(continue reading)

According to Bloomberg, Richard Parsons – the chair of Citigroup since February – now owns stock in the company worth, at yesterday’s close, about $350,000 (96,298 shares at $3.69).  For such a well-established and highly remunerated corporate executive, we can reasonably refer to such an amount as “chump change.”  In May, Forbes estimated Mr. Parsons’ net worth as a little under $100m.

I have no particular complaint about Mr. Parsons; he is an experienced banker, with the very best political connections.  But I would point out that while Wall Street likes to talk big about people having “skin in the game,” when it comes to putting their personal net worth on the line, many finance executives prefer a different kind of arrangement.  Specifically, they are attracted to compensation structures in which they have a lot of upside but very little downside.

If you had such a deal, how would this affect your relative interest in risk-taking and careful supervision of subordinates?

David Brooks famously argued, a few months ago, that the problem with our banking system circa 2008 was not anything about incentives and political power, but rather stupidity.  Probably he was right that this mattered in some degree for the housing bubble. 

But what should we think about an industry that is carefully and deliberately constructing the exact same arrangements again?  Won’t this lead us inexorably towards a Truly Great Bubble?  Stupidity involving smart people in well-heeled organizations must surely be about incentives for those at the top.

Just because these arrangements involve and are being implemented by a member of President Obama’s Transition Economic Advisory Board, does that make them OK – or even remotely sensible?

And where exactly do you see the impact of the adminstration’s vaunted regulatory reforms for the financial sector here?

If your response is “well, that’s the system and there’s nothing you can do about,” you have a point.  But if that’s your response and you work in the White House, we all have a very big problem.

By Simon Johnson

wonder what the nwife and children of citigroup’s chairman think.

Parsons and model-philanthropist MacDella Cooper are the parents of a cute baby girl named Ella. Photos on
http://celebrityexpos.blogspot.com/2009/05/dick-parsons-citigroup-chairman.html

[Inglaterra] [No se sabe si lo emparedaron para alejar a los malos espíritus, pero no son más que especulaciones que nadie explica por qué se hicieron]. Lo leímos en El Chañarcillo:

Encuentran Gato Momificado Hace 400 Años tras la Muralla de una Casa. Un insólito hallazgo se hizo en una casa luego de que unos trabajadores que estaban abriendo una pared de un baño, descubrieran a un gato perfectamente momificado, que tendría unos 400 años. El animal, que es reconocible en la forma y aún tiene sus garras y dientes, puede haber sido colocado en las paredes de la casa en Devon cerca de Plymouth, Inglaterra, para alejar los malos espíritus. Richard Parsons, un director de una funeraria y propietario de la casa señaló que fue bastante aterrador y que el gato es más grande que uno doméstico normal.
[25 de abril de 2009]
[©chañarcillo]

A couple of posts down, I speculated that Citi may be a takeover target for the Feds. Here’s some evidence that it should be: the apparent, and utter, cluelessness of its new chairman:

Citigroup Inc.’s new board chairman, Richard Parsons, said financial institutions are being targeted for creating the nation’s financial crisis, but they aren’t the only ones responsible.

“Everybody participated in pumping up this balloon. Now the balloon has deflated,” he said Monday. “Everybody, in reality, has some part of the blame. But it’s much more in the culture to find a villain and vilify the villain.”

Besides banks, there was reduced regulatory oversight, loans to unqualified borrowers were encouraged and people took out mortgages or home-equity loans they couldn’t afford. …

” … to demonize the bankers alone for creating this financial meltdown is both inaccurate and shortsighted.”

Now, it is technically true that all these factors contributed to the now-deflated balloon. But it is also true that the most damage has been done by bank holding companies like Citi and other nonbank (i.e., essentially unregulated) financial institutions, who got themselves way overleveraged and then looked to the taxpayers for a bailout.

And their mistakes weren’t limited to overleveraging themselves: A lot of lenders committed outright fraud.

But here’s my favorite part:

“Any time you have these financial crises, the bad news seems to overwhelm all the good news,” he said. “But within the envelope, Citigroup is still a very powerful, vibrant, highly profitable, good bank.”

That little gem comes after this little bit of the story:

Citigroup has suffered five straight quarters of losses, including $8.29 billion in the fourth quarter alone.

It has received $45 billion in bailout aid, and the government also agreed to cover a portion of losses on hundreds of billions of troubled assets and loans as Citi looks to right itself.

“Vibrant, highly profitable”?? Heck, forget his disingenuous spin. He should be fired because he can’t even count.

* Nervous in Newcastle is now decisive in Dunfermline (Andrew Hill, The Financial Times)

The ignominious collapse of the Dunfermline Building Society is more of a nuisance than a heart-stopping moment in UK finance. And maybe everyone is a little jaded by bail-out Mondays. Still, the lack of detail from the government is striking.

* ‘We Will Find You’: Feds on Housing Scams (Matt Jaffe, ABC News)

The Obama administration has already unveiled its plan to stem the rising home foreclosure rate , but with foreclosure scams also increasing, the administration today announced a multi-agency effort to crack down on scams that prey on struggling homeowners.

* Dad says James Duncan is a crook (Leslie Berkman, Press-Enterprise)

Who would defraud his own father? Dow Duncan, who faces criminal charges for making false statements on a mortgage application, contends that is just what his son, James B. Duncan, did.

* Lake Oswego sewer rates jumping 30 percent (Lee Van Der Voo, West Linn Tidings)

Lake Oswego residents will be paying substantially more for sewer work than previously thought, with sewer rates predicted to climb 30 percent in July and at least 25 percent in the following two years.

* Beware of refinancing schemes (Mario Roldan, WCNC)

The Better Business Bureau of Southern Piedmont welcomes Mondays announcement by the federal government that it will crack down of fraudulent mortgage schemes.

* Citigroup chairman: bankers being ‘vilified’ (Jaymes Song, San Diego Union-Tribune)

Citigroup Inc.’s new board chairman, Richard Parsons, said financial institutions are being targeted for creating the nation’s financial crisis, but they aren’t the only ones responsible.

* The appraisers are back – and with a vengeance (Scott Van Voorhis, Boston Globe)

Back during the boom there were few if any barriers between you and the home or condo you wanted to buy.

* President has to bet on economy with the cards he’s been dealt (Thomas L. Friedman, Columbus Dispatch)

While campaigning for the presidency in 1932, in the midst of the Great Depression, Franklin D. Roosevelt gave a commencement address on May 22 at Oglethorpe University in Atlanta that probably describes President Barack Obama’s strategy today — and the big bet he has made — as well as anything could.

* Pa. man admits to defrauding Toms River church members of $1M (Margaret F. Bonafide, Asbury Park Press)

Pennsylvania man pleaded guilty in federal court Monday for operating two so-called Ponzi schemes bilking members of the Church of Grace and Peace in Toms River of more than $1 million, officials said.

* To Rent or Buy in 2009? (Sara Sutachan, California Real Estate)

Given recent changes in home prices and the current low mortgage rate climate, there have been significant gains in affordability for prospective first-time homeowners. Earlier in 2009, a provision in the Stimulus Bill provided for a first-time Homebuyer Tax Credit of 10 percent of the purchase price of the home up to $8,000. The CALIFORNIA ASSOCIATION OF REALTORS� analyzed the difference betwe…

* Australia cuts interest rates to lowest in almost 50 years (Bonnie Malk, Telegraph)

The Reserve Bank of Australia (RBA) has reduced interest rates each month since September, pausing just once last month to assess the impact of the cuts. After Tuesday’s quarter point cut, the bank’s key rate now stands at 3pc, down from 7.25pc in September.

* Irrelevant Rand (Patrick Durusau, Covington News)

Sales of “Atlas Shrugged,” Ayn Rand’s vision of a utopia based on “rational self-interest” have been brisk during the recent economic downturn. The fictional nature of that vision was conceded by Alan Greenspan, the former chair of the Federal Reserve, when he testified before Congress that he was mistaken in thinking that “rational self-interest” would protect the markets.

* Recession exit strategies carry high risk (John Thornhill, The Financial Times)

The good news is that even some of the worlds most enthusiastic economic pessimists, such as Nouriel Roubini of New York University, are beginning to discuss exit strategies from the worst global recession in generations. The bad news is that many of these exit strategies appear as toxic as a bunch of subprime mortgage assets.

* Nervous in Newcastle is now decisive in Dunfermline (Andrew Hill, The Financial Times)

The ignominious collapse of the Dunfermline Building Society is more of a nuisance than a heart-stopping moment in UK finance. And maybe everyone is a little jaded by bail-out Mondays. Still, the lack of detail from the government is striking.

* ‘We Will Find You’: Feds on Housing Scams (Matt Jaffe, ABC News)

The Obama administration has already unveiled its plan to stem the rising home foreclosure rate , but with foreclosure scams also increasing, the administration today announced a multi-agency effort to crack down on scams that prey on struggling homeowners.

* Dad says James Duncan is a crook (Leslie Berkman, Press-Enterprise)

Who would defraud his own father? Dow Duncan, who faces criminal charges for making false statements on a mortgage application, contends that is just what his son, James B. Duncan, did.

* Escape from the Twittering masses (Robert X. Cringely, Infoworld)

I’m thinking maybe this whole social media thing has gone too far. Maybe we don’t really need to know what everyone we’ve ever encountered is doing every single moment of their lives in 140 characters or less. It’s starting to distort our collective notion of reality.

* Beware of refinancing schemes (Mario Roldan, WCNC)

The Better Business Bureau of Southern Piedmont welcomes Mondays announcement by the federal government that it will crack down of fraudulent mortgage schemes.

* Citigroup chairman: bankers being ‘vilified’ (Jaymes Song, San Diego Union-Tribune)

Citigroup Inc.’s new board chairman, Richard Parsons, said financial institutions are being targeted for creating the nation’s financial crisis, but they aren’t the only ones responsible.

* The appraisers are back – and with a vengeance (Scott Van Voorhis, Boston Globe)

Back during the boom there were few if any barriers between you and the home or condo you wanted to buy.

* SHORT SALE in a nutshell (Cynthia Sells, Summit Daily News)

* ‘We Will Find You’: Feds on Housing Scams (Matt Jaffe, ABC News)

* Dad says James Duncan is a crook (Leslie Berkman, Press-Enterprise)

* Debt: The next big American crisis? (Chris Hansen, Newsweek)

* Stalled bill costs JCTC chance to expand (Tom Loftus, Courier-Journal)

* Fannie and Freddie join the bonus backlash (Loren Steffy, Houston Chronicle)

* Homeowner-Aid Plan Caught in Spat (Ruth Simon, Barron’s)

* Citigroup chairman: bankers being ‘vilified’ (Jaymes Song, Kansas City Star)

* Harold Brown weighs in on Fisher Hill proposal (Neal Simpson, Bolton Common)

* ‘LIENNY’ DYKSTRA (Chuck Bennett, New York Post)

* Stalled bill costs JCTC chance to expand (Tom Loftus, Courier-Journal)

* Fannie and Freddie join the bonus backlash (Loren Steffy, Houston Chronicle)

* Homeowner-Aid Plan Caught in Spat (Ruth Simon, Barron’s)

* Citigroup chairman: bankers being ‘vilified’ (Jaymes Song, Kansas City Star)

* Lake Oswego sewer rates jumping 30 percent (Lee Van Der Voo, West Linn Tidings)

* ‘LIENNY’ DYKSTRA (Chuck Bennett, New York Post)

* Financial facts: Condo confusion (Bob Kieber, Summit Daily News)

* Burns: Its a safari and the game is real estate (Scott Burns, Houston Chronicle)

* Qualifying for a low-down FHA loan (Les Christie, Money)

* The appraisers are back – and with a vengeance (Scott Van Voorhis, Boston Globe)

On a day when Chairman of the Federal Reserve, Ben Bernanke and Treasury Secretary, Turbo Tax Timmy Geithner, tax cheat (TTTG,tc) appear before Congress seeking unprecedented power to further loot manipulate regulate the financial industry, including non-banking entities like AIG, the company whose bonuses they’ve been called on the carpet to address, perusal of the day’s news stories, blog posts, and opinion pieces reveals more questions than answers.  Is this the bizarre Obministration Hokey Pokey Bamboozle One Step Forward, Two Steps Back Cha-Cha-Cha it appears to be, or are the Obanomic efforts of the government so far truly on behalf of the people?

Talking Points Memo’s Josh Marshall wonders if we are living in an “alternate universe” after reading today’s Wall Street Journal article claiming that the Obministration has had a recent change of heart towards Wall Street, itself.  I’m not sure what exactly it is about the Journal’s conclusions that has Marshall’s knickers in a twist, but one of the passages that jumped out at me lead me to believe that the article’s writer is completely full of hooey.  Rather than eschew a close working Wall Street relationship as Monica Langley claims, it seems to me that Barack Obama was bought, paid for and hand-delivered to the White House courtesy of the banksters he now serves.  Though Ms. Langley spends a lot of ink chronicling the many instances where Obacolytes paid lip service to being critical of the “dirty bankers” that financed his campaign and advised his every move during his presidential run, she ignores the obvious fact that he’s been dirty banker pocket lint all along.  Here’s the part that leapt off my page:

Early on, Obama aides had had little to do with Wall Street heavyweights such as J.P. Morgan Chase Chief Executive Jamie Dimon. On March 11, Mr. Dimon was ushered into the White House and Treasury Department, where advisers brain-stormed with him about how banks and markets would react to their emerging policies. The following day, at a White House meeting, business executives implored Mr. Obama to get credit flowing again. “All right,” the president said, according to a transcript of the meeting. He’d have his people “talk to Jamie.”

That’s it?  Is she kidding?  The “talk to Jamie” exchange wasn’t at just any “White House meeting,” it occurred during the March 12 Business Roundtable when Obama responded to Citibank CEO Richard Parsons that the previously “catastrophic” economy was suddenly “not as bad as we think.”  And, he didn’t say he’d get “his people” to talk to Jamie, he said he would.  From the Journal’s own transcript:

MR. PARSONS: So take it down to our industry, the banking business. At its core, it’s a very simple business: It takes funds from depositors and other providers of funding, and then it makes those funds available in the credit markets. And that’s how businesses grow, when people buy homes, and send their kids to college, buy cars, and all that sort of stuff.

THE PRESIDENT: Can I just say, Dick, it hasn’t been that simple lately. (Laughter.) But I get your theory, though.

MR. PARSONS: I said at its core.

THE PRESIDENT: All right, I’ll talk to Jamie. Maybe that’s — (laughter.)

edit

So I am very confident about our long-term prospects. We live in such a rapid-fire information-rich environment that people’s attention spans go like this. And that makes for volatility in confidence. A smidgen of good news, and suddenly everything is doing great. A little bit of bad news — oh, we’re down in the dumps. And I am obviously an object of this constantly varying assessment. (Laughter.) I’m the Object-in-Chief of this varying assessment. (Laughter.)

Not only is it clear that Obama and Geithner and all the rest of the Keystone Kop Obministration say one thing to Americans understandably upset by their power-grabbing, Wall Street serving actions, as they continue to do their Bankster Masters’ bidding uninterrupted, right in front of our faces, any “journalist” who accepts anything said by anyone associated with them, at face value, collects a paycheck under false pretenses.

Jamie Dimon, New York Federal Reserve Board of Directors member and CEO of new plane-buying JP Morgan Chase, has been on Obama’s economic team for months, if not years.  Their relationship stretches back to Chicago when Dimon was parlaying his reluctantly accepted position at Bank One (after being unceremoniously dumped by Citigroup’s Sandy Weill, his former “mentor”) into his current job.  In a July, 2008 CNN Money/Fortune interview, Obama was asked to name CEO’s he admired.  After dropping Warren Buffet’s name, he was asked if he was on a cell phone basis with the investor (Buffet):

Obama: I call him, yes. He’s one of the most refreshing people. He’s one of those rare people who is exactly how you hope he will be. He’s just completely down to earth and is as smart as they come. Really a wise, wise person. I got to know Jamie Dimon quite well when he was in Chicago. I think he’s a very smart person, and I think he’s doing his best to manage his bank under difficult circumstances.

A simple search through my archives will reveal that Dimon has been on my “more to this than meets the eye” radar for months.  If Obama even hints that he’s been consulting with this guy throughout the bailout process (which he did) you’d think that any “journalist” worth his or her salt would break their neck chasing that particular red flag down, whether Obi’s “aides” were privy to the meetings, or not.

If AIG “highlights broad failures of our financial system,” as Geithner told Congress, and Obama really doesn’t want to “choose between a chaotic and unforgiving capitalism and an oppressive government-run economy,” as he wrote in his 30 paper op-ed, we need to know if the Obministration’s ties to companies like JP Morgan Chase and Goldman Sachs, two of the biggest donors to his campaign, directly influence their policy making, and how.  Perhaps the reason the Pretendident has so much trouble tempering the public’s furor when he talks out of both sides of his mouth about whether people should be as angry as he pretends to be before he vows not to “govern out of anger,” is because he and especially, his Boy Wonder’s, loyalites remain suspect:

As it happens, Mr. Geithner used to be a Republican and changed his voter registration — to Independent — only in the late 1990s, when he became under secretary for international affairs in the Clinton administration.

Cross posted @ Cinie’s World

The sting of Republican-backed bailouts and their support for unprecedented expansion of government in our lives will take a while to soothe.  But it’s somewhat comforting to know that there are, amazingly enough, some Republicans still out there who understand the consequences of government folly.

Yesterday, the House began debate on the TARP Reform and Accountability Act of 2009 (H.R. 384), which is Barney Frank’s answer to the failures of the original TARP financial bailout which passed in October.  The bill proposes changes to the mechanics of the original TARP, and would be implemented if the second tranche of the program is approved.  Congressman Ed Royce of (R-CA) had this to say about certain provisions of the bill on the House floor (emphasis added):

I guess part of my concern here is philosophical, but I think that ideas have consequences, and bad ideas have bad consequences in policy. And specifically what I worry about here are two challenges that the U.S. faces; one is a budget deficit right now which, when we look forward, it’s going to be about 7 percent of GDP. And with the Fed’s balance sheet continuing to expand, I think it’s now at about $2 trillion.

With the promise of another stimulus package coming, which will be somewhere between $800 billion and $1 trillion, we are becoming increasingly dependent upon our rescuers. Now, in this case our rescuers are the American taxpayers and U.S. debt purchasers, most of them overseas. Why worry about this? Well, I think one of the reasons we have to be concerned is that eventually bond investors might begin to reconsider purchasing that U.S. debt, they might begin to second guess that. And that consequence would really be catastrophic. Avoiding such a scenario would require us, then, to take a step back from where we are and require us to begin to eliminate unnecessary spending and not go forward with compounding the problem with the deficits.

But beyond the impact of the budget, there is a second concern that I have, and that’s the ill effect of this bailout trend in terms of the rapidly increasing role that government is playing inside financial firms, that it’s playing in the board rooms. And I will just cite this December 17 article in the Wall Street Journal entitled, “U.S. Ratchets Up City Oversight.” And in that story they describe the active role that regulators are playing in the day-to-day operations of the financial institution.

Earlier this week, headlines focused on an effort by U.S. banking regulators to encourage Citigroup to shake up its board and to replace its chairman, Win Bischoff. And they said this would be an effort to restore confidence in the beleaguered financial giant. But then as the argument is put forward, one of the leading candidates is Richard Parsons, who is Time Warner’s chairman, and he is a member of Citigroup’s board, but he also happens to be a member of President-elect Barack Obama’s transition economic advisory board.

Additionally, it should come as no surprise, I think, that earlier this week Citigroup announced it would support legislative efforts to allow bankruptcy judges now to rewrite mortgage contracts. Now, that’s a provision that would restrict the flow of capital into the mortgage market, it would increase the cost certainly going forward of obtaining a mortgage for anybody. And traditionally the financial press has called this a “cram down” provision that’s been adamantly opposed by the financial institution. Now we have $45 billion of taxpayers’ cash, we have a $249 billion taxpayer guarantee for bad assets on the balance sheets of the institution. And the institution, which now has seen this bureaucratic control within the firm reverse itself on a position, and I begin to wonder if political pull is going to replace market forces, if government bullying is going to determine the actions that firms are going to take. And this is my second concern. Because, to me, a major reason we’re in dire financial straits is the market distortions caused by bureaucratic and regulatory manipulation of the quasi public entities. We’ve had 16 hearings where we’ve heard the Federal Reserve Board, we’ve heard the Treasury warn over the last few years about Fannie Mae and Freddie Mac. And these institutions took on that excessive risk. It was Congress that encouraged it and prevented the regulation that the Treasury wanted in order to prevent it.

By the way, Congressman Royce voted against the TARP bailout plan as well as last month’s measure to access TARP funds to assist the auto industry.

Contrary to the implication in the bill’s title, there is neither “reform” nor is there any “accountability” in this bill.  What the bill calls for is the expansion of the government bailouts and intervention into other troubled industries, including the auto industry (which effectively approves President Bush’s use of the original TARP money to bailout the auto industry) a focus of the amended TARP.   Not to mention that the bill provides for the program’s use in student loans, consumer loans, etc.  The full text of the bill is here (PDF). 

As conservatives, its important that we take heed of what Congressman Royce is saying.  Besides the disastrous effects on the federal budget, the bailouts open the door to massive government expansion through “oversight”, which includes more ownership of private companies, more bureaucracy and, inevitably, more waste and a greater burden on the taxpayer and private enterprise.  But more importantly, once these measures are implemented, they will take years or be nearly impossible to reverse.  Government is good at expansion–but it almost never contracts.  The TARP did not work and common sense says to do away with the program altogether. 

And, as Royce points out, political cronyism will inevitably come into play.  Lets not forget, it was through “oversight” and political stewardship that  Fannie Mae/Freddie Mac imploded.  Encouraged by policies instituted by the likes of Frank and Chris Dodd (among others),  the firms were able to relax credit standards and book more loans (through lower capital requirements), leveraging their balance sheets to the edge of disaster and, eventually, into the abyss.  And now they’re demanding access to the remaining portion of the TARP to try all over again.

If Republicans have learned anything from the electoral misery of the past decade, it should be that they need to differentiate themselves from liberal Democrats.  Increased government spending, expanding the reach of government, has not and will not accomplish that.  As Royce says, “bad ideas have bad consequences in policy”, and Republicans apparently haven’t learned this lesson yet.  Voting against HR 384 and voting against the use of the second tranche of TARP money would be a step in the right direction.

(UPDATE)

Bailout Fallout: The Senate votes down a resolution (42-52) to stop the release of the second half of the TARP.  See the roll call on the vote here.   Why do we even bother…

(UPDATE)

Middle of the night bailout of Bank of America

Nick Cannon and new wife Mariah Carey made their first public appearance in NY last night at Time Magazine’s 100 most influential people in the world event, since setting the media world on fire with the announcement of their secret nuptials. Chris Rock and his beautiful wife Malaak Compton, Gayle King, and Tyler Perry, LA Reid, and CEO Richard Parsons all attended. To see the exclusive pics of Mariah and Nick’s wedding click here.

To see more pics from this swanky affair