Regular readers may well have formed the impression that I am not a particular fan of The Suit...Timothy Geither, the Secretary of the Treasury of the United States. I'm not, but not even inmy nightmares could I have dreamed up a more self-serving, nonsensical, historically innacurate and completely partisian piece of rubbish that The Suit served up today on the op ed page of the Wall Street Journal. It is a panderinhg piece for the implementation of possibly the worst piece of legislation in the past 25 years, the Dodd/Frank consumer reform and protection act--and that's saying something. If not implemented he warns we will have learned nothing and forgotten everything relating to our most recent financial crisis caused, when you get right down to the bottom line, a lack of adaquate regulation. Perhaps we should explore The Suits unique positioning over the years that allows him to make this claim.
The Leader and his water carriers love to blame most of what occurred on financial deregulation, implying that it was the Republican Party that pushed for it. True, but what is forgotten that the real champion of deregulation was Mr. Clinton's Treasury Secretary, Robert Rubin and the deregulatory act was signed not by Mr. Bush but by Mr. Clinton on 1999. Central to that effort especially in dealing with the Congress was Mr. Rubin and his off-side? Why, none other than The Suit, who was deregulating every step of the way. In the clubbie little world of Goldman Sachs alumni, it was Mr. Rubin who recommended that The Suit became President of the NY Fed to the then Chairman, a sitting Goldman partner, who steared the nomination through the Board and thereby put The Suit in the chair where he was responsible for the most powerful and important financial oversight institution in the world. In this role he failed miserably, not because of lack of resources or authority, but because of lack of interest, knowledge and leadership. Understand this: the Fed needed no legislation; if you were reviewed and under the control of the Fed and told to jump, the only answer was, "how high?" Oh sure, you could drop a dime or two and maybe get cut a bit of slack but in the end you did as you were told. Problem was no one was told to jump. As an aside, the present President, Billy the Dud is also an alumnus of Goldman but that's another story.
In regard to The Suit, even his admirers...and there are many...will admit that his management approach is bottom up; not one to put himself in a position to take the first bullet is our boy. He is a consenus builder and when his Rabbis like the way things are going he's not going to be the one that points out 40x leverage might not be great for the system. Oh no. In the article he points out that he had no authority over the Bear Sterns and Fanny and Freddies of this world which is true in a strict lega; sense but the appalling exposure of Bear and Lehman was well known and debated within the Fed because of the counterparties who WERE regulated by the Fed...and debated, and debated, and debated. Nothing emerged but silence. He blames the derivative market as well which played little or no role in the events leading to the collapse but were a major cause for concern after the fact. And his claim that Dodd/Frank is not complex? He is made to look the fool by the testimony of Bernanke this week who informed the Congress that after a year there is still no firm timetable for implementation.
Have we ever seen the likes of a Secretary of the Treasury like this one? All one can ask is honesty and competence and in this we have neither. This is a political water-carrier rather than the primus inter pares of financial leadership in the western world. One almost wishes that MF Global never happened; in Corzine one had a real leader: of course he almost caused Goldman to go broke in '97 with his Russian bet, destroyed New Jersey and bankrupted MF Global. He was the replacement: just remember I did say "almost."
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Nothing happened in Euroland today...certainly nothing good. Thursday is the day. Have a great weekend.
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