Geithner's Blowup

Apparently federal financial regulators resistance to particular parts of the Obama administration's financial regulatory reform plan proved too much for Treasury Secretary Timothy Geithner.  

I'm both amused and disturbed by this incident.  I'm glad to see that the Treasury Secretary has a temper.  Too bad it's reserved for other banking regulators, not the financial services industry.  (Were mortgage servicers and credit card executives treated to the parade of expletives in their recent meetings?)   

But the incident also recalls Clinton Treasury Secretary Bob Rubin and Fed Chairman Greenspan, and SEC Chair Arthur Levitt bullying CFTC Chair Brooksley Born off her plan to regulate OTC derivates, regulation that might have averted some of the present crisis.  

It's important to remember that most of the regulators at the meeting are part of independent agencies, and that they are independent with good reason.  The CFTC, the FDIC, the Federal Reserve, and the SEC are all independent agencies.  They do not answer to the President, much less to his Treasury Secretary.  While some of their boards are appointed by the President with advice and consent of the Senate, they are not at-will employees of the President nor are they his agents.  Only the OCC and OTS are within Geithner's chain of command, and by statute the Treasury Secretary has but limited authority over them.  (See 12 USC 1, 12 USC 1462a(b)(3).)  

These agencies are independent because we want independent expertise, not politically-controlled expertise, and we should want it to stay that way.  Geithner is no doubt correct that this is a case of agencies jealously guarding their own turf.  But there are also good, independent reasons to question the wisdom of the Obama financial regulation reform plan.  There are plenty of people not affiliated with any of the agencies who have misgivings about the plan, and if federal banking regulators have qualms about it, they should speak up and we should listen, even if we don't agree.  

Comments

[Hal]

Really it's fundamentally the same as with health care reform. The plutocrats and their agents want to keep the system that has shoveled so much money into their pockets. Wall Street hopes that once the present "unpleasantness" is over, it can go back to its old ways of siphoning up billions from the economy just as it has been doing for decades. And the health care insurance industry is hysterically fighting government health insurance (in addition to Medicare) because it is scared to death its rich profits might evaporate. The present situation is a struggle in America between the have-too-muches vs. the have-too-littles. It's really quite simple. But of course the chattering classes want to make it all very very complex.

[Hal, FL]

I find it a bit disturbing myself because I think it's continued evidence of the bullying tactics this administration is willing to employ. Other evidence of that to me is the President's interaction over the college professor and police officer incident. I am wonder about more of his appointees to Czar positions as well and their previous ties to community organizations who employed the bullying tactic. We shall see. But it's becoming more and more clear to me that this administration is trying to force its desires upon every aspect of the nation, whether the citizens want it or not.

[Mike Dillon]

Hmmm... Try comparing this list from WSJ:http://blogs.wsj.com/economics/2009/08/04/list-of-banks-progress-on-loan-modifications/

To this list from ...hmm... oh, yes the U.S. Treasury: http://www.financialstability.gov/docs/transaction-reports/transactions-report_08042009.pdf

Servicers have now sucked up $20 Billion in TARP funds. So how's it working so far?

SPS eats $660 million in TARP and only mods 1849 of the 57,450 loans deemed eligible from their portfolio? That's $356,949.70 per loan to date.

Green Tree needed $156 Million in TARP to mod 209 of the 5228 loans they claim eligible ??? $746411.48 per loan to date

Ocwen: $659 Million - 2,517 of 55,516 deemed eligible. $261,819.63 per loan to date.

National City: $294,980,000 Million - 4 out of 37,126 deemed eligible. 73,745,000.00 per loan to date.

Wilshire Credit: $453,130,000 - 20 out of 3411 deemed eligible. $22,656,500 per loan to date.

And those are only mods that have been STARTED.

I have to stop now. I'm laughing too hard to type....

[Mike Dillon]

Ok... I'm better now... Those figures are all pulled from the last page of the TARP report and the WSJ article that I linked to above.

Maybe Secretary Geithner is upset because he and Secretary Donovan and the administration actually thought that this plan would work... Or maybe he's beginning to realize the swamp land that Mr. Paulson sold to him and that no one else wants to back him up on this plan...

[Patches]

We all knew what was going to happen when they decided (probably on compromise) to leave it up to Servicers. Those numbers blew me away mike..

[Mike Dillon]

Well, wouldya look at this:
http://cbs13.com/wireapnewsca/AP.IMPACT.Mortgage.2.1116047.html
Gov't Mortgage Partners Sued For Abuses