Posts Tagged ‘Timothy Geithner’
Wednesday, October 20th, 2010
Two years after the global financial meltdown and collapse of Lehman Brothers, world leaders seem to have reached an impasse over crucial proposals designed to prevent the same devastating scenario from occurring in the future. The stalemate is so serious that there may be little chance that needed changes will be made. Executives at the World Bank and the International Monetary Fund (IMF) are disappointed with the slow movement and analysts warn that national interests could undercut badly needed real reforms. Tension over currency rates is growing, and there is an increasing sense that major financial centers will create significantly different rules impacting their nation’s financial firms. United States Treasury Secretary Timothy Geithner prefers a more unified approach to financial reform.
“Urgent action is needed to arrest the disturbing trend toward unilateral moves,” wrote Institute of International Finance managing director Charles H. Dallara in a letter to IMF officials. The IMF fears that the global overhaul does not fulfill its promise to insulate the world from a repeat of the financial crisis. “The more we continue with the present system, the more likely we are to have a relapse,” said Jos Vials, the IMF’s financial counselor and head of its capital markets department. “Unless we deal with these problems, we will not have a safer system.”
The major points of contention relate to identifying and regulating firms considered to be too big to fail and how to create a system for some companies to collapse without requiring government bailouts. The IMF’s financial experts believe that companies must be allowed to fail so they do not pursue risky strategies in the confidence that the government will rescue them if they get into trouble. The only way to create effective regulations is to retain the idea of a moral hazard.
Tags: congress, currency rates, financial meltdown, financial reform, International Monetary Fund, investment banking, Lehman Brothers, Timothy Geithner, World Bank
Posted in Economics, Financing, General | No Comments »
Monday, September 27th, 2010
President Barack Obama’s decision to name Wall Street’s archenemy Elizabeth Warren as his special advisor to direct the creation of the Consumer Financial Protection Bureau bypasses the often confrontational Senate confirmation process. The Harvard law professor is now tasked with building a new government agency that will crack down on abusive financial practices such as mortgages and credit cards from the ground up. President Obama – who has known Warren since his law school days – has named her “assistant to the president” — a desirable title in inner White House circles. Warren will report directly to both the president and to Treasury Secretary Timothy Geithner. Importantly, Warren will have direct access to the president, making her, in effect, the Secretary of the Treasury overseeing all consumer lending.
By naming Warren an adviser rather than as the agency head, President Obama avoided the congressional confirmation process, which Republicans likely would have used to derail the nomination. http://news.yahoo.com/s/nm/us_financial_regulation_warren “Clearly putting her in this role cements her imprint on the agency, whether she ultimately leads it or not. It also implies there’s going to be a transfer of power from the other regulators sooner rather than later. I think it would be better, though, for the agency to have a Senate-confirmed agency head, if that’s even possible,” said Ed Mills, an analyst with FBR Capital Markets.
Wall Street’s reaction was predictable, given Warren’s unpopularity there. “It’s a thumb in the eye to people trying to address real issues,” said Matt McCormick, a portfolio manager and banking analyst with Bahl & Gaynor. “It is obviously more political than focused on correcting ills of what happened in the financial industry. I really doubt she will have the ability to bring people together considering the political nature of her appointment. It is troubling.”
“The Consumer Financial Protection Bureau will empower all Americans with the clear and concise information they all need,” President Obama said at the Rose Garden announcement. “Never again will folks be confused or misled by the pages of barely understandable fine print that you find in agreements for credit cards or mortgages or student loans.”
Tags: Beltway, Department of the Treasury, Elizabeth Warren, Harvard, President Barack Obama, Senate, Timothy Geithner, Wall Street
Posted in Economics | No Comments »
Tuesday, September 14th, 2010
The Obama administration – fresh from its financial regulation reform legislative victory – is not resting on its laurels. Next on the busy agenda is reforming the American housing market, which is viewed by many as the root of the financial crisis. In a response to collapsing housing prices and waves of foreclosures, the administration it looking at overhauling the government’s housing policy, although the specifics of the proposed legislation are still under discussion.
The new approach could include bigger downpayments and higher interest rates, as well as more barriers to lower-income people purchasing houses they cannot afford. The goal is to create a more stable housing market that puts fewer taxpayer dollars on the line and lessens the risk that owners will be unable to pay their mortgages. Reform also could bring changes to the financial markets as investors are forced to find new investment vehicles if the government removes incentives for putting their money in the mortgage market. Since the financial crisis began in 2008, the federal government has spent hundreds of billions of dollars to keep housing afloat and assure that borrowers can get loans – and much of that money will never be recovered. Since the federal government seized Fannie Mae and Freddie Mac, the two mortgage giants and the Federal Housing Administration have more or less been the sole sources of backing for new mortgages for nearly two years.
The Treasury Department’s new Office of Capital Markets and Housing Reform is studying options and has decided that federal policy should highlight “sustainable homeownership” rather than merely growing the rate of ownership. According to Vincent O’Donnell of the Local Initiatives Support Corporation, “My impression is that the administration at pretty much every level is serious about a balanced policy. Their purpose is to make more workable rental housing programs.”
Tags: Barack Obama, department of treasury, Fannie Mae, Federal Housing Administration, financial crisis, financial reform, foreclosures, Freddie Mac, housing reform, National Economic Council, Shaun Donovan, Timothy Geithner
Posted in Development, Economics, Financing, Residential | 1 Comment »
Monday, August 9th, 2010
With the passage of historic financial reform legislation, Treasury Secretary Timothy Geithner is being given the authority to reshape bank regulations, oversee financial markets and create a consumer protection agency. Few Treasury secretaries will wield this much influence once President Obama signs the new financial overhaul legislation passed by Congress.
Geithner’s fingerprints are all over the effort to expand financial regulation. The bill is extremely close to the initial draft he released last summer but also names him — as long as he remains Treasury secretary — as the head of a council of senior regulators. The legislation also puts him at the head of the new consumer bureau until the Senate confirms a permanent director. In other words, Geithner will mold the regulator over the next several months. It also will be his responsibility to work out several issues left unresolved by the bill — for instance, which financial derivatives will be subject to the strict new trading rules and which risky activities big banks will have to spin off.
The legislation “will help restore the great strength of the American financial system, which — at its best — develops innovative ways to provide credit and capital, not just for our great global companies, but for the individual with an idea and a plan,” according to Geithner. Efforts to win passage of the financial regulatory bill were driven primarily by the Treasury, proof that Geithner has significant autonomy within the administration.
Sen. Christopher J. Dodd (D-CT), who moved the financial overhaul package through the Senate, said it wasn’t his preference to put the Treasury secretary in charge of the new council. He would prefer that a member of the Federal Reserve board fill that role. At the same time, he said, having a member of the president’s Cabinet in charge could make the council “more politically responsive. It gives you some accountability,” Dodd said.
Tags: Christopher Dodd, congress, consumer protection agency, Federal Reserve, financial reform legislation, Larry Summers, National Economic Council, President Barack Obama, Secretary of the Treasury, Timothy Geithner
Posted in Economics | No Comments »
Tuesday, August 3rd, 2010
With the passage of historic financial reform legislation, Treasury Secretary Timothy Geithner is being given the authority to reshape bank regulations, oversee financial markets and create a consumer protection agency. Few Treasury secretaries will wield this much influence once President Obama signs the new financial overhaul legislation passed by Congress.
Geithner’s fingerprints are all over the effort to expand financial regulation. The bill is extremely close to the initial draft he released last summer but also names him — as long as he remains Treasury secretary — as the head of a council of senior regulators. The legislation also puts him at the head of the new consumer bureau until the Senate confirms a permanent director. In other words, Geithner will mold the regulator over the next several months. It also will be his responsibility to work out several issues left unresolved by the bill — for instance, which financial derivatives will be subject to the strict new trading rules and which risky activities big banks will have to spin off.
The legislation “will help restore the great strength of the American financial system, which — at its best — develops innovative ways to provide credit and capital, not just for our great global companies, but for the individual with an idea and a plan,” according to Geithner. Efforts to win passage of the financial regulatory bill were driven primarily by the Treasury, proof that Geithner has significant autonomy within the administration.
Sen. Christopher J. Dodd (D-CT), who moved the financial overhaul package through the Senate, said it wasn’t his preference to put the Treasury secretary in charge of the new council. He would prefer that a member of the Federal Reserve board fill that role. At the same time, he said, having a member of the president’s Cabinet in charge could make the council “more politically responsive. It gives you some accountability,” Dodd said.
Tags: Barack Obama, Christopher Dodd, congress, consumer protection agency, Federal Reserve, financial reform legislation, Larry Summers, National Economic Council, Secretary of the Treasury, Timothy Geithner
Posted in Economics, General | No Comments »
Thursday, April 15th, 2010
The United States economy is entering an era of sustainable growth as companies begin hiring again. That’s the opinion of Treasury Secretary Timothy Geithner, who said “I think the economy is definitely getting stronger. We’ve made a lot of progress, we’ve got some work to do still and it’s going to take some time to heal the damage.”
With the news that 162,000 jobs were created in March – the biggest uptick in three years – Geithner believes that the economic recovery is expanding. The March numbers include 48,000 temporary workers hired by the government to work on the 2010 Census, as well as increases in manufacturing and healthcare. Private payrolls climbed by 123,000 in March. The Obama administration is emphasizing the change in the labor market because the economy shed 779,000 jobs in January of 2009, the month the president was inaugurated.
Christina Romer, head of the Obama administration’s Council of Economic Advisors, cautioned that while the report is “the most positive jobs report we have had in three years, there will likely be bumps in the road ahead.” Alan Krueger, Geithner’s chief economist, sees private-sector hiring as a “healthy sign” that the economic recovery is gaining long-anticipated momentum.
Tags: Alan Kruger, census, Christina Romer, economic recovery, President Barack Obama, Timothy Geithner, Treasury Department, unemployment rate
Posted in Economics, General | No Comments »
Monday, February 22nd, 2010
An independent audit released by the bipartisan Congressional Oversight Panel (COP) has found the $700 billion Troubled Asset Relief Program (TARP) to be effective, so much so that the Department of the Treasury has extended it to October 3, 2010. Treasury Secretary Timothy Geithner plans to use the remaining funds to assist families facing foreclosure and give loans to small businesses.
The COP was unable to fully gauge TARP’s impact because of other forces such as the $787 billion American Recovery and Reinvestment Act, tax cuts and actions by the Federal Reserve and Federal Deposit Insurance Company. “Even so, there is broad consensus that the TARP was an important part of a broader government strategy that stabilized the U.S. financial system by renewing the flow of credit and averting a more acute crisis,” according to the report. “Although the government’s response to the crisis was at first haphazard and uncertain, it eventually proved decisive enough to stop the panic and restore market confidence.”
That said, after 14 months of TARP, the panel admits that problems remain. Banks are still skittish about making loans, toxic mortgage-related assets are still sullying banks’ balance sheets and smaller banks are susceptible to difficulties in the commercial real estate sector. And, with 13 million additional home foreclosures expected over the next five years, “TARP’s foreclosure mitigation programs have not yet achieved the scope, scale and permanence necessary to address the crisis.”
Repayments from banks that received TARP dollars are expected to total $116 billion, including $45 billion that is being returned by Bank of America. The government is likely to receive as much as $175 billion in repayments from companies it rescued by the end of 2010.
Tags: AFL-CIO pension fund, American Recovery, bailouts, Bank of America, Congressional Oversight Panel, department of treasury, Federal Deposit Insurance Company, Federal Reserve, Harvard Law School, Main Street, President Obama, Securities and Exchange Commission, TARP, Timothy Geithner, Wall Street
Posted in Economics, Financing | No Comments »
Tuesday, February 16th, 2010
Congressman Barney Frank (D-MA) wants to scrap Fannie Mae and Freddie Mac in favor of an entirely new mortgage-financing system. According to Frank, Chairman of the House Financial Services Committee and who previously supported the programs, “The committee will be recommending abolishing Fannie Mae and Freddie Mac in their current forms and coming up with a whole new system of housing finance.”
Fannie Mae and Freddie Mac, which back a majority of the nation’s home loans, buy mortgages from lenders, insure them against default and supply new money to create new loans. Thanks to growing losses on these loans that threatened the health of Fannie Mae and Freddie Mac, the federal government took control of the programs in September 2008. Since their seizure, Fannie and Freddie have been run by regulators and kept alive by $110.6 billion in taxpayer money. Frank says that Congress needs to decide what to do with Fannie’s and Freddie’s remaining shareholders, as well as investors in the companies’ $5.4 trillion in mortgage bonds and $1.7 trillion in unsecured corporate debt.
Fannie Mae and Freddie Mac profit by financing mortgage-asset purchases with low-cost debt and on guarantees of home-loan securities they create out of loans from lenders. They currently own or guarantee more than $5 trillion in U.S. residential debt, and were responsible for as much as 75 percent of the new mortgages made in 2009.
“We’re going to look at the whole question of housing finance,” Frank said. “Sorting out the function of promoting liquidity in the market, and also the secondary market in general but then also doing some kind of subsidy for affordability.”
Fannie/Freddie were caught in the eye of the subprime meltdown. In February of 2007, the residential mortgage-backed securities market crashed with sales plummeting 90 percent. While reform is needed, Fannie and Freddie operate like a public option – by making home ownership more affordable and creating competition to commercial banks. A positive step is the Deed for Lease program. After foreclosure – at 57,000 homes in the first half of 2009 – the new program allows owners to lease their homes and avoid foreclosure.
Artificially creating/guaranteeing a market for home loans has lost billions. Hopefully, whatever entity replaces Fannie and Freddie will be prohibited from contributing to congressional campaigns and PAC’s.
Tags: Barney Frank, congress, Deed for Lease program, Fannie Mae, Freddie Mac, House Financial Services Committee, house of representatives, Massachusetts, mortgages, PBS News Hour, Timothy Geithner
Posted in Development, Economics, Financing, Residential | No Comments »
Thursday, January 14th, 2010
Compensation czar Kenneth Feinberg – officially, the Obama administration’s special master for executive compensation – believes that the pay reductions he mandated at seven taxpayer-rescued firms should become the model for Wall Street and corporate America.
“There is entirely too much reliance on cash and there’s got to be a better way to tie corporate performance to long-term growth,” Feinberg said. “I’m hoping that the methodology we developed to determine compensation for these individuals might be voluntarily adopted elsewhere.” The Obama administration is holding unregulated risk-taking fueled by excessive pay partially responsible for the financial crisis, which has caused $1.6 trillion in losses and write-downs globally, as well as 7,200,000 jobs in the United States. Between Feinberg’s ruling and Federal Reserve guidelines for banker compensation, the government has inserted itself directly into decisions normally made by corporate boards.
Feinberg has restructured cash “guarantees” into stock that the recipients must hold over the “long term”, according to a statement from the Treasury Department. “Guaranteed minimum amounts give employees little downside risk in the event of poor performance – but upside when times are good.”
Meanwhile, the Federal Reserve has proposed new guidelines on pay practices at that nation’s banks and plans to review the 28 biggest firms to assure that compensation packages don’t create incentives that lead to the risky investments that caused the worst financial crisis in 70 years.
Tags: American International Group, Bank of America Corporation, Ben Bernanke, Chrysler, Citigroup, compensation czar, department of treasury, Federal Reserve, General Motors, GMAC, Kenneth Feinberg, Kenneth Lewis, Obama administration, special master, Timothy Geithner, Wall Street
Posted in Economics | No Comments »
Wednesday, December 16th, 2009
The Obama Administration is giving serious thought to the best use of the remaining funds that are part of the Troubled Asset Relief Program (TARP) financial bailout. The President – under pressure to bring down the deficit that has grown as the government seeks to reverse the economic crisis — is considering using a significant amount of the leftover funds to reduce the national debt.
Approximately $139 billion of the $700 billion financial bailout program passed last year remains unspent and available to the Treasury Department. Financial institutions have returned approximately $71 billion in TARP funds to the government and paid an additional $10 billion in interest and dividends to the Treasury Department. The struggling economy and high unemployment rates are the impetus for paying down nearly $200 billion of the $12 trillion national debt.
Some Democrats in Congress think that unspent TARP funds should be used as an antidote to rising unemployment. According to Representative John B. Larson (D-CT), chairman of the House Democratic Caucus, lawmakers could send a strong message about their priorities by using TARP funds to pay for road and bridge projects and other efforts that will create jobs. “We want to look at how Wall Street can refund Main Street,” Larson said, noting that he and other senior House Democrats are considering a tax on financial transactions. One possible use of unspent TARP funds could be payouts to small business programs to jump start job growth.
Tags: department of treasury, John Larson, national debt, Obama administration, TARP, Timothy Geithner
Posted in Economics, Financing | 1 Comment »