Guardian: Elizabeth Warren Critical Of The Geithner Way

This is an interesting development:

[Elizabeth] Warren, a Harvard law professor and chair of the congressional oversight committee monitoring the government's Troubled Asset Relief Program (Tarp), [will issue] a damning report that will question the administration's approach to saving the financial system from collapse. . . . She declined to give . . . detail[s] but confirmed that she would refer to insurance group AIG, which has received $173bn in bailout money, and banking giant Citigroup, which has had $45bn in funds and more than $316bn of loan guarantees.

Warren . . . believes there are "dangers inherent" in the approach taken by treasury secretary Tim Geithner, who she says has offered "open-ended subsidies" to some of the world's biggest financial institutions without adequately weighing potential pitfalls. "We want to ensure that the treasury gives the public an alternative approach," she said, adding that she was worried that banks would not recover while they were being fed subsidies. "When are they going to say, enough?" she said. . . .

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    so, now certain people on certain blogs (5.00 / 5) (#1)
    by Turkana on Sun Apr 05, 2009 at 04:20:37 PM EST
    will claim she's as evil as mean old krugman?

    heh (5.00 / 4) (#2)
    by andgarden on Sun Apr 05, 2009 at 04:27:00 PM EST
    I've never heard anyone say a bad word about her. Get ready. . .

    What I find interesting is that (5.00 / 2) (#23)
    by Anne on Sun Apr 05, 2009 at 08:43:35 PM EST
    of all the players in this drama, all these big, powerful men in their expensive suits, it is a woman - Elizabeth Warren - who is truly speaking truth to power; I hope people are listening, that they get a chance to hear what she's saying, because I think of all of them, she may be the only one who remembers that there are ordinary people involved here, whose futures - maybe even whose lives - hinge on this mess being fixed.

    We shall see.


    Is Christina Romer (2.00 / 2) (#24)
    by Politalkix on Sun Apr 05, 2009 at 09:04:51 PM EST
    not a woman or does she not care about ordinary people? Sorry for interrupting a good rant!

    So, you're saying that Romer (none / 0) (#27)
    by Anne on Sun Apr 05, 2009 at 09:36:49 PM EST
    is not agreeing with the Boyz?  That she is advocating for something other than the Geithner plan, as it is currently configured?

    Romer is a woman.  Wow, you got me there.  Score!

    Does she care about ordinary people?  Show me something that reflects push-back against Geithner, and by extension, Obama; show me something that speaks to what people like us are worried about.  


    Don't set up false choices (2.00 / 1) (#28)
    by Politalkix on Sun Apr 05, 2009 at 09:45:30 PM EST
    Well, her son worked... (5.00 / 3) (#9)
    by lambert on Sun Apr 05, 2009 at 04:48:06 PM EST
    Nah. Can't go there. That riff is tired ;-)

    I learned a new term today: (5.00 / 1) (#20)
    by inclusiveheart on Sun Apr 05, 2009 at 08:19:28 PM EST
    "Covenant lite loans"

    It means that a lender provides funds without specifics about how it will be spent of goals for ROI.

    It's like eating lite foods - totally unsatisfying.


    And on (4.33 / 3) (#4)
    by JThomas on Sun Apr 05, 2009 at 04:30:28 PM EST
    other blogs they will hail her as a brilliant all-knowing oracle.

    In reality, she is neither.

    She is pissed cus they are not getting all the info from the banks like they want. I think publicizing the weakness of particular institutions while trying to sort thru which banks can hold up under the stress tests would be counterproductive but she is nervous about it in her role as an oversight leader. I am not castigating her for her concern but this Geithner plan is still unfolding.


    So STFU and support the plan? (5.00 / 6) (#5)
    by andgarden on Sun Apr 05, 2009 at 04:31:40 PM EST
    No, let the President fire her.

    No worries (2.00 / 1) (#13)
    by Catch 22 on Sun Apr 05, 2009 at 05:34:09 PM EST
    Obama can't fire her. She was appointed by congress.

    I wonder what her alternative to give the public an alternative approach will be. Here is one:

    Warren, a Harvard law professor and chair of the congressional oversight committee monitoring the government's Troubled Asset Relief Program (Tarp), is also set to call for shareholders in those institutions to be "wiped out".

    That is very helpful. That will certainly help the banks recover. I don't know how but if she says so. Seems it would put them in a worse way.

    So if Citi reports 2 months profits out of three during the worse economic cycle since the depression that is not good enough? What a loon.


    Citi's "profit" is about as real as (5.00 / 3) (#25)
    by reslez on Sun Apr 05, 2009 at 09:05:33 PM EST
    Rod Blagojevich's hair. While Citi was posting its very dubious "profit" AIG posted a loss of $66 billion. Where do you think all that money went? Straight into holes in bank balance sheets. We have a legion of CEOs who have agreed not to accept any compensation unless their company turns a profit. Hence profits magically appear.

    The fact is shareholders of these corporations should and eventually will take a haircut. They would have done so already if the federal government were not propping them up. For you to scratch your head in mock puzzlement at Warren's statement reveals a profound misunderstanding of the financial and behavioral incentives that led to the crisis. Warren is correct to criticize TARP and correct to call for shareholder sacrifices. We can only hope her viewpoint will eventually prevail in this administration, or Obama's first term will likely be his last.


    Heh (5.00 / 1) (#26)
    by Steve M on Sun Apr 05, 2009 at 09:20:10 PM EST
    You'd report a profit too, if AIG was calling you up to unwind entire portfolios of credit-default swaps at 100 cents on the dollar!  Regrettably, don't look for that performance to continue.

    Wasn't it exactly (5.00 / 2) (#33)
    by NYShooter on Sun Apr 05, 2009 at 11:40:15 PM EST
    two weeks prior, they were on bended knee whimpering for a 20 billion helping hand? I say, fire Geithner, and hire Citi's CEO. Gotta be the biggest, bestest, and fastest turn-a-round artist evah!

    What (2.00 / 1) (#29)
    by Catch 22 on Sun Apr 05, 2009 at 10:37:08 PM EST
    are you saying? That AIG bought existing CDS' from Citi in the first quarter of the year? If so I'd sure like to see a citation on that. Or did AIG have to contractually pay Citi for some CDS' that they purchased from AIG?

    The link (5.00 / 1) (#31)
    by Steve M on Sun Apr 05, 2009 at 10:50:40 PM EST
    is here.

    While the source is anonymous the proof will be in the pudding either way.  In other words, Citi will either continue to bang out profitable months or it will not, and if it suddenly stops we can surmise the reason for its one-time success.

    The story is certainly plausible IMO.


    Tom Terrific (2.00 / 1) (#32)
    by Catch 22 on Sun Apr 05, 2009 at 11:34:17 PM EST
    So you have an anonymous source who doesn't even name Citi who says "I can only guess/extrapolate what sort of PnL...". And then you add in "at 100 cents on the dollar" out of who knows where and you are hanging your hat on that? Please. And then you say "Regrettably, don't look for that performance to continue". You you base that on?

    Plausible. Nice word. It covers so much ground even when there is no ground to be covered.


    Oh gosh! (5.00 / 1) (#35)
    by Steve M on Sun Apr 05, 2009 at 11:46:01 PM EST
    You don't believe something that doesn't fit with your preexisting worldview!  I am completely shocked by this!  I haven't seen anything like this since your previous 10 aliases.

    Feel free to keep on believing that Citi remains a legitimately profitable enterprise.  The market offers an excellent method for you to cash in on this proposition, at less than $3 per share at this writing.  Come on, don't just be an Internet message board bloviator, make a million bucks.


    I think (2.00 / 1) (#38)
    by Catch 22 on Mon Apr 06, 2009 at 11:02:24 AM EST
    it is you that may have the preexisting world view. To the point you post anonymous sources that are splattered all over the internet by others with a possible preexisting world view. The entire story is probably one of those hoaxes started by someone with a preexisting world view who can simply say whatever they want anonymously and knows it will take root with those who want it to be true. Happens all the time online. And I'm still waiting to see where you got 100 cents on the dollar from and explain exactly what it means and represents.

    Simply produce one credible source that says AIG did unwind some CDS' in some illegitimate way. I searched last night and found nothing. The only citations to that line of thinking was the anonymous story itself. That does not make the story very credible. Present credible evidence and I will believe that credible story.

    As for my world view on this economic situation, I have none. Other than of course that I want it to get fixed fast. And that I realize that like them or not, perfect or not, what we now have is the plans in place. Some wish for them to fail so they can be right. Some hope that they will work so they can be right. I hope they will work so we don't have to hit reset and start all over again and drag this thing out.


    Wipe them out (3.50 / 2) (#16)
    by Politalkix on Sun Apr 05, 2009 at 06:54:29 PM EST
    Shareholders also include pension funds that manage money for ordinary investors. Yes, wipe them out.

    It means seizing the big insolvent ones (none / 0) (#14)
    by andgarden on Sun Apr 05, 2009 at 05:39:42 PM EST
    just as the FDIC seizes the small insolvent ones every friday.

    So who are (2.00 / 1) (#15)
    by Catch 22 on Sun Apr 05, 2009 at 05:51:05 PM EST
    those the big insolvent ones? Bet she doesn't name any. At least none where she can back up her words.

    So far she is just a mouth piece for congress whose main job is to utter the words protect the tax payer as often as possible so they can get reelected.

    I read the article and was not impressed. So she is copying 10,000 articles that have already been written. Oy.


    yes, wipe them out (4.20 / 5) (#18)
    by jussumbody on Sun Apr 05, 2009 at 07:35:52 PM EST
    Because they are worth MUCH less than the US government has already sunk into them, directly thru TARP and indirectly thru AIG.  We could have bought them outright for less than what we put into them for a measly NONVOTING 80% ownership interest.  And their recent "profitability" is a result of the money being funnelled to them thru AIG.

    The taxpayers deserve all of the upside to this investment (if there is any) and most of all we need to get rid of the management that got us there.

    We'll never know who is insolvent and who is solvent under Geithner and Obama because they are doing their level best to keep us from finding that out.

    But you knew that already, didn't you, Troll.


    Heh (5.00 / 7) (#6)
    by Big Tent Democrat on Sun Apr 05, 2009 at 04:32:57 PM EST
    Still unfolding. Indeed.

    You disagree? (5.00 / 2) (#7)
    by JThomas on Sun Apr 05, 2009 at 04:37:30 PM EST
    You think there are not contingencies in place in the plan to address the terminal patients?

    There is no exact formula for correcting our problems in the financial sector..some errors will be made.
    I know, just nationalize them all and we will all be drinking champagne and eating caviar next month. Easy,peasy,japaneasy.


    I think that is Warren's critique (5.00 / 7) (#8)
    by Big Tent Democrat on Sun Apr 05, 2009 at 04:40:59 PM EST
    That it is in never ending unfolding mold.

    Remember, the Geithner way is a continuation of the Paulsen/Geithner Way (at least I think so.)

    I think it is a terrible plan. I think it is pretty clear what the plan is - a continued handout of taxpayer money to the Masters of the Universe.


    Just today (2.00 / 1) (#36)
    by JThomas on Mon Apr 06, 2009 at 01:33:30 AM EST
    Geithner indicated that they would replace management if they determined that was necessary.
    I still think there are more options that Geithner and Obama will consider as the stress testing is completed.

    Capture Castle Greenspan. (none / 0) (#11)
    by Salo on Sun Apr 05, 2009 at 05:23:45 PM EST
    Skeletor already beat us to it, i'm sorry to say.

    Personally I think that Health Insurance corps... (none / 0) (#12)
    by Salo on Sun Apr 05, 2009 at 05:26:58 PM EST
    ...ought to be nationalized. They are just another tier of thieving gits ripping off the ordinary ( wo )man.   The banks bytheir nature are private, but they are clearly too corrupted to be trusted right now.

    Warren Has Been Critical of.. (5.00 / 5) (#17)
    by santarita on Sun Apr 05, 2009 at 06:57:58 PM EST
    Treasury's lack of cooperation and transparency almost from the beginning.  I really like her presentations...very matter of fact, direct and to the point.  She raises valid points.

    I like this part (5.00 / 5) (#19)
    by Cream City on Sun Apr 05, 2009 at 07:49:11 PM EST
    "We want to ensure that the treasury gives the public an alternative approach."

    Yes, I would be reassured by such a sign that Obama, Geithner, et al., are actually managing the bankr rather than being managed/manipulated by them.  Managers identify and explore options.  That's what differentiates them from rubber stamps.


    The Masters of the Universe do not (5.00 / 2) (#21)
    by inclusiveheart on Sun Apr 05, 2009 at 08:20:52 PM EST
    believe that "the public" have a valid POV.

    They are of course The Masters of the Universe, so why would they?


    Hopeful Signs... (none / 0) (#22)
    by santarita on Sun Apr 05, 2009 at 08:36:43 PM EST
    I see the ouster of the GM president as a possible warning shot across the bow for some of the big banks.  And Geithner on "Face the Nation"  today threw out a suggestion that some CEO's and Boards may have to go.

    The next few weeks should be very interesting.  


    Pour encourager les autres (5.00 / 3) (#30)
    by lambert on Sun Apr 05, 2009 at 10:46:21 PM EST
    is all very well.

    But it's the money that matters, not the CEOs.

    Trillions transferred from the taxpayers to the banks, without so much as a Congressional hearing, and we have no idea why or where it went (except for the AIG counterparties, a small fraction they were forced to disclosed by a public outcry).

    Remind me again why this is democracy, as opposed to being (say) France under the Bourbons?


    Can't blame her one bit for doing this. (5.00 / 2) (#34)
    by AX10 on Sun Apr 05, 2009 at 11:43:06 PM EST
    The Geithner plan is the Paulsen plan wrapped up in a bow.

    Interesting? No, not (5.00 / 3) (#37)
    by Cream City on Mon Apr 06, 2009 at 09:08:22 AM EST
    to U.S. mainstream media.  Googling this a day later, I find it in exactly one U.S. newspaper -- the Cleveland Leader.

    Interesting that this had to be found reported in the Guardian?  Yes.

    (Noting that it is an advance, i.e., that she "will call" this out this week, let's see how widely it is reported here when she does.  See how many U.S. media then see it as an old story already reported in . . . the Cleveland Leader.)

    perhaps, (none / 0) (#3)
    by cpinva on Sun Apr 05, 2009 at 04:27:01 PM EST
    will claim she's as evil as mean old krugman?

    she's his evil twin, "skippy" krugman?

    Here's my Bankster plan... (none / 0) (#10)
    by Salo on Sun Apr 05, 2009 at 05:20:30 PM EST
    "Gentlemen-Blindfold? Cigarette? Priest?.... Ready, aim, fire!"