Socialize

As crisis loomed, Geithner ignored warning signs

By
April 3, 2009

Timothy Geithner, President Barack Obama’s embattled Treasury Secretary, ignored warning signs of the impending banking and economic crisis because he, as head of the Federal Reserve Bank of New York, was too close to the industry he was supposed to regulate.

Others saw it coming and the warning signs were there but Geithner missed the signs and ignored the warnings of others.

The collapse of the housing market sent out early warnings but they were lost in Geithner’s moves to streamline the banking system to allow Wall Street to make money faster and bypass safeguards that would spot problems.

As the house of cards began to fall apart, those still getting rich honored Geithner and the Fed as a "Dream Team" of financial wizards. In reality, the wizards accelerated America’s plunge into a national economic nightmare.

Then incoming President Obama picked Geithner as the man to get this nation out of the economic chaos he helped create.

Reports The Washington Post:

In September 2005, Timothy Geithner made one of his most visible moves as a supervisor of the U.S. banking system. He summoned the nation’s top financial firms and their regulators to streamline an antiquated system that threatened Wall Street’s boom.

Billions of dollars worth of financial instruments known as credit derivatives were being traded daily, as banks and investors worldwide tried to protect against losses on increasingly complex and risky financial bets. But the buying and selling of these exotic instruments was stuck in a pencil-and-paper era. Geithner, then head of the Federal Reserve Bank of New York, pressed 14 major financial firms to build an electronic network that would cut backlogs and make the market easier to monitor.

Geithner’s summit, held at the New York Fed’s fortress-like headquarters near Wall Street, was a success. By fall 2006, the new system had all but eliminated the logjam, helping derivatives trade more efficiently. One financial industry newsletter honored Geithner as part of a "Dream Team" for his leadership of the effort.

Yet as Geithner and the New York Fed worked to solve narrow mechanical issues in the derivatives market, they missed clear signs of a catastrophe in the making. When the housing market collapsed, derivatives stoked the fires that ignited inside some of the biggest banking companies. The firms’ failure to assess an array of risks they were taking has emerged as a key element in the multitrillion-dollar meltdown of the global financial system.

Although Geithner repeatedly raised concerns about the failure of banks to understand their risks, including those taken through derivatives, he and the Federal Reserve system did not act with enough force to blunt the troubles that ensued. That was largely because he and other regulators relied too much on assurances from senior banking executives that their firms were safe and sound, according to interviews and a review of documents by The Washington Post and the nonprofit journalism organization ProPublica.

A confidential review ordered by Geithner in 2006 found that banking companies could not properly assess their exposure to a severe economic downturn and were relying on the "intuition" of banking executives rather than hard quantitative analysis, according to interviews with Fed officials and a little-noticed audit by the Government Accountability Office. The Fed did not use key enforcement tools until later, after the credit crisis erupted, according to its records and interviews

Posted by on April 3, 2009. Filed under FUBAR. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

11 Responses to As crisis loomed, Geithner ignored warning signs

  1. Jim Shelton

    April 3, 2009 at 10:18 am

    …ever wonder if he had the authority to do anything? As I understand the situation, there was a paucity of regulatory authority based on actions of the last administration. The recent G 20 conference spent a lot of time discussing international regulation. Quit digging in the past and write something more contemporary.

  2. Carl Nemo

    April 3, 2009 at 1:11 pm

    People need to get in their heads that this entire financial debacle was Bushco’s engineered “financial Iraq” with the mechanisms in place to continue their shakedown even if they lost the election.

    Timothy Geithner is nothing more than a Goldman Sachs~Fed~Treasury axis plant to facilitate a vast transfer of tax-debtor wealth into the hands of the few; ie., the major stockholders of the Federal Reserve System of which there are about eight including the Rothschilds of Europe and of course the Rockefellers et al.

    “as crisis loomed, Geithner ignored the warning signs”…extract from article

    Why? Because he was supposed to ignore the warning signs and allow their plans to unfold no differently than our intel agencies concerning 9/11.

    President Obama; ie., Mr. “Yes We Can” is nothing but feelgood window dressing for this continued post Bushco shakedown, quite possibly an unwitting, highly principled dupe that was groomed for the job. I was stunned when he moved to have Timothy Geithner appointed to SOT, me knowing his Fed~Goldmann Sachs association along with twenty plus other appointees with Bilderberg, CFR and TriLateral org ties. The Senate although with some opposition rubber-stamped this appointee; now everyone is scratching their heads and asses as to what’s happened; ie., business as usual in Congress.

    Geithner needs to go immediately if not sooner, otherwise there’s nothing to stop this modern era version of a modern era James Gang holding up the U.S. Treasury to an extent which will be tantamount to issuing a financial coup de grace to the U.S. and its citizens.

    http://socialistworker.org/2009/03/24/the-geithner-giveaway

    Carl Nemo **==

  3. almandine

    April 3, 2009 at 5:29 pm

    One of the most important things to note is the typical bewilderment by both the average Joe and the institutional pundits as to what is going on. Few see that the goal is to do just what Obama is attempting to do, i.e., level the playing field so that – AFTER THE ELITE HAVE TAKEN THEIR BOUNTY – residual income is distributed evenly among the people. Not just the American people, but ALL people, everywhere. That couldn’t happen as long as the average US citizen remained wealthy – relative to other citizens of the world – because people who aren’t really hungry, people who own homes, people who have bank accounts, credit cards, and retirements, people who are thusly not dependent on government for their livelihoods, won’t kowtow to the political elite. ONLY when the average US citizen has been broken financially, except for whatever taxes s/he can pay toward the global financial machine, can the levelling occur. Only then can (world) government truly rule everything. Only then can collectivism work. Only then will all citizens of the world be enslaved. None of this crisis and the responses to it has ever been about financial “mistakes” made by politicians and bankers… none of it since those so-called mistakes has ever been about putting the financial system back on sound footing. The goal is only to set the machine back on course, to hoodwink and shift the various debates to fringe issues that expend popular emotion, so that there is little real fight left in those being beaten down… so that there are too few left to rise up and become free again. Welcome to socio-fascist hell.

    Collectivism is slavery…

  4. DejaVuAllOver

    April 3, 2009 at 4:29 pm

    Nice post and link, Carl. And nice summary, Doug. The problem with our economy is, as far as bankers are concerned, that the value of the dollar will settle to a reasonably stable value based on the value of goods and services (GNP) and there’s no way to generate much interest from such a stable and theoretically non-manipulable system. So, the Rothschilds, Rockefellers (and maybe others) figured out long ago that if they could control the money supply, they could control value of the dollar and the GNP. By manufacturing swings, they could then steal great wealth by several mechanisms: hoarding cash, denying loans which forced bankruptcy and then allowed easy and cheap takovers, even loaning money to governments to recover from the panics they created. And of course, they could also get governments to fight wars for their pet causes under the guise of increasing productivity and relieving poverty and unemployment, all brought about by THEM.

    We’re not dealing with normal people, here. We’re dealing with sick, demonic sociopath criminals who care nothing for anyone except themselves. Unfortunately, our legal system has yet to recognize most of these complex and virtually untraceable crimes and scams. And even if it could, how do you prosecute these cretins? I wish I knew.

  5. Carl Nemo

    April 3, 2009 at 8:31 pm

    Thanks for the feedback DejaVuAllOver.

    “Unfortunately, our legal system has yet to recognize most of these complex and virtually untraceable crimes and scams. And even if it could, how do you prosecute these cretins? I wish I knew.” …post extract

    That’s why I’m hoping for an asteroid incoming. Maybe not a planetary extinctor, but one that at least destabilizes civilization to the point that it knocks the supports from under their evil plans permanently. I think justice would be that that these once uber wealthy cretins find themselves alongside the unwashed masses spearing rats with fire-hardened sticks and having to survive in the wreckage of a civilization they no longer valued… : |

    Carl Nemo **==

  6. Carl Nemo

    April 3, 2009 at 6:22 pm

    Thanks Almandine for mentioning what I call “the great leveling” in terms of wages resulting in equal desperation for all. Of course those in the world that are abject have nots will perceive their newly found upward mobility refreshing while those in the U.S. and other Western nations will be dragged kicking and screaming down to the newly established lowest common denominator.

    That’s why I always refer to the NWO’s agenda as a reduction of the U.S. to that of a minor plantation within their greater global plantation. They’ve been busy dividing the planet up into enterprise zones and it seems they’ve been doing quite well until a rogue mega-insurer AIG created a bump on their globalist highway to their New World Order.

    I can’t blame the average citizen for ignoring such plots or even more sophisticated readers simply saying its another conspiracy theory, but rest assured it is not. These elitist mattoids will never have enough power. The amount of money they amass in the process is simply to keep score.

    Henry Kissinger once said that “power is the ultimate aphrodisiac”… /:|

    Carl Nemo **==

  7. woody188

    April 5, 2009 at 1:37 am

    We always called it “the race to the bottom.”

    AIG isn’t a rogue. AIG is a sacrificial lamb to help set off the bust and deflect anger.

  8. Carl Nemo

    April 5, 2009 at 4:56 am

    Hi Woody 188,

    Strike rogue then and I’ll allow that possibly the AIG’s failure was engineered with the tragic outcome to be exploited for their endgame purposes.

    “The appearance that this was all an inside job is overwhelming. AIG was nothing more than a conduit for huge capital flows to the same old suspects, with no reason or explanation.” …Eliot Spitzer former NY State AG

    Ref: Same old suspects as Goldman Sachs, Citibank, Bank of America, J.P. Morgan et al.

    Carl Nemo **==

  9. bryan mcclellan

    April 3, 2009 at 9:25 pm

    We may have that event from within as the Yellowstone area has heated up volcanically in the last few years. Not much solace in that except the greedy bastards won’t be able to staunch an eruption with fiat cash.

    People thought I was nuts when I claimed Reaganomics was a wealth regathering effort by the shadow industrialists.I wonder what they are thinking now. HACK!

    Great commentary folks. Love this C.H.B.

  10. remoran

    April 4, 2009 at 4:14 pm

    “Never stop questioning.” Einstein

    The Fed is the linchpin on which this fubar rests and Geithner was the head of the NY Fed. Any questions? Do the research on how money is created because once you know the drill, you will realize why this government has no power to change a damn thing unless the Fed is abolished, something Obama and Congress lack the guts to do.

  11. Marzman

    April 5, 2009 at 6:44 am

    Bingo!

    “The Fed is the linchpin on which this fubar rests and Geithner was the head of the NY Fed. Any questions?”

    “Meet the new boss. Same as the old bosss”

    And the vast majority of the American people are too distracted by consumerism, religion and the cult of entertainment to notice.