Geithner's Meltdown Over Financial Reform

« The Recession Is Permanent | Main | Need A Job In Banking? Call Barclays »

Aug 4 2009, 12:00 pm by Derek Thompson

Treasury Secretary Tim Geithner unleashed an "expletive-laced" barrage on regulators over financial reform frustrations, and it's making some people worried that Obama's regulation plans are already falling apart. Tim Fernholz has some great analysis. To highlight his best point: Geithner is fighting a war on two fronts. The first front is against Wall Street, which doesn't want to cede any power to the administration now that they're cutting the strings and re-learning to put up huge profits. The second front, just a few hundred miles down I-95, is against Washington regulators who don't want to cede any power to the administration because ... well, because they're Washington agencies and that's how they do.

What does this mean to the future of the US financial regulation plans? It's difficult to say, but combined with this report that parts of the financial regulation plan have stalled in committee, I think we're seeing what many analysts feared months ago: That by scheduling financial reform after health care and cap-and-trade was akin to nailing its coffin.

The farther we get from the nadir of this financial crisis, the weaker the pull the administration will have over Wall Street and the less extraordinary will we're going to see from Washington agencies to cooperate with the administration to shuffle regulation duties and concentrate power in the Federal Reserve. However: When I quickly summed up this blog post to my colleague Daniel Indiviglio, he expressed uncertainty that the agencies could ever be accommodating enough for Geithner and the administration to bend and twist into spanking new regulatory bodies.

Can we count this as a crisis wasted? It's impossible to issue a verdict, but I think we're going to see increased pressure on Obama to take a personal stake in financial reform. As Fernholz notes, the questions being raised by regulators are mostly about turf, not policy, and no matter how many four-letter words Geithner wields, they won't replace the influence of the president making personal appeals to regulators about their changing role.

Comments (6)

Stayfree August 4, 2009 1:25 PM

Finally, some responsible bureaucrats have balked at the socialist steamroller aka the Obama administration. Granted recent events have made it abundantly clear that more adequate financial safeguards should be put in place, but there would be no checks and balances if the Fed were allowed to design any financial reform and then use its unrestrained power to botch everything up again. Both the Fed (with its cheap money policy over the last several years) and the existing regulatory agencies asleep at their desks are responsible for this mess as much as the boneheads in Congress who encouraged foolish lending practices and the flakes who borrowed more than they could handle. The American public is astounded and outraged at the carelessness and idiocy that prevails in D.C. It is time to clean house from top to bottom!

Bob Loblaw August 4, 2009 2:23 PM

I agree that it's time to clean house. It wasn't just the Fed, the regulatory agencies, the boneheads in congress and the flakes who borrowed the money. I won't argue with those, but why stop there?

How about the idiots who borrowed money to bet on high risk financial derivatives, or the PHDs who wrote software to make high risk loans look like low risk loans, or the credit rating agencies that took bribes to rate high risk investments as low risk investments. We have the means to clean house in DC by voting. Who is going to clean house on Wall Street? I say it's time for the DOJ to start doing it's job. That is if the GOP will stop blocking Obama's appointments

mgoodfel (Replying to: Bob Loblaw) August 4, 2009 2:49 PM

How about all the loons who bought houses at 6 times their annual income? Can we get rid of them too?

drhall August 4, 2009 2:58 PM

Agree on all points, Bob and Stay. The GLOP cannot stop the Demoncrats, you see, both sides are at fault, As per Usual. America would do well to heed our illustrious teaching system which utilizes and teaches DELPHI TECHNIQUE, both parties serve to keep idiot voters busy ranting at each other, while "they" go right about business.

DELPHI - continual polling until a "consensus" is reached. of course it is rigged from the outset. but so is our political system. Rand Corp. '64. (want more, i personally know more than i should about this).

Now, for Obama. I am sorry to have voted for him. The swarth of his path has echoed Bush from day one.
Grab and Torture, check. Big Govern't, check. PUSH INSANE FINANCE BILLS and DEMAND support for the good of the country, check. INSANE H.R.3200, check. Lord, save us from this guy. What a dork!

Yes, I have answers and never ever take part in an argument(debate) without offering solutions/attempts to correct perceived error.

As Bob so forthrightly stated, America is on the verge of purging (revolution) government - i predict within three years, five latest. Simple Answer - FLAT TAX. Money is the grease for all our attempts to save this sinking ship. Oh yeah, and people must get off their a.. and work for it. Talk is cheap.

Don Hall
Lexington, KY
http://drhprojectconsulting.vpweb.com

Bob Loblaw August 4, 2009 3:29 PM

The DELPHI TECHNIQUE. That's good. I've been aware of it for a long time, but never knew it had a name. All this liberal/conservative nonsense. It's just something the power brokers use to keep everyday people busy while they rob them blind.

I could go with a flat tax. I could also see more reliance on sales taxes. It would hold down spending to some degree, but isn't the mess we are in right now due to people spending beyond their means? Maybe some moderation wouldn't hurt.

drhall August 5, 2009 9:32 AM

Again, Bob Loblaw is right on the money.

We spend beyond our means. Many 1970 and 1980 economic studies expressed the lack of the American SAVINGS habit. Okay, we are manipulated beyond belief and save almost nothing of our earnings.

True and true again. However, the injustice is the lack of fiscal responsibility shown by both presidents
houses and senate. The public manipulation by way of lack of real news, and political machination, is out the roof, insane.

The healthcare H.R. 3200 is the most flawed piece of legislation since Home Security was pushed into existence. President Obama has not even read the paper he is pushing. Maybe he will. The point is that
he was insisting the piece of garbage be passed by AUGUST. Unread!

We cannot allow politicians to say it is okay for Mexicans to illegally obtain services and social security.
A strong and clear message to OBAMA - AMERICA is not going to take your crapola anymore!

A Flat Tax would allow America to build a better healthcare system. Eliminate the bogus government handouts and pharmaceutical behind the scenes manipulation too. Hospitals would not need pharm money, education would not need their money, politicians (who cares about those kind anyway)would far less
powerful.

We Are AMERICANS fighting our own kind for our freedom and right to work and be educated.

Flat Tax will take the impossible IRS Code to its knees. Get rid of that arcane and ridiculous organization.
Flat Tax will also allow people to begin seeing that they no longer are dependent on political bribes, goodwill and favors from their elected talking heads. Get rid of them too!

Dick Armey of Texas was right on the money too. It took me awhile to come around to exactly how useful Flat Tax would be. Until Now.