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Stories tagged with “Timothy Geithner”

NEWS FLASH

Geithner: House Republican Budget Is A ‘Recipe For Decline’ | Yesterday, President Obama blasted the House Republican budget that passed last week as “thinly veiled social Darwinism” that is a “prescription for decline.” Treasury Secretary Tim Geithner piled on today, calling the budget a “recipe for decline.” “There is no economic or financial case for using the fear of future deficits to cut as deeply into core functions of the government, to weaken the safety net or fundamentally alter Medicare benefits as do the Republican proposals,” Geithner said during a speech at the Economic Club of Chicago.

Health

Paul Ryan Berates Tim Geithner For Not Embracing GOP’s Medicare Privatization Scheme

By Jeff Spross on Feb 22, 2012 at 12:33 pm

If President Obama’s newly-proposed budget were to be enacted, its long-run projections show U.S. debt stabilizing as a percentage of GDP until approximately 2030, after which it begins to rise again indefinitely. Last Thursday, House Budget Committee Chairman Paul Ryan (R-WI) decided to take Treasury Secretary Tim Geithner to task over those numbers:

RYAN: Leaders are supposed to fix problems… Our government is making promises to Americans that it has no way of accounting for them. And so you’re saying, “Yeah, we’re stabilizing it but we’re not fixing it in the long run.” That means we’re just gonna keep lying to people. We’re going to keep all the empty promises going.

The most important thing to remember about the debt increase from 2030 onward is that it’s driven almost entirely by health care costs:

Some of this is the retirement of the baby boomers, and the resulting increase in retirees as a share of the population. Though Social Security is also effected by this, and its per year expenditures stabilize after a few decades at 6 percent of GDP. Some of this is also technological advancement, which just naturally makes health care more expensive as it’s able to do more things. Every advanced country’s health care is rising as a percent of GDP, but none are as high or rising nearly as quickly as the U.S. The fundamental problem is the cost of health care in America is rising at a much faster rate than overall economic output. And that’s the costs for everyone: Individuals, private insurers, and government alike. As a result, the amount of money the government is scheduled to spend each year on health care, the lion’s share of which goes to Medicare, is predicted to grow indefinitely as a percentage of GDP. Simply put, the thing Medicare buys is becoming ever more expensive, so Medicare’s budget is becoming ever larger.

There are two ways to solve this. One, the government can simply buy less health care over time — and by extension leave every American who has relied on that support to find some other way to make up the difference. That’s what Ryan and the Republicans did in their 2011 budget which passed the House last April. Ryan’s budget would’ve transformed Medicare into an exchange providing private insurance plans, with premium support to help seniors buy those plans. Ryan and the Republicans would then have slashed that support so drastically that by 2030 the typical 65-year-old would be paying 68 percent of their health care costs, according to the CBO. Absent those changes to Medicare, that amount would not rise above 30 percent. Ryan’s budget also called for severe cuts to Medicaid and discretionary spending, two-thirds of which would’ve fallen on the shoulders of America’s poorest and most vulnerable citizens. Read more

Economy

In 2006, Fed Predicted ‘At Worst, An Orderly Decline In The Housing Market’

By Pat Garofalo on Jan 13, 2012 at 10:45 am

The Federal Reserve yesterday released transcripts from 2006 (full official transcripts of Fed meetings are released five years after the meetings occur), which shed some light on how badly the Fed misinterpreted the housing bubble. “I really believe that the drop in housing is actually on net going to make liquidity available for other sectors rather than being a drain going forward, and that will also get the growth rate more positive,” said then Fed member Susan Bies. “Housing is a relatively small sector of the economy, and its decline should be self-correcting,” added Janet Yellen, now the Fed’s vice chairman.

Dallas Fed Chairman Richard Fisher said that, “as one CEO told me, the only subject that has been more analyzed than the housing situation is the birth of Brad Pitt’s baby.” Chairman Ben Bernanke, meanwhile, predicted “at worst, an orderly decline in the housing market,” while now Treasury Secretary Tim Geithner (then president of the New York Federal Reserve) said, “we think the fundamentals of the expansion going forward still look good.”

The Fed’s perspective is perhaps best summed up by Gary Stern, then president of the Minneapolis Federal Reserve, in a March 2006 meeting:

I thought I would comment a bit more on two issues in particular—one is housing—where I wonder if the significance of potential developments might not be being exaggerated a bit. I certainly agree that changes in housing prices, up or down, feed into household wealth and through that into consumer spending. I think that’s a perfectly acceptable story. So if housing prices go down or level off, they will have that effect on wealth and potentially on spending.

But there seems to be a view that, in some sense, an exogenous pronounced decline in housing prices is possible, maybe even likely, and that this could be more devastating for the economy. It’s not that I would quibble with that story, but I would wonder about its likelihood because it seems to me more likely that housing is the tail rather than the dog in this. That is, as long as employment continues to go up, incomes continue to go up, and mortgage rates remain relatively moderate, then I would expect that we would avoid severe difficulties in housing except for a few markets that are particularly inflated at this point.

From the transcripts, it becomes clear that Fed officials thought the economy supported the housing market. But it was actually the other way around: the housing sector was supporting the economy. Meanwhile, the nation’s biggest banks had entwined themselves (via the housing market, which they were helping prop up with predatory subprime loans) to such an extent that when housing finally declined, the whole system fell apart.

Security

Treasury Official: Senate’s Iran Central Bank Sanctions ‘Risk Fracturing The International Coalition’ Against Iran

By Ali Gharib on Dec 1, 2011 at 6:26 pm

The Obama administration, while wanting to apply additional pressure on Iran, came out today in a letter to a key Member of Congress and in a Congressional hearing with “strong opposition” to a Senate amendment to the Defense Department budget that would level hard-hitting sanctions against Iran’s Central Bank (CBI). The Kirk-Menendez amendment, named for the sponsoring Senators Mark Kirk (R-IL) and Bob Menendez (D-NJ), would bar any companies or central banks abroad that do business through Iran’s central bank from doing any business in the U.S. Kirk has said the legislation was designed to collapse Iran’s currency and expressed indifference to the suffering of ordinary Iranians as a result of doing so.

At a Senate Foreign Relations Committee hearing today, two administration officials pushed back against the Kirk-Menendez amendment, offering a critique that while they shared the goals that underly the bill — pressuring Iran — they feared consequences of the legislation might be counterproductive.

Under Secretary of the Treasury for Terrorism and Financial Intelligence David Cohen, who recently returned from a trip to Israel and the United Arab Emirates to work with U.S. allies in pressuring Iran, told the committee that the Kirk-Menendez amendment could shatter the international coalition that has been successful in slowing Iran’s nuclear progress:

COHEN: [It] risks fracturing the international coalition that has been built up over the last several years to bring pressure to bear on Iran, especially today in the aftermath of what has occurred in Tehran over the last several days, in the aftermath of the IAEA report, and in the growing sense of urgency internationally with respect to Iran’s nuclear program.

I think we have an opportunity to work cooperatively and collaboratively with our international partners to bring additional pressure to bear on Iran. The amendment, however, would focus the most powerful sanction that we have, the termination of access to the United States on the largest financial institutions and the central banks and some of our closest partners.

Watch the video:

Cohen said the “threat of coercion that is contained in the amendment” could alienate even close and cooperative allies like Japan and European countries. The administration believes, Cohen added, that cooperation and coordination can be better achieved “if we approach this issue through an effort to coordinate action voluntarily.”

Under Secretary of State for Political Affairs Wendy Sherman, who also appeared at the hearing, said the administration’s analysis concludes that “there is absolutely a risk that in fact the price of oil would go up, which would mean that Iran would in fact have more money to fuel its nuclear ambitions, not less.”

Also today, as committee chair Sen. John Kerry (D-MA) acknowledged, Treasury Secretary Timothy Geithner wrote a letter to Armed Services chair Sen. Carl Levin (D-MI) stating the administration’s “strong opposition to this amendment because, it its current form, it threatens to undermine the effective, carefully phased, and sustainable approach we have undertaken to build strong international pressure against Iran.”

Yglesias

Strange Tales From ‘Confidence Men’

By Matthew Yglesias on Sep 21, 2011 at 4:00 pm

One of the plotlines in Ron Suskind’s Confidence Men concerns the various bureaucratic and substantive moves through which Tim Geithner and Rahm Emmanuel dissuaded the president from ordering the seizure and shutdown of Citigroup. The story starts with the fact that Larry Summers and Christina Romer, who were sympathetic to the idea, lacked the staff resources to develop a plan for doing it, while Geithner, who had the staff, thought it was a bad idea. Sheila Bair also had the staff, and also wanted to go ahead, but was out of the loop:

But when it came to controlling information, there was one area in which Geithner’s office had been successful. Key disclosures of what actually happened in the March 15 “showdown” never leaked. Bair didn’t know, and never found out, that the president had been trying to push forward what the FDIC chairwoman was recommending. He wasn’t successful, either. Alan Krueger said one reason Treasury dragged its feet on a constructing a plan for Citigroup’s resolution was Sheila Bair. They would have had to consult the FDIC chairwoman. After all, her agency is in the business of closing banks. “The fear was that Sheila would leak it,” Krueger said, in a comment echoed by others at Treasury. “And there’d be a run on Citi.” He added that this was one of many reasons: “It was more than just that. The bottom line is Tim and others at Treasury felt the president didn’t fully understand the complexities of the issue, or simply that they were right and he was wrong, and that trying to resolve Citi and then other banks would have been disastrous.”

Krueger, for one, disagreed, and that very day he was due to have lunch with someone uniquely suited to edify him about the resolution of troubled banks: Andrea Borg, the Swedish finance minister.

This stated rationale both makes perfect sense and is completely crazy. It’s clearly the case that one problem with seizing failed banks and resolving them is that before you seize a bank, you have to consider seizing the bank and preparing to do it. And if word of your plan leaks, then there’ll be a run on the bank. Very sensible worry. But by the same token, this worry is so sensible that the FDIC struggles with it all the time. This is kind of like how one problem with asking NASA to send someone into space is that rocket science is difficult. It is difficult, but this is the business NASA is in. Either the FDIC is a completely dysfunctional agency that regularly sparks bank runs through leaks, or else there’s no problem here. Since the FDIC isn’t a completely dysfunctional agency that regularly sparks bank runs through leaks, there’s no problem.

I think the best case for the Geithner view is simply that nationalization, recapitalization, and reorganization weren’t necessary. I can’t really connect the dots between “Sheila Bair wins this argument” and “unemployment is lower today.” I was a proponent of Bair’s view at the time, and I think her view would have better served cosmic justice, but in terms of practical economic problems I’m much less sure.

Related Posts

NEWS FLASH

Huckabee Wants Trump To Replace Geithner, Trump Says No, ‘Obama Should Be Calling The Smartest People We Have’ | This weekend, former Arkansas Gov. Mike Huckabee (R) joined the chorus of conservatives calling on their current scapegoat Tim Geithner to step down as Treasury secretary. Joining the comfy crew at Fox and Friends this morning, Huckabee reiterated his demand and his “game-changing” idea to replace Geithner for 90 days with none other than Donald Trump, the quadruple-bankrupted real estate mogul and reality TV star. Later on the show, a surprisingly self-aware Trump dismissed the idea. “Honestly, forget me,” he said. “Obama should be calling the smartest people we have in business.” Later, noting that the president would hardly appoint someone who championed the debunked birther myth, Trump said Obama should just hire “my type.” Watch it:

By Tanya Somanader on Aug 8, 2011 at 11:00 am

Economy

FLASHBACK: In February, Geithner Rightly Warned Against Negotiating Over Raising The Debt Ceiling

By Pat Garofalo and Faiz Shakir on Jul 27, 2011 at 9:30 am

For months, Republicans have refused to budge when it comes to negotiations over raising the nation’s debt ceiling, rejecting various generous concessions in return for a simple vote to ensure that the country pays its bills. Now, with default only days away, Republicans have dug in, insisting that acceptance of their radical “cut, cap, and balance” plan is the only way forward.

The Obama administration and the Democrats have offered the GOP deal after deal, saying that they are willing to cut everything from Social Security to Medicare in order to secure a debt ceiling increase, even though the debt ceiling is typically raised as a matter of protocol without controversy. But Republicans, sensing that they could wring more concessions from the Democrats and eager to placate their Tea Party base, have refused to say “yes.”

As the Los Angeles Times details, the administration was well aware that negotiating over the debt ceiling could lead to an ugly place. In fact, back in February, Treasury Secretary Tim Geithner explicitly warned against engaging in negotiations over the debt ceiling at all, because “if you let people negotiate over the terms, the risk is you leave people with expectations you can’t meet”:

For months, the administration’s position seemed to be that the debt limit should be raised with no conditions. In Washington-speak, that’s known as a “clean” increase.

In February, Geithner spoke at a House Budget Committee hearing and said, “You know, this is not a popular thing for people to do, and if you let people negotiate over the terms, the risk is you leave people with expectations you can’t meet. And it is just that that suggestion leads us to suggest you should do it clean.”

But two months later, Obama told a reporter that lifting the debt ceiling was “not going to happen without some spending cuts.” Later in the month, White House Chief of Staff William Daley said something similar: “Nobody thinks there will be a clean debt ceiling extension vote. There probably shouldn’t be, without some changes in spending. The budget deficit is a real thing that has to be addressed.”

Rep. Peter Welch (D-VT), who introduced a clean debt ceiling increase, “said he got a phone call from Geithner commending him for pushing for an increase in the debt ceiling not tied to anything else.” According to reports, Geithner’s preferred strategic approach was ultimately rejected by others in the administration because it was deemed to be a course that couldn’t muster the votes. (Ironically, the preferred approach adopted by the administration also wasn’t able to generate support.)

Now, a clean debt ceiling increase seems to be inexplicably off the table, even though the leadership of both parties agree that the debt ceiling needs to go up if the nation is to avert an unprecedented and potentially catastrophic economic mess. Because default truly would be disastrous, and because a negotiated compromise seems increasingly out of reach within the Aug. 2 deadline, a clean vote for an increase would be the responsible course at this late hour.

Justice

Treasury Secretary Tim Geithner Suggests Debt Ceiling Is Unconstitutional

By Ian Millhiser on Jul 1, 2011 at 1:48 pm

Earlier this week, Sen. Chris Coons (D-DE) revealed that several senators are studying whether the debt ceiling may be unconstitutional, thus giving President Obama the ability to declare it so and save the nation from a crippling economic disaster if Republicans fail to raise our debt limit. An interview with Treasury Secretary Tim Geithner suggests that the Administration may already be considering this option. Last month, Geitner suggested to Politico’s Mike Allen that the Debt Ceiling violates the Fourteenth Amendment:

ALLEN: You’ve been clear about the risk in not acting on the debt ceiling. Do you think Members of Congress get that?

GEITHNER: I think the leadership absolutely understands it. I think the vast bulk of Congress understands it completely. I think there are some people that are pretending not to understand it, who think there is leverage for them in threatening a default.

I don’t understand it as a negotiating position. I mean, really, think about it, you’re going to say that, uh, can I read you the Fourteenth Amendment. . . . “the validity of the public debt of the United States authorized by law including debts incurred for the payments of pensions and bounties for services in suppressing insurrection and rebellion”—this is the important thing—“shall not be questioned.” So, as a negotiating strategy, you’re going to go say, “if you don’t do things my way, I’m going to force the United States to default—not pay the legacy of bills accumulated by my predecessors in Congress?” It’s not a credible negotiating strategy, and it’s not going to happen.

Watch it:

Geithner may want to rethink his claim that congressional leaders understand the danger of a debt default, now that GOP leaders walked away from negotiations over the debt ceiling to protect tax breaks for the very richest Americans. But his citation to the Fourteenth Amendment is a very encouraging sign that the White House is seriously exploring whether the Constitution will save America’s economy from the GOP’s extortionary tactics.

As Yale Law Professor Jack Balkin explains, the “validity of the public debt” language was inserted into the Fourteenth Amendment entirely to prevent the kind of hostage taking Republicans are now engaged in:

The original purpose of Section Four, which is reflected in its text, was to prevent political disruption and party wrangling over the public debt following the Civil War. However, the language of the Amendment went beyond this particular historical concern. It was stated in broad terms in order to prevent future majorities in Congress from repudiating the federal debt to gain political advantage, to seek political revenge, or to try to disavow previous financial obligations because of changed policy priorities. . . .

The threat of defaulting on government obligations is a powerful weapon, especially in a complex, interconnected world economy. Devoted partisans can use it to disrupt government, to roil ordinary politics, to undermine policies they do not like, even to seek political revenge. Section Four was placed in the Constitution to remove this weapon from ordinary politics.

Hopefully, the GOP’s threat to destroy the entire national economy will prove to be a bluff, and the debt ceiling will be raised the old fashioned way. If it is not, however, Geithner’s statement is a hopeful sign that the White House is exploring all available options to save America from catastrophe.

Alyssa

Review: HBO’s ‘Too Big To Fail’

By Alyssa Rosenberg on May 23, 2011 at 10:36 am

Game of Thrones and True Blood may be HBO’s hottest shows this summer, but the network’s making a big investment in a more grounded direction. It has adaptations of Dick Cheney biographyAngler and 2008 election chronicle Game Change in the pipeline, and is gearing up for Veep, a dark comedy series about an overwhelmed female Vice President, which will air next year. In that environment, HBO’s adaptation of Andrew Ross Sorkin’s chronicle of the financial crisis, Too Big To Fail, which premieres on the network at 9 PM tonight, is a test of whether HBO can make excellent movies and shows about the inside business of policy and politics—and whether audiences will tune in to watch them.

If Too Big To Fail is any evidence, they certainly ought to. Most movies about the economic crisis focus on the ordinary Americans who have lost their jobs and homes, whether it’s Drag Me to Hell, about the inadvisability of foreclosing on a powerful gypsy, or The Company Men, a look at masculinity in the wake of corporate downsizing. The main characters in Too Big To Fail are all secure in their fortunes: they might have to downsize to smaller apartments or give up their commutes by helicopter or NetJet, but they’re magnitudes removed from actual desperation. That doesn’t mean that the movie isn’t dramatic—there are a lot of slammed phones, and a scene of Paulson’s staffers listening to him throwing up as yet another deal falls through—but Too Big To Fail can’t rely on the immediate relatable suffering of a family losing its home or parents losing their jobs to engage the audience. It has to stand on the strength of its own writing, simultaneously explaining hugely complex financial and legislative negotiations, while also drawing humor and tension out of them.
Read more

Economy

Whatever Geithner’s Feelings, Warren Is A Good Choice To Lead The New Consumer Protection Agency

By Pat Garofalo on Jul 16, 2010 at 2:00 pm

Yesterday, the Senate passed the Dodd-Frank financial regulatory reform bill on a 60-39 vote, meaning that, among many other things, a new Consumer Financial Protection Bureau will come into being. The agency fixes a critical gap in the regulatory framework, as there is no regulator specifically tasked with policing consumer products and ensuring that banks can’t rip off consumers with (usually highly profitable) predatory products.

A handful of names have been tossed around in the media as to who will be nominated to be the CFPB’s first director. The most oft-mentioned name is Elizabeth Warren, the Harvard Law professor who is currently heading the Congressional Oversight Panel for the Troubled Asset Relief program.

It was a 2007 journal article written by Warren that motivated lawmakers to propose creating the new agency in the first place. “Clearly, it is time for a new model of financial regulation, one focused primarily on consumer safety rather than corporate profitability. Financial products should be subject to the same routine safety screening that now governs the sale of every toaster, washing machine, and child’s car seat sold on the American market,” Warren wrote.

Last night, it was reported that Treasury Secretary Tim Geithner is opposed to Warren heading the agency. Assistant Treasury Secretary Michael Barr refuted that notion today, saying “I don’t know where that (report) came from.” “I believe and Secretary Geithner believes that she’s exceptionally well-qualified to run it,” he said.

Whetever Geithner’s personal feelings on the matter, Warren is eminently qualified to lead the CFPB. She explained her philosophy regarding the regulation of consumer products to me during an interview back in May 2009:

We need to think at the product level. All these lousy mortgages got sold, one family at a time. These were crummy mortgages, like selling plastic spoons that have carcinogens in them or toys that put out little children’s eyes. We sold them one product in a time. If we had had just basic safety standards in place from the beginning, then we never would have fed these into the front end of the financial system, where they then would have been bundled up and then sliced into tranches and rated and rebundled and sold and rated again.

House Financial Services Chairman Barney Frank (D-MA) backed Warren, saying “she is a brilliant advocate. She is sensible. She has a good sense how to operate. She is not some windmill-tilting ideologue.”

Barr himself has also been mentioned as a potential CFPB head, and would be an excellent choice, as he’s been intimately involved with the regulatory reform bill since the beginning. Illinois Attorney General Lisa Madigan, who was one of the first public officials to try to crack down on subprime lending, has also had her name tossed into the ring, but said that she preferred Warren. “She has long understood the need for such an agency to ensure that another financial crisis doesn’t devastate the futures of millions of hardworking Americans,” Madigan said.

Update

Matt Yglesias has more.

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