Thursday, April 30, 2009

Geithner, Member and Overseer of Finance Club

Just who is Timothy Geithner (Treasury Secretary), The New York Times just did a huge expose on his career and who he hangs out with. The jury is in, he's a friend of Wall Street. The previous head of the Federal Reserve New York he was the regulator for companies like Citibank, Bear, Lehman and the list goes on. So why does the guy who is at the center of the Wall Street failure have one of the most important jobs in the country? Good question and one many are scratching their heads trying to answer, including the New York Times (who endorsed President Obama when he was running).

I have not been a fan of Geithner. I think he is too cozy with Wall Street and has done a terrible job trying to lead during this crisis. I think his ideas are bound for failure. However, I don't think he is an idiot (yet), I just disagree with how he is conducting the nations business (I didn't much care for the Goldman guy either - Hank Paulson - he was Wall Street).

I don't expect many of you will take the time to read this whole article, but you should. Geithner and Bernanke (also Rubin and Summers) are the ones remaking our financial system and they are important people to follow.

The Chrysler "managed" bankruptcy is my first glimmer of hope with Geithner, perhaps he's starting to realize that bondholders are going to have to share in the losses (and should have before taxpayers) of big financial firms that made stupid mistakes. This may be a test run for a "managed" bankruptcy of a large or mid-size financial firm, we shall see.

What I do know is that I don't see how PPIP is going to be a successful program, yet we need to deal with the underlying collateral (mortgages) soon or we will see another crisis. The good news is that with Mark-to-Market accounting being relaxed we shouldn't see the runs we saw last year, however because of this relaxation we may not see the banks deal with the losses for years - we've pushed off the inevitable and made it much more expensive.

Scott Dauenhauer CFP, MSFP, AIF