http://articles.marketwatch.com/2012-07-26/commentary/32858545_1_treasury-secretary-timothy-geithner-credit-default-swaps-banks
New Geithner disclosures further cloud his record
Commentary: Treasury chief too timid with the big banks
July 26, 2012 Darrell Delamaide
WASHINGTON (MarketWatch) — Treasury Secretary Timothy Geithner, who has kept his head low for months, is back in the news, coming under fire for his somewhat timid response four years ago to suggestions of fraud in the setting of Libor.
The manipulation of the London interbank offered rate by global banks has now emerged as a full-blown scandal and further evidence that these banks have become a rogue industry. It has also raised new questions about Geithner’s record as head of the New York Federal Reserve Bank, the job he held in 2008 at the onset of the financial crisis.
Geithner defended his reluctance to report possible fraud by British banks in setting of Libor in a pair of congressional hearings this week. He said his action to recommend structural reforms in Libor was the appropriate response in the midst of the crisis and other actions were the responsibility of British regulators. Read MarketWatch’s news coverage of Geithner coming under fire.
But these new revelations come as Geithner nemesis Neil Barofsky, the former special inspector general for the TARP program, paints a thoroughly unflattering portrait of the Treasury secretary in his new book, “Bailout.”
Barofsky may have an axe to grind, but he grinds it well, portraying Geithner as a dissembling bureaucrat in thrall to the banks and reminding us all that
President Barack Obama’s selection of Geithner as his top economic official may have been one of his biggest mistakes, and a major reason the White House incumbent has to fight so hard for re-election.
From his willingness to bail out the banks with virtually no accountability, to his failure to make holders of credit default swaps on AIG take a haircut, to his inability to mount any effective program for mortgage relief, Geithner systematically favored Wall Street over Main Street and created much of the public’s malaise in the aftermath of the crisis.
Even before the new disclosures about Fed inaction regarding possible Libor fraud, Geithner’s tenure as New York Fed chief was marred by his failure to take any effective action against the explosive growth of the credit default swaps in the first place.
Geithner was uneasy about the rapid growth of the new derivatives, but his only action, again somewhat timid in the face of the potential threat, was to ask the banks to speed up their bookkeeping procedures.
Barofsky, a former prosecutor, relates that he rooted for Geithner to get the Treasury appointment and was initially willing to give him the benefit of the doubt when it emerged that he had misreported his taxes while he worked at the International Monetary Fund.
But as more details on those unpaid taxes came out and Geithner’s explanations seemed increasingly disingenuous, Barofsky had his first doubts about the secretary-designate.
Barofsky, of course, was not alone in his skepticism, and Geithner’s credibility was damaged from the very beginning by the disclosures about his unpaid taxes.
Facebook
Twitter