Questions for Secretary Geithner
This Sunday, New York Times Magazine is publishing a story titled: HEADING OFF THE NEXT FINANCIAL CRISIS (Hat tip Mike Allen at Politico). In the piece New York Times economics columnist David Leonhardt looks at the idea of preventing the next financial crisis, or at least making it less damaging. He includes a conversation he had with Tim Geithner recently. We have a few questions for Secretary Geithner that we hope he asked:
1. Please name one reasonably senior member of the Senate or House banking committees who, prior to 2005, warned against the practice of “structuring” AAA mortgage bonds from junk mortgages.
2. Please name all the Federal Reserve Bank Presidents, including yourself, who warned against these practices, prior to 2005.
3. Please list all of the major-economy central banks that dissented from the idea (endorsed in the Basel Accords) of scoring banks holding such “structured” mortgage securities as more safe than banks holding old-fashioned mortgages directly on their balance sheets.
4. Please cite any majority statement from any Congressional committee, any federal banking or securities regulatory agency, or any international regulatory authority, prior to 2007, acknowledging that it had become impossible for any investor, regulator, or bank president to confidently assess the financial health of any bank with more than $100 billion in deposits. Name one of the above that warned that the banks might be broke but we had no way of knowing for sure.
5. Please cite any Democrat, pro-government-regulation, senior member of Congress who endorsed the idea of reigning in Fannie and Freddie prior to 2007, or who opposed what we now call “predatory lending”, i.e. giving mortgages to people who can’t afford them.
6. Please name any living human being more responsible for more predatory loans than Barney Frank or Chris Dodd the alleged “watchdogs” for Fannie, Freddie, and the banking industry.
Geithner, like all the government apologists, is frantically selling the story that the crisis was caused by ‘deregulation’, by the regulators allowing the banks to do whatever they wanted. Even if that is true, the only way the administration’s proposed “re-regulation” could have prevented the crisis, is if the regulators, or at least someone in government somewhere, had actually understood the bad things the banks were doing.
There is no evidence whatsoever that anyone in the government did understand.
And that’s the flaw in the government’s plan. The government is not proposing stronger regulations, it is proposing stronger regulators.
There are a few simple changes in black letter law that really could make the banks safer without significantly hobbling their legitimate activities. Congress isn’t interested. Congress just wants to make the same old cozy club of regulators and bankers stronger and more invulnerable to citizen and investor oversight than ever.
Tags: Andrew Redleaf, bankers, banking crisis, banking deregulation, David Leonhardt, economy, Geithner, NYTimes, Regulation, Richard Vigilante, Whitebox
