Tim Geithner's Latest Derivatives Scheme Reeks of Wall Street Mafia, New York Fed, and Failure


Pic credit: from the pen



Perhaps you recall news late last month that Tim Geithner had been exposed in the New York Times. Now for this to happen, breaking the NYT's sordid history of obscurity and bowing to the powers that be, meant that TG crossed some very important people. Or worse, that he's supposed to be ripped apart in both mainstream and alternative media outlets. The second possibility is more frightening, of course, because this means he is also meant to behave so erratically. Confusing the issue further, he seems entirely unequipped to handle even the simplest of tasks and yet we are assured that he is the best man for the job. Any of this smell strange to you?

In that NYT article, we learned that our buddy Timmy the Two-Bit Tax Cheat had recently sent legislation to Congress that was copied word-for-word from a draft by financial lobbyist law firm du jour Davis Polk & Wardwell. Worse, the Treasury tried to blame The Fed! saying that they were the ones who sent the draft to the Treasury in the first place. The Fed may deserve the blame for a lot but that was a low blow by Timmy Boy against his homies over there footing the bill for his big fat mouth. It shows the sort of person Tim Geithner is; he'll even throw his own people under the bus to try and save his own ass.

Via me, April 26, 2009 (I can't believe I just quoted myself - how narcissistic is that? Suck it):

And it even exposes the Treasury's deliberate attempt to insert more Wall Street Mafia doctrine into Congress hoping no one will notice:

A bill sent recently by the Treasury to Capitol Hill would give the Obama administration extensive new powers to inject money into or seize systemically important firms in danger of failure. It was drafted in large measure by Davis Polk & Wardwell, a law firm that represents many banks and the financial industry’s lobbying group. Mr. Geithner also hired Davis Polk to represent the New York Fed during the A.I.G. bailout.

Treasury officials say they inadvertently used a copy of Davis Polk’s draft sent to them by the Federal Reserve as a template for their own bill, with the result that the proposed legislation Treasury sent to Capitol Hill bore the law firm’s computer footprints. And they point to several significant changes to that draft that “better protect the taxpayer,” in the words of Andrew Williams, a Treasury spokesman.

But others say important provisions in the original industry bill remain. Most significant, the bill does not require that any government rescue of a troubled firm be done at the lowest possible cost, as is required by the F.D.I.C. when it takes over a failed bank.


Alright so what are we getting to here?

The Treasury has already been busted trying to insert very suspicious Gospel of Goldman into Congress, so I'm a little sketchy when it comes to any new crackpot schemes our boy Timmy has packed in his lunchbox.

Davis Polk & Wardwell, the folks friendly enough to offer out of the goodness of their hearts to draft critical Treasury documents for Congress without Congress being informed as to who authored said documents, are of course members of the ISDA (International Swaps and Derivatives Association). The ISDA stands behind Geithner's proposed changes for the OTC swaps and derivatives market:

The need for transparency in the over-the-counter derivatives market was stressed by Theo Lubke, a senior vice president at the Federal Reserve Bank of New York, last month at a derivatives industry conference in Beijing.

Lubke, who was appointed in 2007 to oversee OTC derivatives by Geithner when he was president of the New York Fed, said the credit swap prices now available are not sufficient, according to a transcript of his comments.

ISDA welcomes the recognition of industry measures to safeguard smooth functioning of privately negotiated derivatives,” Robert Pickel, chief executive officer of ISDA, said in an e-mailed statement.

Lubke said at the ISDA conference that the major banks’ control of the over-the-counter derivatives market must end by allowing hedge funds and other investors more input into how market decisions are made.

“It is simply unacceptable in today’s environment that the design and structure of the OTC derivatives market can be controlled by a handful of large dealers,” Lubke said. “There is opacity in the OTC market that doesn’t have commensurate public policy benefits,” he said. “This is not something that can continue.”

I knew this reeked of the Fed somewhere and worse, the New York Fed. Ugh it's like rotten garbage and the inside of a crime scene lab, bleh.

Tying everything back together now, Geithner's latest scheme to regulate the OTC derivatives market is a sad and transparent attempt to jerk off the largest and most blood-thirsty of the derivatives players.

Bloomberg:

May 23 (Bloomberg) -- The U.S. Treasury’s plan to regulate the over-the-counter derivatives market outlined by Secretary Timothy Geithner on May 13 contains recommendations similar to those made by Goldman Sachs Group Inc., JPMorgan Chase & Co., Credit Suisse Group AG and Barclays Plc three months earlier.

The banks sent the Treasury a plan written in February titled “Outline of Potential OTC Derivatives Legislative Proposal,” saying the Federal Reserve should extend capital and margin requirements to companies and hedge funds that trade in the $592 trillion unregulated market, according to a document obtained by Bloomberg News and confirmed by the Treasury. Energy companies, corporations and hedge funds don’t face such requirements now, while banks do under central bank oversight.

“The banks appear to wish to maintain the intra-dealer market and raise barriers to new entrants to keep the OTC business as compartmentalized as possible and to protect their profitable market conditions,” said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York. “The Street’s lobbyists appear to be asking for a ‘club’ structure in OTC trading.

Profitable market conditions? Whose market is this?

Down with the dunce already. We get it, you have us by the balls, alright, fine. Tim Geithner obviously has some sort of nerd complex (not to offend the cool nerds, you know who you are) - bullied his entire life for being not only goofy looking but not all that bright (at least Ben Bernanke has a brain in his head), now's his payback.

Enough. I'm almost sick of fronting this dude off, it's too easy. Next.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.

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