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  • Wang Qishan and Timothy Geithner on US-China Economic Cooperation

    During his visit to the US last week, Chinese Vice Premier Wang Qishan sat down with Charlie Rose and US Treasury Secretary Timothy Geithner . It was a smart and timely booking for the program, as it gave the two key policy makers an opportunity to discuss what greater economic cooperation between China and the US might mean for the global economy and for global business. Here is an excerpt from that interview. You can watch the full interview here .

  • COP January Report: Time For a Clear Plan to Unwind TARP

    In December, Treasury Secretary Timothy Geithner announced that his department is extending the Troubled Assets Relief Program through October 3, 2010. So with less than ten months to go, part of the Treasury's responsibility will be to manage the end of TARP. But as the Congressional Oversight Panel's January report points out, the impact of TARP will be felt for long after October. And in their January report, the COP members call on Treasury to be more transparent in the department's effort to "unwind its stake in the financial markets": As Treasury enters the next stage of its administration of the TARP, it must learn from the mistakes it has made in the past – in particular, its failure to follow the money used to bail out large financial institutions. Because Treasury never required the institutions that received the first infusions of TARP funding to account for their use of these funds, taxpayers have not had a clear understanding of how their money has been used. As Treasury embarks on new programs, it must require that future recipients provide much greater disclosure of their use of TARP dollars. Finally, and perhaps most significantly, the TARP has raised the long-term challenge of how best to eliminate implicit guarantees. Belief remains widespread in the marketplace that, if the economy once again approaches the brink of collapse, the federal government will inevitably rush in to rescue financial institutions deemed too big to fail. This belief distorts prices, giving large financial institutions an advantage in raising capital that mid-sized and smaller banks – those not too big to fail – do not enjoy. These implicit guarantees also encourage major financial institutions to take unreasonable risks out of the belief that, no matter what happens, taxpayers will not allow their failure. So long as markets continue to believe that an implicit guarantee exists, moral hazard will continue to distort prices and endanger the nation’s economy, even after the last TARP program has been closed and the last TARP dollar has been repaid. Here is COP Chair Elizabeth Warren discussing the January report: Read the full report here .

  • COP December Report Gives Treasury and TARP Mixed Grade

    The Troubled Asset Relief Program (TARP) has an extension. Treasury Secretary Timothy Geithner announced yesterday that Treasury is extending the bailout program through next October. TARP was slated to end on December 31 if Geithner didn't trigger the extension. This decision is sure to spur a new round of debates between those who believe TARP helped stave off economic calamity, those who think it is a waste of federal dollars, and those who believe it worked but now funds should go elsewhere. When TARP was launched 14 months ago, Congress tasked the Congressional Oversight Panel with closely watching the use of TARP funds. And in the latest COP monthly report, the panels' members weigh in on the effectiveness of the program. And the panel concluded that the data they studied shows that, in the end, the Treasury's actions were "decisive enough to stop the panic and restore confidence among key financial institutions and actors." But they find it hard to give TARP much credit for fixing any core structural problems in the financial system that may have been responsible for the crisis: While strong government action helped prevent a worse crisis, it may have done so at a significant long run cost to the performance of our market economy. Implicit government guarantees pose the most difficult long-term problem to emerge from the crisis. Looking ahead, there is no consensus among experts or policymakers as to how to prevent financial institutions from taking risks that are so large as to threaten the functioning of the nation‘s economy. Congress is currently grappling with this issue as it considers how to respond legislatively to the financial crisis. It is clear that a failure to address the moral hazard issue will only lead to more severe crises in the future. Since its inception, the TARP has gone through several different incarnations. It began as a program designed to purchase toxic assets from troubled banks but quickly morphed into a means of bolstering bank capital levels. It was later put to use as a source of funds to restart the securitization markets, rescue domestic automakers, and modify home mortgages. The evolving nature of the TARP, as well as Treasury‘s relative lack of fixed goals and measures of success for the program, make it hard to provide an overall evaluation. But the Panel remains convinced, as it has been since its inception, that Treasury should make both its decision-making and its actions more transparent. Despite the difficult circumstances under which many decisions have been made, those decisions must be explained to the American people, and the officials who make them must be held accountable for their actions. Transparency and accountability may be painful in the short run, but in the long run they will help restore market functions and earn the confidence of the American people. COP Chair Elizabeth Warren explains some of the key findings in the December report in this short video: Read the full report here . Go to page 120 for a dissenting view from panel member Rep. Jeb Hensarling (R-TX).

  • Paul Volcker: Feds "Did what they had to do" In Facing Crisis

    Paul Volcker spoke with Charlie Rose last week, and the former Fed chair gave Ben Bernanke and Timothy Geithner generally good marks for its handling of the financial crisis so far. Here's an excerpt: To watch the full interview, in two parts, click here .

  • Geithner in Istanbul: Reform, Fiscal Stimulus Must Continue or Recovery Will be Halted

    Treasury Secretary Timothy Geithner joined other G7 finance leaders in Istanbul to tell members of The Institute of International Finance --representing many of the world's largest bank--that reform is a necessary component of recovery, and to expect "sweeping changes," according to a Reuters report . Reuters quotes Geithner as telling bankers, "We're not going to adopt an approach that does stuff at the margin, and delays any changes that help preserve a bunch of practices that helped make this crisis much more damaging than it otherwise would have been." Geithner also stressed the need to continue fiscal stimulus, as The Wall Street Journal's Andy Jordan and Bob Davis report below:

  • Geithner's Housing Problem

    Treasury Secretary Timothy Geithner may be saying the housing crisis is nearing an end...except maybe not for Timothy Geithner. Here's The Daily Show 's take: The Daily Show With Jon Stewart Mon - Thurs 11p / 10c Home Crisis Investigation www.thedailyshow.com Daily Show Full Episodes Political Humor Joke of the Day

  • Warren to Geithner: 'Why Different Standards for Automakers and Banks?'

    Treaury Secretary Timothy Geithner went befor the Congressional Oversight Panel yesterday, where COP chair Elizabeth Warren asked the question on a lot of people's minds these days: "Why are the US automakers that took bailout money under TARP being treated so differently from US banks that took federal funds?"

  • Geithner Details Comprehensive Regulatory Reform

    On Tuesday, Treasury Secretary and Fed Chair Ben Bernanke asked Congress for expanded regulatory powers over non-bank financial institutions like AIG ( read Tuesday's post ). Today Geithner, again in testimony before the House Financial Services Committee, put forth a detailed plan to, as the Washington Post writes, " to overhaul financial regulation by subjecting hedge funds and traders of exotic financial instruments, now among the biggest and most freewheeling players on Wall Street." The plan calls for "comprehensive regulatory reform," and has four components, according to the Treasury's released outline:  Addressing Systemic Risk: This crisis – and the cases of firms like Lehman Brothers and AIG – has made clear that certain large, interconnected firms and markets need to be under a more consistent and more conservative regulatory regime. It is not enough to address the potential insolvency of individual institutions – we must also ensure the stability of the system itself.  Protecting Consumers and Investors: It is crucial that when households make choices to invest their savings we have clear rules of the road that prevent manipulation and abuse. While outright fraud like that perpetrated by Bernie Madoff is already illegal, these cases highlight the need to strengthen enforcement and improve transparency for all investors. Lax regulation also left too many households exposed to deception and abuse when taking out home mortgage loans  Eliminating Gaps in Our Regulatory Structure: Our regulatory structure must assign clear authority, resources, and accountability for each of its key functions. We must not let turf wars or concerns about the shape of organizational charts prevent us from establishing a substantive system of regulation that meets the needs of the American people.  Fostering International Coordination: To keep pace with increasingly global markets, we must ensure that international rules for financial regulation are consistent with the high standards we will be implementing in the United States. Additionally, we will launch a new, three-pronged initiative to address prudential supervision, tax havens, and money laundering issues in weakly-regulated jurisdictions. For details, read the full outline here . And Sec. Geithner's statement to Congress here . And the AP has a video excerpt of the statement:

  • Geithner on the Air

    After announcing his plan yesterday to get bad assets off of banks' books, Sec. Geithner hit the airwaves yesterday to answer questions about the plan. He spoke with Kai Ryssdal of Marketplace , and reinforced statements from earlier in the day that , namely that this is just "part of a broader plan," and "we aren't doing this for the banks. We are doing this for the people who need banks." When Ryssdal asks what Geithner is watching to see whether the economy is turning around, Geithner answers "spending." Listen : You can read a transcript of this interview here . Geithner also spoke with CNBC 's Erin Morris . For the most part, he stuck to the same themes, though the questioning was a little different. For example, he had to answer questions like "Does the administration believe that a key part of being American is for people to be entrepreneurs and be able to make as much money as they can on their own, or not?" Morris also asked Geithner whether we can use his own effor to sell his house as an economic indicator. (Geithner's NY house is on the market, but Geithner responds that they aren't moving until the end of the school year). You can watch the full interview here , and read a transcript here .

  • Toxic Cars: Mark Thoma Explains the Geithner Plan

    This morning Treasury Secretary Geithner will hold a briefing to lay out the details of the government's plan to deal with the toxic assets problem of American banks. He provided an overview of the plan in the Wall Street Journal . He writes that the new Public-Private Investment Program is designed to "increase the flow of credit and expand liquidity ." The Public-Private Investment Program will purchase real-estate related loans from banks and securities from the broader markets. Banks will have the ability to sell pools of loans to dedicated funds, and investors will compete to have the ability to participate in those funds and take advantage of the financing provided by the government. The funds established under this program will have three essential design features. First, they will use government resources in the form of capital from the Treasury, and financing from the FDIC and Federal Reserve, to mobilize capital from private investors. Second, the Public-Private Investment Program will ensure that private-sector participants share the risks alongside the taxpayer, and that the taxpayer shares in the profits from these investments. These funds will be open to investors of all types, such as pension funds, so that a broad range of Americans can participate. Third, private-sector purchasers will establish the value of the loans and securities purchased under the program, which will protect the government from overpaying for these assets. Mark Thoma provides a useful way of understanding Geithner's plan. In Thoma's explanation, the toxic assets are cars, and he uses the toxic car problem to demonstrate three possible goverment responses: 1) The government purchases the toxic cars; 2) Subsidies and private partnerships (the Geithner plan); and 3) Nationalization. Read Government Intervention in the Market for Toxic Cars here .

  • Geithner says US Government has 'Great Obligation' to Lay Out Comprehensive Reform

    Treasury Secretary Timothy Geithner told Charlie Rose last night that the US banking system was not strong or resilient enough to respond to the fallout from the subprime mortgage crisis, and that the regulatory system "designed largely 90 years ago," did not adapt to new challenges: Later, Geithner told Rose that the Obama Administration needs to simultaneously fix the banks for the short term and build a better foundation for the whole system: You saw that in the campaign layout, a set of very ambitious proposals for reform. And in some ways, we face these two critical obligations today. One is to get the economy back on track, fix this system, get credit flowing again, arrest this deepening recession, but at the same time we have this great obligation to lay out for the American people and the world a commitment to the kind of comprehensive reform so that the crisis like this never happens again. And we’re going to move as quickly as we can on both those fronts. The president had the leadership of Congress in the Oval Office two weeks ago to start that process on building consensus on a reform. You’re going to see him lay out to G 20 to the leaders of the world a very comprehensive framework. You know, people talk about this a lot, but not much was done frankly in the run up to the crisis, and we have to take advantage of this opportunity, where we’re living with the acute damage caused by those judgments to put in place a set of reforms that will prevent this from happening again. And the president believes deeply in this stuff, and you’re going to find us very aggressive and creative and ambitious in the scope of change we’re going to try to bring about. You can watch the full interview here . And Greg Mitchell of Editor and Publisher provides a transcript here .