Treasury Officials Used Copy Of Financial Industry's Template To Draft Bailout Bill

[KittyWampus]

.....Mr. Geithner has also recruited aides from Wall Street, some from firms that were at the heart of the crisis.

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. Treasury officials said that is because they would use the rescue powers only in rare and extreme cases that might require flexibility. Karen Shaw Petrou, managing director of the Washington research firm Federal Financial Analytics, said it essentially gives Treasury “a blank check.”

http://www.nytimes.com/2009/04/27/business/27geithner.html?pagewanted=7&_r=1&hp

[xchrom]

1. ...

:grr:

[marketcrazy1]

3. SOP.

let the banks write the regulations..... just like the "stress test" BULLSHIT!! the banks did the test and the government took their word for it. banks compiled and calculated most of the data for the so called "stress test" and regulators gave them a free hand to "adjust" certain parts of the calculations to make their results look better........ how many here knew THAT!!!

[robinlynne]

2. I wish the world would read DU...

[ananda]

4. Well.. we know who owns who.

nt

[KittyWampus]

5. Geithner Proposed Treasury Guarantee ALL Debt In Banking System

Last June, with a financial hurricane gathering force, Treasury Secretary Henry M. Paulson Jr. convened the nation’s economic stewards for a brainstorming session. What emergency powers might the government want at its disposal to confront the crisis? he asked.

Timothy F. Geithner, who as president of the New York Federal Reserve Bank oversaw many of the nation’s most powerful financial institutions, stunned the group with the audacity of his answer. He proposed asking Congress to give the president broad power to guarantee all the debt in the banking system, according to two participants, including Michele Davis, then an assistant Treasury secretary.

The proposal quickly died amid protests that it was politically untenable because it could put taxpayers on the hook for trillions of dollars.

“People thought, ‘Wow, that’s kind of out there,’ ” said John C. Dugan, the comptroller of the currency, who heard about the idea afterward. Mr. Geithner says, “I don’t remember a serious discussion on that proposal then.”

But in the 10 months since then, the government has in many ways embraced his blue-sky prescription. Step by step, through an array of new programs, the Federal Reserve and Treasury have assumed an unprecedented role in the banking system, using unprecedented amounts of taxpayer money, to try to save the nation’s financiers from their own mistakes.

Snip

In fashioning the bailout, his drive to use taxpayer money to backstop faltering firms overrode concerns that such a strategy would encourage more risk-taking in the future. In one bailout instance, Mr. Geithner fought a proposal to levy fees on banks that would help protect taxpayers against losses.

The bailout has left the Fed holding a vast portfolio of troubled securities. To manage them, Mr. Geithner gave three no-bid contracts to BlackRock, an asset-management firm with deep ties to the New York Fed.

http://www.nytimes.com/2009/04/27/business/27geithner.html?hp

[marketcrazy1]

6. why not!!

whats 50 or 60 TRILLION between friends..........................

[safeinOhio]

7. Little risk should mean little profit

econ 101. I'd think 1% profit for a company with no risk.

[aquart]

8. And we are still pretending he's competent?

[NV Whino]

17. Does that include my skimpy bank account?

[KittyWampus]

9. Geithner Handed Out 3 No-Bid Contracts To BlackRock (Firm W/Ties To NYFed)

The bailout has left the Fed holding a vast portfolio of troubled securities. To manage them, Mr. Geithner gave three no-bid contracts to BlackRock, an asset-management firm with deep ties to the New York Fed (which Geithner headed before going to Treasury).

snip


Mr. Geithner has also faced scrutiny over how well taxpayers were served by his handling of another aspect of the bailout: three no-bid contracts the New York Fed awarded to BlackRock, a money management firm, to oversee troubled assets acquired by the bank.

snipped out portion concerning social ties between Geithner and BlackRock bigwigs.

For months, New York Fed officials declined to make public details of the contract, which has become a flash point with some lawmakers who say the Fed’s handling of the bailout is too secretive. New York Fed officials initially said in interviews that they could not disclose the fees because they had agreed with BlackRock to keep them confidential in exchange for a discount.

The contract terms they subsequently disclosed to The New York Times show that the contract is worth at least $71.3 million over three years. While that rate is largely in keeping with comparable fees for such services, analysts say it is hardly discounted.

snip

Mr. Geithner said he hired BlackRock because he needed its expertise during the Bear Stearns-JPMorgan negotiations. He said most of the other likely candidates had conflicts, and he had little time to shop around. Indeed, the deal was cut so quickly that they worked out the fees only after the firm was hired.

But since then, the New York Fed has given two more no-bid contracts to BlackRock related to the A.I.G. bailout, angering a number of BlackRock’s competitors. The fees on those contracts remain confidential.

Vincent Reinhart, a former senior Federal Reserve official, said a more open process might have yielded a better deal for the taxpayers.

“They may have been able to convince themselves that this was the only way to go, but it sounds to me like nobody stepped back and said, ‘What’s this going to look like to the outside world,’” he said.

http://www.nytimes.com/2009/04/27/business/27geithner.html?pagewanted=6&hp

[xchrom]

10. ...

:grr: more 'no-bid contracts'.

[aquart]

11. "The fees on those contracts remain confidential."

This boy is a piece of work.

[SammyWinstonJack]

12. Nice!

x(

[HamdenRice]

13. As if the Fed, Treasury and nationalized Fannie and Freddie don't have experience managing assets?

This is stupid. They have the expertise in house.

[KittyWampus]

14. I'll go back and bold the part where OTHER QUALIFIED FIRMS COMPLAIN

the first time- Geithner can claim there was an emergency with no time for sifting through prospective firms.

Second time- not so much
Third time- sorry, it's bullshit

Oh, I'll also bold the part where the fact the fees the public can find out about are NOT discounted.

[Badgerman]

15. The Fox in the hen house

Geithner is not just a weak link in this administration, he is a HACKSAW!

[cbayer]

16. Kittywampus,

Please be aware that DU copyright rules require that posting of copyrighted material be limited to 4 paragraphs with a link. We need to do this in order to avoid copyright issues with other websites or organizations.


Thanks,

cbayer
DU Moderator

[truedelphi]

18. Shame on Obama for this. The "Change" we were hoping to see was not

Continuation of Reagonomics, nor was it allowing such horrors as allowing for the government rescue of failed banks to be done at other than the lowest prices.

Geithner needs to go and go now. This is simply a disgrace for everyone who hoped that life would be made easier and more pleasant.

The second that Geithner mentioned "his regulations" I knew we were in trouble. We don't need "his regulations" which are merely banking industry preferences, we need to have Glass Steagall put back in place.

People in the know are now predicting that this country is on an irreversible course to beconme the new Argentina. In that nation, the policies such as what Mr Geithnerare proposing wiped out the monies of 87% of the population, leaving only the rich to posses anything of value.

Already, economic guru Salbucci points out: “We’ve been pushed and dragged through the entire hysterical hocus-pocus of inflation, hyperinflation, systemic banking collapses, currency changes, Debt Bond Swaps, Mega-Debt Bond Swaps, financial ‘armoring,’ banking holidays, freezing of
bank accounts, etc., etc . . . And we have also suffered the end-results: bank bailouts paid for by taxpayers (or through inflation, or through the confiscation of savings), disappearance
of pension funds, destruction of job posts and overall impoverishment of the population."

And no one knows how much our impoverishment has cost us. Is is $ 25,000 per person, is it $ 43 000 or even $ 80K a piece?

[chill_wind]

19. Wonderful.

:nuke: