Obama Treasury nominee oversaw Citigroup’s descent into the toilet

posted at 3:59 pm on January 14, 2009 by Allahpundit

Normally I’d drop this one into Headlines, but since everyone’s caught up in his tax dodging, I want to emphasize the point I made yesterday: The real objection to Geithner isn’t back taxes, it’s the fact that the financial collapse happened on his watch as head of the New York Fed. What does that mean, exactly? In the case of Citigroup, evidently it meant a lot of rhetoric about making sure banks have enough capital to offset their risk while politely ignoring Citi making riskier and riskier deals as its capital dwindled.

Because the Fed conducts much of its work in secret, details about Geithner’s role in the Citigroup debacle remain hidden. But a review of publicly available records shows that the New York Fed, in a key period, relaxed oversight as Citigroup went on a risky spree…

In 2006, Citigroup’s issuances of collateralized debt obligations – securities in which mortgages and other debts are bundled and sold based on risk – grew to $40.9 billion, more than double the prior year. The number of subprime mortgages originated by Citigroup rose 85 percent that year, while other top originators had begun reducing subprime output, Fed data show…

These deals pumped up Citigroup’s balance sheet. Assets went from $1.2 trillion at the end of 2003 to $2.3 trillion by September 2007. But the bank’s defenses weakened during the same period. By the end of September of 2007, records show, Citigroup’s once comfortable Tier 1 capital ratio had fallen to 7.32 percent, below the bank’s target…

When it comes to valuing [a company's capital] base, regulators and credit rating agencies favor using common stock. But Citigroup, beginning in late 2007, relied increasingly on “hybrid” capital forms, such as trust-preferred securities, to prop up its Tier 1 ratio.

Even with these hybrids, its capital ratio dipped to 7.12, well below peers like JP Morgan Chase, at 8.44 percent, or Bank of New York Mellon, at 9.32 percent. In general, the NY Fed and the Federal Reserve allow the use of hybrid capital but apply limits and ask firms to obtain prior approval. In 2007, Citigroup exceeded the limit, the only bank among its peers to do so.

Don’t expect Republicans to hassle him at his confirmation hearing for not being a strict enough regulator. Will Democrats? They’re chomping at the bit to “fix” Wall Street; The One himself, in his speech on the stimulus, vowed that “No longer can we allow Wall Street wrongdoers to slip through regulatory cracks.” Why he’d pick Geithner as his economic quarterback in those circumstances seems bizarre — until you realize what his real job will be, and the fact that Larry Summers almost certainly would have been Treasury Secretary instead if not for the “unpleasantness” at Harvard.

The confirmation hearing’s been postponed from Friday to next Wednesday, incidentally. Not that it matters.


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and he forgot to pay his taxes.

hope. change. whatever.

lorien1973 on January 14, 2009 at 4:01 PM

But he’s the ONLY ONE who knows anything about TARP!

ctmom on January 14, 2009 at 4:02 PM

Yep. Definitely without lubrication.

Time to invest in the First Bank of Mattress.

Dr.Cwac.Cwac on January 14, 2009 at 4:03 PM

I say he’s more than qualified. The job is as good as his! Awesome.

I think I’m going to love the next 4 years.

LimeyGeek on January 14, 2009 at 4:03 PM

Well he has experience!
Now he can oversee the collapse of the entire American economy!!

izoneguy on January 14, 2009 at 4:05 PM

Was he one of those to settled Obama’s lawsuit against CitiGroup?

unclesmrgol on January 14, 2009 at 4:07 PM

Has this guy done anything right or on time? Can he tie his own shoes?

amerpundit on January 14, 2009 at 4:07 PM

Anyone hear Grahamnesty say republicans shouldn’t play any games and nominate this idiot for Treasury Sec.?

That last person who should ever tell how the republican party should act is this doofus.

jencab on January 14, 2009 at 4:09 PM

The most amazing thing about the whole Economic meltdown is that we keep the SAME STINKING PEOPLE in charge of the economy, after messing up so badly.

Same Congress… same Fed Res bank folks… Same folks at treasury… they are just playing musical chairs… and not FIXING ANYTHING.

All they have done is give money to banks, who have then used it to buy other banks… for the Government getting socialistic equity in the banks…

Not sure who owns who now… does the Government own the banks? or as I suspect from the musical chairs I’m seeing, do the banks own the Government…

Romeo13 on January 14, 2009 at 4:10 PM

Kind of like AP’s spin on his Palin posts — I don’t think it’s important, but I think you rubes do so I’ll post about it.

Memo to everyone: You try not paying your taxes for a few years and see if it’s not a big deal.

Memo to the media: If the financial collapse is to be laid at Geithner’s hand, why didn’t we hear about it until Obama nominated him to something??

Normally I’d drop this one into Headlines, but since everyone’s caught up in his tax dodging, I want to emphasize the point I made yesterday: The real objection to Geithner isn’t back taxes, it’s the fact that the financial collapse happened on his watch as head of the New York Fed.

BigD on January 14, 2009 at 4:10 PM

What a surprize !!!!!! These democrats are perfect reverse barometers. Reagan trusted the people to fix the economy and reduced taxes to grow the economy, these fools insist it needs to be the government to fix the problem.

Roosevelt tried it and it didn’t work. WWII bailed his ass out. A massive tax cut would work again for sure.

Our longshort march to socialism.

saiga on January 14, 2009 at 4:11 PM

A graduate of Dartmouth, he has a master’s degree from the Johns Hopkins School of Advanced International Studies, did a turn with Henry Kissinger’s consulting firm, a stint in the Clinton administration and, for the last five years, has been the president of the Federal Reserve Bank of New York.

He will effectively lead the team Mr. Obama has chosen to mend a crippled economy. That’s important because they won’t just be debating economic theory — they will be making deals Wall Street-style, negotiating billion-dollar bailouts and restructuring entire industries on behalf of their client, the taxpayers.

Does Dartmouth offer a major in Tax Evasion?

drjohn on January 14, 2009 at 4:13 PM

If i ran my business (which failed due to poor planning on my part)
Like these idiots
The irs would have arrested me and thrown my ass in jail.

Even i paid my taxes
Knew how much i had earned
and paid or accounted for all of my receipts.

Yet there MORONS are the BEST ONES
THAT THE GAG MESSIAH CAN FIND..
PLEASE..

jcila on January 14, 2009 at 4:14 PM

The real objection to Geithner isn’t back taxes

Wait, what? It wasn’t an underpayment of a hundred bucks that slipped through the cracks on his tax return, four years in a row he “forgot” to pay his taxes.

“Geez, sorry America, I ‘forgot’ to maintain competent oversight of the various treasury departments and it seems that we are completely screwed. I’ll be retiring with my government pension and living in Bermuda. Good luck.”

Bishop on January 14, 2009 at 4:14 PM

“We have only two things to say about Tim Geithner, who we do not know: A.I.G. and Lehman Brothers,” said Christopher Whalen of Institutional Risk Analytics. “Throw in the Bear Stearns/Maiden Lane fiasco for good measure,” he said.

“All of these ‘rescues’ are a disaster for the taxpayer, for the financial markets and also for the Federal Reserve System as an organization. Geithner, in our view, deserves retirement, not promotion.”

A disaster. In keeping with Democrats’ policy, he will no doubt be confirmed.

drjohn on January 14, 2009 at 4:15 PM

The confirmation hearing’s been postponed from Friday to next Wednesday, incidentally. Not that it matters.

Isn’t there something else going one around that time in Washington?

right2bright on January 14, 2009 at 4:16 PM

Maybe Blago can just appoint him.

Firebird on January 14, 2009 at 4:16 PM

Of course, this same argument can be made for every single person who was serving in the financial/monetary industry at the time, or any of the academics who didn’t see this coming. That includes just about everyone. There you go.

Meanwhile, I guess the econometricists whould have gotten some modeling help from the global warming fools, as there was not a single econometrics model that I am aware of that predicted the credit crisis (as if I expected to get one … LOL).

Why is no one bringing the long-term failure of econometrics to predict anything with more accuracy than a 7 year old and a dart board into the debate when the global warming morons claim that their models are so accurate?

We will never learn.

progressoverpeace on January 14, 2009 at 4:16 PM

BAdge of honor for a Democrat to have caused such a giant screw up. Just look at who is sitting there telling us how to fix the problem. Where did these people come from, Kenya?

tarpon on January 14, 2009 at 4:16 PM

Boys and Girls, this is what we have to look forward to, Citigroup times 10,000,000.00. I say we march, we revolt!

Ammo, the new gold!

Mercy4Me on January 14, 2009 at 4:17 PM

He will have control of alll that Tarp money. That’s scary.

becki51758 on January 14, 2009 at 4:18 PM

the democRATs CARE…and thats what really matters…and it is the will of OBAMA, it must not be questioned…

right4life on January 14, 2009 at 4:19 PM

Ammo, the new gold!
Mercy4Me on January 14, 2009 at 4:17 PM

Which would make me a multimillionaire.

All you poor serfs get off my property.

Bishop on January 14, 2009 at 4:21 PM

Appropriate poster.

Dr.Cwac.Cwac on January 14, 2009 at 4:22 PM

right2bright on January 14, 2009 at 4:16 PM

After the coronation, all nominees will be confirmed without question, even if they made “mistakes.” No one says no to that one.

Brat on January 14, 2009 at 4:22 PM

Allah,

The one question that people need to ask Geithner, which would lay everything out on the table is this:

Citi said that their risk analysis did not include the possibility of a stalling, or drop, in housing prices. Why did you allow that when it is from page 3 of Finance 101 that says that all economic conditions that have occurred within the past 20 years must be taken into account to get anything even approaching a realistic assessment of true risk?

That question would sink him, all by itself, since there is no good answer.

progressoverpeace on January 14, 2009 at 4:23 PM

Dr.Cwac.Cwac on January 14, 2009 at 4:22 PM

Great poster!

becki51758 on January 14, 2009 at 4:26 PM

They pull the wooltarp over your eyes.

the_nile on January 14, 2009 at 4:26 PM

Fan-effing-tastic!
…..In other news, the rats are starting to jump ship.

HornetSting on January 14, 2009 at 4:27 PM

Oh my god obama talked to me! Confirm they guy please.

tomas on January 14, 2009 at 4:29 PM

After the coronation, all nominees will be confirmed without question, even if they made “mistakes.” No one says no to that one.

Brat on January 14, 2009 at 4:22 PM

Yeah, because the biggest mistake of all will already be in the Oval Office.

HornetSting on January 14, 2009 at 4:29 PM

Get the bus out and warm it up!

GarandFan on January 14, 2009 at 4:33 PM

until you realize what his real job will be

This is what I was getting to the other day in the headlines, when I asked folks here if this level of appropriations power has ever existed in the Executive Branch. It seems to me, Congress will view TARP as a permanent purse for the Treasury to do what may be politically unpopular for the House and Senate. We may see the “end” of Pork in legislation because it will no longer require legislation in which to hide. Let all the implications of this sink in.

Weight of Glory on January 14, 2009 at 4:34 PM

Hmmm…. lets see…

New York is the banking capital of the country, and this guy was in charge of banks in New York.

Obama really started to lead in the polls, once the banking crises started.

Obama then puts this guy in charge of the Treasury…

But really… its all just coincidence… nothing to see here…. move along… don’t mind the man behind the curtain… these are not the droids you’re looking for…

Romeo13 on January 14, 2009 at 4:34 PM

Anyone hear Grahamnesty say republicans shouldn’t play any games and nominate this idiot for Treasury Sec.?

That last person who should ever tell how the republican party should act is this doofus.

jencab on January 14, 2009 at 4:09 PM

Yep. We couldn’t get rid of that goober last election. He’s so strange. His man-crush on Mac is embarrassing. He’s been in Mac’s hip pocket for years. Inquiring minds want to know what he does there. ;)

Cody1991 on January 14, 2009 at 4:36 PM

All we heard about Hussein’s transition team was how smart they are, how intellectual they are. Yet from what I understand, this guy doesn’t even have a Masters. No PhD. Plus, he was in charge of this mess in NY?

I guess the sky is falling. And, no, this is not a distraction. Hussein’s been defending him, and with all of this now in the open, will he pull his trademark “I didn’t know” position?

madmonkphotog on January 14, 2009 at 4:39 PM

You do Geithner a disservice. Besides not paying his taxes, and daydreaming while Citi burned, he had his little hand in the AIG collapse as well. Why leave that out?

JiangxiDad on January 14, 2009 at 4:39 PM

Why doesn’t he bring in Chris Cox as a bipartisan Bailout Czar in Chief? He oversaw the stock market tanking, while Timmy oversaw the banking collapse. Maybe the Maverick can oversee both of them!

Bipartisanship: it solves everything!

PattyJ on January 14, 2009 at 4:41 PM

But really… its all just coincidence… nothing to see here…. move along… don’t mind the man behind the curtain… these are not the droids you’re looking for…

Romeo13 on January 14, 2009 at 4:34 PM

Yes, yes. It’s all such a coincidence. Take a look at a chart of the DJIA or S&P and note Sept 13th. That was when it was decided to let Lehman Bros. go BK after bailing out other companies. Scared the market into a downward spiral for weeks. I guess Paulson and his pals were suddenly overcome with a sense ‘moral suasion’ and decided on the tough love route. Yep, that was it.

Suddenly people are talking about that event now that the TARP program is being criticized. At the time no one said anything.

Cody1991 on January 14, 2009 at 4:46 PM

Anyone hear Grahamnesty say republicans shouldn’t play any games and nominate this idiot for Treasury Sec.?

That last person who should ever tell how the republican party should act is this doofus.

jencab on January 14, 2009 at 4:09 PM

Yep. We couldn’t get rid of that goober last election. He’s so strange. His man-crush on Mac is embarrassing. He’s been in Mac’s hip pocket for years. Inquiring minds want to know what he does there. ;)

Cody1991 on January 14, 2009 at 4:36 PM

Lindsey is a rash on Mac’s backside, I believe. Roast the Rinos. Shut them up and shut them down. 2010 for Mac, defeat with conservative. 2014 for Lindsey. SC lost an oppurtunity to rid us of this ilk this past election.

HornetSting on January 14, 2009 at 4:47 PM

Why shouldn’t Geithner get a reward for being catastrophically incompetent in his job? Every other idiot who has done the same has been rewarded, either by the federal government (e.g., AIG, Citi, GM, Chrysler, etc.), or by voters (e.g., Barney Frank). Why should Geithner be treated differently?

AZCoyote on January 14, 2009 at 4:47 PM

I didn’t vote for Obama, so he can disregard my advice : ) , but he should regretfully accept Geithner’s withdrawl. First of all, Geithner didn’t pay his taxes – that should be disqualifying in and of itself. It shows him to be arrogant a la Leona Helmsley. Secondly, as another thread here notes, he was Chair of the NY Fed as Citi took the unfortunate steps that led to its likely demise.

I have to believe that Obama can do better than Geithner. The country deserves better. We need Obama to be strong enough to admit h a mistake and correct it before its too late.

Sheerq on January 14, 2009 at 4:48 PM

The dang Republicans should have a field day with this! They should yell loud and long and make the msm pay attention. If you put on a good show, the media will play it for the people.

Is it really worth voting anymore? Is it really worth paying attention to any of this crap?

Vince on January 14, 2009 at 4:54 PM

Like the plunge of a roller coaster.

Mr. Joe on January 14, 2009 at 5:04 PM

Hussein’s been defending him, and with all of this now in the open, will he pull his trademark “I didn’t know” position?

madmonkphotog on January 14, 2009 at 4:39 PM

The Precedent-Elect knows that he can do anything he wants, and he will still have many so-called “conservatives” talking about how he has a “first-class intellect” or how “he’s got intelligence to spare to handle the job” … even though all available evidence has pointed to BHO’s being as dumb as a rock.

It is a very sad situation.

progressoverpeace on January 14, 2009 at 5:16 PM

One of socialism’s many disastrous features is the way it selects its leadership and allocates resources. In a socialist government, competence is all but irrelevant – it only matters that the apparatchik is a member of the ruling elite, in good standing with his masters. Since the socialist government will never respond to its own failures by transferring control to a private citizen, the replacement for an incompetent apparatchik is another member of the elite.

Socialist “industries” collapse because their primary goal is not maximizing profitability or efficiency – in fact, it is usually openly stated that profitability is not the major concern, or is even considered immoral or undesirable. Thus, the Fannie Mae disaster, in which gigantic sums of money were allocated to borrowers that no free-market private industry would have been willing to touch, unless they were certain their risks would be covered by the government – at which point they were no longer private industries.

Liberals don’t care if their leaders have violated various laws. In fact, this only enhances the stature of the Great Person in their eyes. That’s why they loved Bill Clinton more with every felony, or think ACORN and the Al Franken vote-fraud rackets are hilarious instead of deeply disturbing. It’s not just cynicism or hypocrisy, cutting slack for their team on issues they would use to pillory a Republican. They get a positive thrill out of watching their leaders skate past the laws that apply to “little people,” because they love the feeling they are ruled by a super-intelligent elite of Very Special People. These Very Special People are all, by definition, liberal Democrats, so they become outraged at Republicans who try to claim the same privileges for themselves. They’ll only turn on this latest tired old hack if he becomes politically inconvenient and gets the non-liberal benighted masses too worked up, at which point he’ll be forgotten faster than you can say “Zoe Baird.”

Doctor Zero on January 14, 2009 at 5:43 PM

since everyone’s caught up in his tax dodging, I want to emphasize the point I made yesterday: The real objection to Geithner isn’t back taxes, it’s the fact that the financial collapse happened on his watch as head of the New York Fed.

Um… Excuse me but tax cheating by the man nominated to be in charge of the IRS is a little bit more important than you suggest. Yes, the New York Reserve stuff is more significant (and what will cause the most problems for Geither IMO now that it is out there). Nevertheless the tax cheat stuff shouldn’t be dismissed as unpaid jaywalking tickets. It’s that low level of standards by you Obama supporters and leftists that got us in this position. WE SHOULD BE OUTRAGED BY BOTH. It’s offensive to wave off multiple years of tax cheating paid off days before the nomination and I’m pretty angry that people like you have no problem with it.

highhopes on January 14, 2009 at 5:45 PM

Citi sucks.

Case in point: I went to re-finance my house just for a lower rate; wasn’t looking for equity cash or anything else.. just a simple re-fi. Well, I had to deal with a local branch who valued my home “off the charts”. I knew when she quoted the current value at over $100k from the purchase price just a few years prior that something was up. We were pressed to cash out this enormous “equity” and soothe sayers planted words like: new boat! New car! New Kitchen! All free! Just sign!.

Needless to say, I went with a more reputable lender, got my lower rate, didn’t take any equity, and now I see the market correcting itself. Citi deserves to fail. There is no doubt in my mind that these minions were acting at corporate direction, hungrily collecting massive “loan origination” and other junk fees. What happened to all the fees? What? No fees? Where did all of them go?

Fools.

Key West Reader on January 14, 2009 at 6:06 PM

it’s the fact that the financial collapse happened on his watch as head of the New York Fed

Isn’t this exactly what qualifies him?

allrsn on January 14, 2009 at 6:34 PM

But Buuuuush!

BUUUUT BUUUUUUUUUUUSH!

[/sarc]

Ryan Gandy on January 14, 2009 at 7:10 PM

Geithner Accepted IMF Reimbursement For Taxes He Didn’t Pay

The tax story’s getting bigger … his new employees may have to put him in jail.

eucher on January 14, 2009 at 9:10 PM

Kind of like AP’s spin on his Palin posts — I don’t think it’s important, but I think you rubes do so I’ll post about it.

BigD on January 14, 2009 at 4:10 PM

Excellent observation!

Tinian on January 14, 2009 at 9:51 PM

Good pick.

Johan Klaus on January 14, 2009 at 11:48 PM

The new motto, “Rewarding crooks and failures one trillion at a time.”

Done That on January 15, 2009 at 4:52 AM

Could Obama make WORSE picks? It’d be hard to do.

marklmail on January 15, 2009 at 8:10 AM

Interesting connections to Obama, by the way.

Obama was the guy who filed a lawsuit against Citicorp in Chicago to demand they cease “racist lending practices” or NOT lending to Blacks, regardless of income or credit worthiness (in other words, that if someone was Black but had a bad credit worthiness, low income, did not have capacity to repay a home mortgage, then Citicorp HAD TO LEND TO THEM because they were Black).

Citicorp caved because it feared the Al Sharpton, Jesse Jackson nationwide media smears led by Obama as retaliation if it did not settle.

THUS BEGAN what would become the Financial Crises.

S on January 15, 2009 at 9:06 AM

Wesley Snipes gives a big hell yeah!

Richard Hatch says booyah!

Mr. Joe on January 15, 2009 at 9:57 AM

Even the hyperpartisan Obama cheerleader Tom Toles in on his case with this cartoon.

Pervygrin on January 15, 2009 at 4:08 PM