Home > Opinion > Michael Barone > The Geithner Paradox: Unregulated Institutions Bailing Out Regulated Ones

The Geithner Paradox: Unregulated Institutions Bailing Out Regulated Ones

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We as a people cannot continue to bail out the Banksters, We as a people cannot let the Federal Reserve have more control over other private institutions.
As for Geithner he is hard at work, just not for us, he made that very clear with his comment to Congresswoman Waters. This man is a CROOK working for OTHER CROOKS.
WE NEED TO LET THE MARKET CORRECT ITSELF, THE MORE WE INTER FEAR THE MORE THE DAMAGE.

Dwayne Davis of OH 8:12PM March 26, 2009

A good point! Here's a corollary:
If the government had regulated every financial institution, doesn't it follow there wouldn't now be any institutions left that were healthy enough to bail the regulated ones out?

Eric Rasmusen of IN 5:04PM March 26, 2009

than the private investors, you're being had (again). I like Obama and Geithner, but this sounds fishy---like a giveaway to hedge fund type buyers who buy the assets way too cheap----with YOUR money.

Muser of NM 4:42PM March 26, 2009

There is no good answer to what to do about the existing bad loans but we need to have a better system for new loans and refinancing of existing loans. Borrowers need to have reasonable credit and a down payment. There also needs to be at least some recourse back to the maker of the loan to prevent backsliding. There should be a way to certify the quality of these loans. These new loans could be sold on the securitization market if they can be assured that the loans are legitimate. Then the banks could loan the new money. www.santaclaussyndrome.com

R. Lamar Smith, CPA of GA 6:36PM March 25, 2009

The very Government that created the problem in the first place, with the Fed, Fannie and Freddie creating the housing bubble,
The very Government that has mortgaged our children's future on a spending binge, and then when the chickens came home to roost, they throw away our grandchildren's future on an even more profligate spending binge,
The very Government that has quintupled the Federal debt,
The very Government that has destroyed about $15trillion in peoples' savings since August 2008 through its ill-conceived politically-correct meddling in the markets,
The very Government that has nationalized the banking industry that it has destroyed ... and is now "managing" it with political rather than economic objectives,
Is now asking the sole part of the market that it has not regulated to death to rescue the economy that it has destroyed.
Beware, oh hedge funds and private equity firms, because you are now dancing with the devil.
The same Government that retroactively decides to confiscate the contractual earnings of the people who now work in nationalized AIG and others.
The same Government that pulled the rug out from under the investors in Fannie, Freddie and others despite assurances from the Government that all was well and the Government would stand behind them ...
In the immortal words of Otter in the seminal "Animal House"
"You f**ked up ... you trusted us!"
And now the unregulated part of the banking system is being asked to trust the same Socialist miscreants.
Egads.

The Epicuren of NJ 6:31PM March 25, 2009

To HH,
AIG didn't "blow up because psychopathic speculators in their financial products group were running a totally unregulated betting shop in high-flying hedge fund style."
AIG went broke guaranteeing MBS (Mortgage Backed Securities) and CDOs (Collateralized Debt Obligations). The MBS were rated AAA by government regulated and approved ratings agencies. The CDOs were rated AAA because they were built on the AAA MBS bonds.
The MBS may have been privately issued, but they were entirely similar to the MBS issued by Fannie Mae and Freddie Mac, called GSEs (Government Sponsored Enterprises).
Fannie, Freddie, and all other issuers were directly regulated by the House Financial Services Committee (Barney Frank and Maxine Waters among others) and a special regulator OFHEO. Fannie Mae and Freddie Mac were specifically put outside the regulation of the SEC, outside the influence of the Bush administration, and under the captive OFHEO.
Congress maintained close oversight of what Fannie, Freddie, and others were doing, and approved of it. Congress created OFHEO (The Office of Federal Housing Enterprise Oversight) especially to regulate FanFred. The much larger and more visible SEC (Securities and Exchange Commission) was available, but Congress wanted its own regulator.
OFHEO was captive to House congressional committees, and outside the influence and control of the Bush administration. All of the private issuers of MBS and CDOs were under the same regulatory regime. This was the regulatory regime that Barnie Frank and Chris Dodd were running.
This seems unconstitutional to me, but I am not an expert.
The House committee regulating banking and financial services (the Financial Services Committee) did not object, and actually encouraged more lending to subprime borrowers.
Barney Frank (D. MA) has served as ranking (most senior) Democratic member on this committee at least since 1992, and has chaired the committee since 2007 in the Democratic majority.
There is a long history of Barney Frank proclaiming that all was well with Fannie and Freddie, and no further oversight or inquiry was needed.
Much more at "We Guarantee It"
http://easyopinions.blogspot.com/2008/10/we-guarantee-it.html

Andrew_M_Garland of MA 5:46PM March 25, 2009

Those who don't pay taxes use the money of those who pay taxes to bailout those who shelter their taxes.

ic of IL 1:06PM March 25, 2009

The government is proposing to give the same Congress responsible for Fannie Mae oversight over all the institutions that pose high systemic risk...in order to reduce the systemic risk.
Maybe it's just the crazy pills, but it seems to me that's what you would do if your goal was not to reduce systemic risk, but rather to increase your party's ability to bring home da bacon to various constituencies and extort campaign contributions.

Some Crazy Guy of DC 8:49AM March 25, 2009

Is part of the problem the fact that we have let some companies become "too big to fail"? Early in the 20th century we regulated companies so that they could not exert monopoly control over markets. I think that perhaps we have lost sight of that philosophy and let companies become too large. Perhaps contributions from executives of these large companies have made politicians blind to these risks.
On the other hand, is this just an excuse for politicians to get their hands into these markets?

Paul of CT 8:42AM March 25, 2009

This has the stench of socialism written all over it. More and more power given to people who aren't any brighter than the AIG dimwits who gave hard earned taxpayer money to their corporate execs. If Geithner thinks shutting down these businesses is the answer, then why did they bail AIG out with taxpayer money to begin with. Why didn't they allow the natural flow of bad business lead AIG to fail, file Chapter 11, or sell of its weaker performing divisions to save the parts of the company that were flourshing. They should have broken AIG up or allowed it to fail completely. AIG knew this firestorm was coming and played on the sympathy of Congress to bail them out. Poor AIG. The thieves that they are. As far as allowing Geithner more power, that's asking for trouble. We never want to give individuals power to shutdown businesses. This is something that needs to be handled through the court system to find out if any wrong doing has taken place. Giving him power to go after corporations without going through the court system defeats the whole purpose of having a Constitution. We need to stop allowing self serving people to continue changing the Constitution. If the administration is so intent on punishing these corporations, through Constituional changes what is to keep them from making more changes that will affect our "right to bear arms", put in place an SS type of bureacracy to run our healthcare system or educational system? The proposals by this administration are going to hang the United states and bleed us dry. Continuing to pour hard earaned taxpayer money down the drain behind all that has already gone down is absolute ignorance, stupidity, or bolder than heck with an unforseen agenda. Think how much more in debt our country is going to be when billions and trillions of more dollars are poured in to overhaul our healthcare system, and educational system and any other sytem they can find to blow more money on. We cannot allow Geithner to get so much power that our whole system of government is undermined. It is asking for trouble. Americans need to keep our money in America. Buy American made products, support each other, and absolutely refuse to buy anthing that comes from another country, and refuse to buy products from businesses and corporations that send our jobs outside the United States. If Americans are going to get laid off for working hard and doing the right thing we may as well make it worth our while. We don't have much cash flow in America any more. Most of our country's cash is being slowly shifted to outside banking institutions, companies and private entities. This is so our country would have to print up more money which we do not have anything to back it up with. Its not worth the ink its printed on. We need to check out htese big Federal reserve banks and see what they are doing with our cash. Somebody is getting fifthy rich and its not your everyday hard working Americans.

ssmith of GA 1:21AM March 25, 2009