Aussie paper: Geithner a ‘gigantic fool’
Friday, March 20, 2009 at 11:31AM 
A former Australian prime minister believes Geithner is far less than the wonder boy the US president believes him to be. [White House photo]If you blame former president George W. Bush alone for the economic conflagration, there’s no way you can ignore the meltdown former president Bill Clinton left behind.
U.S. newspapers, on learning Tim Geithner was headed to oversee the Obama administration’s Treasury Dept., focused on Geithner’s tax dodging and employment of illegal domestic help in vetting the new president’s pick. Media mentioned these infractions after praising Geithner as a boy wonder who orchestrated solutions for the Asian financial meltdown during the 1990s when Bill Clinton was president. But The Sydney Morning Herald said former Australian prime minister Paul Keating “gave a starkly different account of Geithner's record in handling the Asian crisis...”
Keating spoke to a closed-to-the-public meeting at the Lowy Institute in Sydney (Australia) on Mar. 5. The paper said Keating gave a “different view” of Geithner: "Tim Geithner was the Treasury line officer who wrote the IMF [International Monetary Fund] program for Indonesia in 1997-98, which was to apply current account solutions to a capital account crisis."
Writing for the paper, Peter Hartcher summed it up: “In other words, Geithner fundamentally misdiagnosed the problem. And his misdiagnosis led to a dreadfully wrong prescription.”
ASIA DOESN’T FORGET
Furthermore, Geithner’s actions may have been a factor in tarnishing a US image abroad already tarnished significantly by Clinton. Hartcher said, “As for The New York Post's claim that Geithner was the hero who cajoled those quarrelsome Asians into agreeing to a $US200 billion rescue, the key fact burned into the minds of Asian elites is that the US was deaf to requests for funds. Washington did not contribute a cent of its own money to any of the emergency packages. Japan and Australia were the only nations that made loans to all three of the stricken Asian countries.”
Remember China’s anxiety about current levels of US debt? Keating pointed out, “[b]y frightening the Chinese into building their vast $US2 trillion foreign reserves, Geithner was responsible for the build-up of tremendous imbalance in the world financial system. This imbalance, in turn…contributed to the global financial crisis which has since devastated the world economy.”
KEATING’S AUSSIE SOLUTION: ‘FOUR PILLARS’
Australia’s banks are solid right now and Hartcher gives credit to Keating for creating the “Four Pillars Policy.” He explained the policy rests on requirements “that the four big banks remain separate, barred from taking each other over. This prevented them ‘cannibalising each other’, in Keating's words. As protected species, they had no need to mount risky takeovers to bulk themselves up defensively.”
NONE OTHER THAN BARNEY FRANK QUESTIONED HEDGE FUND REGS
If we trace financial issues backwards through the 90s, we’ll be reminded of a major failure here in the US when LTCM, a mega hedge fund, was bailed out by U.S. banks in 1998. Price tag: $3.6 billion. Here’s what financial experts told PBS about LTCM: “[a] firm called Long Term Capital Management, announced investment losses so large they threatened economic stability worldwide. It was -- for the most part -- the general public's introduction to the arcane investment world of hedge funds." The Federal Reserve Bank of NY organized the bailout.
PBS reported: “That action -- and the risk even one hedge fund failure could threaten the general economy -- was the focus of a hastily called hearing before the House Banking Committee today.” The date: October 1, 1998. A little déjà vu is good for the US soul.
Frank Partnoy, a law professor at the University of San Diego, gave PBS some eye-popping figures on LTCM: “It’s telling that Long Term Capital, for example, had investments in derivatives of approximately 1.25 trillion dollars, that’s trillion with a ‘t.’ Derivatives are difficult to explain, but in simple terms they’re instruments whose value is linked to or derived from—that’s the derivation of the word "derivative," something else, some other underlying financial instrument or index.”
Investment analyst Richard Medley told PBS, “Long Term Capital, from what we can tell, off of a $4 billion base, had $1.25 trillion worth of debts – that’s insane.”
One reason LTCM flopped: Russia defaulted on debt incurred from the Soviet era, a time that included Russia’s attack on Afghanistan.
Over more than a decade, under two different administrations, we didn’t wise up?
What did the Clinton administration enable? More deregulation, courtesy of Larry Summers and Phil Gramm, even as Rep. Barney Frank was quizzing Alan Greenspan questions about regulations.
I confess it pains me to report anything positive about Barney Frank because of the GSE fiascos. But here’s what Frank said to Greenspan 11 years ago: “Mr. Greenspan has said that this may happen again. So then the question is, if it was so important as to justify this intervention now, how do you persuade us to do absolutely nothing, except wait again and trust entirely in your discretion to deal with it if it happens again? Now, I understand you say that we can't regulate the hedge funds. But can we not regulate the people who invest in the hedge funds?”
Greenspan retorted, “Two things will happen: either you regulate them and they will disappear because the nature of their business, they would perceive, cannot be effective if it's regulated, or far more likely, they will move to a different venue and trade, because they don't need the United States particularly.”
Apparently they only need the US “particularly” when they need a taxpayer bailout.
US AMNESIA
Guess what John Meriwether, founder of the collapsed LTCM hedge fund that got bailed out did next? Pundits were calling him a ruined man, a failure. But Meriwether turned right around and set up another hedge fund, JWM Partners LLC. The Wall Street Journal reported Dec. 23, 2008 that JWM’s flagship fund, the Relative Value Opportunity Portfolio, fell 42.78 percent by the end of November.
I’m really really hoping Meriwether didn’t benefit from any of those TARP funds, directly or indirectly.
To get a full picture of Geithner’s career, the Aussie Prime minister’s scathing criticisms of our current Treasury Secretary and the Clinton meltdown no one seems to remember, follow the links in ‘References’ below this column. There’s also a link to information about Geithner’s tax dodging and failures to verify his employees’ immigration status—that article is from McClatchy Newspapers. Geithner certainly didn’t look out for his domestic help. McClatchy said, “Over a decade, he also failed on numerous occasions to pay their Social Security or Medicare taxes until letters from the federal government reminded him.”
Hartcher concluded his analysis for The Herald by saying, “In sum, Tim Geithner is a gigantic fool, the IMF [International Monetary Fund] the gun that can't shoot straight, Alan Greenspan a bungler.”
DON’T JUST BLAME BUSH; OBAMA SHOULD GET AUSSIE ADVICE
Can we ask the former Australian Prime Minister to come over and help us out with this crisis? And can we urge President Barack Obama to take a hard look at his Treasury Secretary? And it’d be wise of the Democrats to stop blaming someone else every time there’s a problem. That party has held control of Congress for almost 3 years and Tim Geithner’s been close enough to a number of economic conflagrations both personal and national to bring us to one conclusion. Where there’s smoke, there’s usually fire. And our government isn’t coming clean on the sparks that started this uncontrolled burn. Truth is, Bush inherited a mess too.
Reader Comments (2)
Geithner is more than a fool, he is an istrument of those interested in the DESTRUCTION of the US financial system.
WHY ? Why do we print ONE TRILLION new dollars, just a few days after the Chinese come knocking on Obama's door asking for the US to pay up the (SUPPOSED) one trillion they have in US Treasury notes? (PS I remeber that till about 3 months ago it was only 500 billions... what happened? It just doubled? ) Is it not enough that Obama GAVE the Chinese their man on the Administration (so they can continue to steal our scientific secrets)....
George, I agree. Geithner is not the boy wonder everyone says he is. So far, he's blown it on a very large level.
I think the economist I wrote about (Weiss) is exactly right--we should face whatever we have to face and do it now.
And above all, there should be a freeze on any new federal spending whatsoever. Period. We're having to cut back and so should the government.