President-elect Barack Obama plans to announce his economic team on Monday as part of an effort to reassure markets and will name New York Fed President Tim Geithner his nominee for Treasury Secretary, NBC News has learned... "I would say the market is going to like it," said James Awad, managing director of Zephyr Capital. "[Former Clinton Treasury Secretary Larry] Summers was more controversial. People will view it as a safe choice, an experienced guy. There's a little bit of a question because he's associated with the bailout, and that's still a work in progress and not totally successful. There will be a few who'll be upset because he's associated with the TARP."
"I would say the market is going to like it," said James Awad, managing director of Zephyr Capital. "[Former Clinton Treasury Secretary Larry] Summers was more controversial. People will view it as a safe choice, an experienced guy. There's a little bit of a question because he's associated with the bailout, and that's still a work in progress and not totally successful. There will be a few who'll be upset because he's associated with the TARP."
Can anyone fill in details about his economic ideas? Here's some quotes his Federal Reserve biography:
Timothy F. Geithner became the ninth president and chief executive officer of the Federal Reserve Bank of New York on November 17, 2003. In that capacity, he serves as the vice chairman and a permanent member of the Federal Open Market Committee, the group responsible for formulating the nation's monetary policy. Mr. Geithner joined the Department of Treasury in 1988 and worked in three administrations for five Secretaries of the Treasury in a variety of positions. He served as Under Secretary of the Treasury for International Affairs from 1999 to 2001 under Secretaries Robert Rubin and Lawrence Summers. He was director of the Policy Development and Review Department at the International Monetary Fund from 2001 until 2003. Before joining the Treasury, Mr. Geithner worked for Kissinger Associates, Inc.
Mr. Geithner joined the Department of Treasury in 1988 and worked in three administrations for five Secretaries of the Treasury in a variety of positions. He served as Under Secretary of the Treasury for International Affairs from 1999 to 2001 under Secretaries Robert Rubin and Lawrence Summers.
He was director of the Policy Development and Review Department at the International Monetary Fund from 2001 until 2003. Before joining the Treasury, Mr. Geithner worked for Kissinger Associates, Inc.
The only hope is that they do have some awareness and some plan, but feel that they cannot tip their hand until Jan. 21, because of the delicate psyche of the 'markets'. Personally, I think that that gives them too much credit. In addition, as pointed out above, the U.S. (and other) economy(ies) are likely to look substantially worse in two months, psychologically impaired or not.
At least, I think that the U.S. government will stabilize the domestic automobile industry in December, which may temporarily slow the slide. paul spencer
Not sure it means much, this increase is likely to be cancelled next week depending on what happens to Citi. In the long run, we're all dead. John Maynard Keynes
You have my sympathy. I lost count of FRB credit facilities created since 14 Dec 2008 after No. 8. And since Mr Paulson's annoucement this week that Treasury will not "seek" release of the remaining $350B budgeted, I had looked forward to the remote possibility those funds would be applied by the next administration to "backstop" HH obligations.
Not anymore. For surely Mr Geithner, pres. of FRBNY, knows better than anyone in Congress which financial services firms require additional support of the full faith and credit of US treasuries. As far as I know, no other regional bank (of the TWELVE) serviced proto-TARP or TARP transactions.
17 Nov 2008 US Treasury Transaction Report, broad strokes, that is the First 30 and excluding private equity under management (funds) and industrial firms. NB The Bailout Bill doesn't require detailed (coded) reporting by the Treasury Sec and "Oversight Board" until Q2 2009.
Let us be clear. Mr Geithner will swear an oath the defend the US Constitution and execute fiduciary duties of public debt management. Is he qualified? Is this creature the best qualified to maximize "taxpayer" returns by lending to FRB reserve banks? Diversity is the key to economic and political evolution.
The latest wave of credit market innovations has elicited some concerns about their implications for the stability of the financial system, concerns similar to those associated with earlier periods of rapid change in financial markets. Will the most recent credit market innovations amplify credit cycles, contributing to "excessive" lending in times of relative stability, and then magnify the contraction in credit that follows? Will they introduce greater volatility in financial markets? Will they create greater risk of systemic financial crisis? These concerns have been heightened in some quarters by the problems currently being experienced in the subprime mortgage sector. It will take some time before the full implications are understood and the full impact can be assessed. As of now, though, there are few signs that the disruptions in this one sector of the credit markets will have a lasting impact on credit markets as a whole. Indeed, economic theory and recent practical experience offer some reassurance against both these specific concerns and more general worries about the implications of credit market innovations for the performance of the financial system.
These concerns have been heightened in some quarters by the problems currently being experienced in the subprime mortgage sector. It will take some time before the full implications are understood and the full impact can be assessed. As of now, though, there are few signs that the disruptions in this one sector of the credit markets will have a lasting impact on credit markets as a whole.
Indeed, economic theory and recent practical experience offer some reassurance against both these specific concerns and more general worries about the implications of credit market innovations for the performance of the financial system.
And how about?
Credit market innovation does not appear to have resulted in a large increase in leverage in the corporate sector, as some had feared. Indeed, nonfinancial corporate leverage in the United States is currently low by recent historical standards. The overall degree of balance sheet leverage by corporations, for example, is higher in some more traditional financial systems than it is in systems where credit market innovations are more advanced.
With that said, he did see the need for more oversight.
What should policymakers do to mitigate these risks? We cannot turn back the clock on innovation or reverse the increase in complexity around risk management. We do not have the capacity to monitor or control concentrations of leverage or risk outside the banking system. We cannot identify the likely sources of future stress to the system, and act preemptively to diffuse them. The most productive focus of policy attention has to be on improving the shock absorbers in the core of the financial system, in terms of capital and liquidity relative to risk and the robustness of the infrastructure. These issues are the principal focus of day-to-day supervision and market oversight in the major financial centers around the world. The Federal Reserve is actively involved in a range of efforts, working closely with the primary supervisors of the major global financial institutions and the critical parts of the financial infrastructure, to encourage further progress. In this context, we are working to put in place a stronger regulatory capital regime and to strengthen the capacity of firms to absorb losses in stress conditions. We are encouraging more sophisticated and more conservative management of credit exposures in over-the-counter derivatives and structured financial products, as well as of exposures to hedge funds. And we are encouraging a range of efforts to modernize the operational infrastructure that underpins the over-the-counter derivatives markets, and to improve the capacity of market participants to manage a major default.
We cannot turn back the clock on innovation or reverse the increase in complexity around risk management. We do not have the capacity to monitor or control concentrations of leverage or risk outside the banking system. We cannot identify the likely sources of future stress to the system, and act preemptively to diffuse them.
The most productive focus of policy attention has to be on improving the shock absorbers in the core of the financial system, in terms of capital and liquidity relative to risk and the robustness of the infrastructure.
These issues are the principal focus of day-to-day supervision and market oversight in the major financial centers around the world. The Federal Reserve is actively involved in a range of efforts, working closely with the primary supervisors of the major global financial institutions and the critical parts of the financial infrastructure, to encourage further progress. In this context, we are working to put in place a stronger regulatory capital regime and to strengthen the capacity of firms to absorb losses in stress conditions. We are encouraging more sophisticated and more conservative management of credit exposures in over-the-counter derivatives and structured financial products, as well as of exposures to hedge funds. And we are encouraging a range of efforts to modernize the operational infrastructure that underpins the over-the-counter derivatives markets, and to improve the capacity of market participants to manage a major default.
Of course, "a stronger regulatory capital regime" never materialized.
The good news is that he's competent and knows his way around (the people and the numbers). Obama seems to believe he'll do what he tells him to do. We'll all have to wait and see what that actually is.
Obama, remember, is a Democrat. Expect no revolutions.
Reading around a bit, Geithner wouldn't be my first choice. NY Fed chairmen tend to be too plugged into the financial markets, and too separated from the larger economy. But he'll probably do fine. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
This article from The New Republic has probably already been posted here somewhere, but just in case, it has some interesting things to say about the "not just highly competent" Geith vs. the "brilliant" Summers choice:
... Summers's brilliance made him simultaneously exhilarating and exhausting to work for--a whirlwind of intellectual energy fueled by an endless supply of Diet Coke. "I remember once giving him a memo that was three pages long," recalls Steve Radelet, a onetime Harvard economist who worked for both Summers and Geithner. "I'd worked on it for days and days. He read it in a minute and a half. He looked at me, saying, 'I don't agree with your argument. But, if I were making your argument, I could have made it better. Here's how.' " In Geithner, Summers recognized the perfect complement. Geithner was razor-sharp, but had an easy way about him. He was a talented softball player who seemed to glide around the diamond, and his workplace demeanor was similarly effortless. This was particularly handy in navigating the political aspects of the job--not always Summers's strong suit. <...> What Obama thinks of this is an open question. Several Obama insiders told me the senator has warm feelings toward both men. "Put it this way," says one. "They are both highly regarded. Very highly regarded. Very, very highly regarded." It's possible to see Obama's personal biases cutting either way. On the one hand, the president-elect has a well-known dislike of "drama," which could tilt the calculus toward Geithner. On the other hand, Obama has an equally strong preference for expertise, which could favor Summers. Substantively, the differences may be slight. Summers, like Geithner, would likely have preferred more robust action in the case of Lehman Brothers and a more systematic approach to the financial crisis generally. Being less politic by nature, it's possible he would have piped up publicly had he been in Geithner's position, or bent Paulson and Bernanke to his will. But it's also possible that such pressure would have backfired. Markets don't generally respond well to conflict among policymakers. If Summers ends up with the Treasury job, it's more than a little reassuring that he'd still have Geithner at the New York Fed--telling him when he's full of it. Obama's Choice
In Geithner, Summers recognized the perfect complement. Geithner was razor-sharp, but had an easy way about him. He was a talented softball player who seemed to glide around the diamond, and his workplace demeanor was similarly effortless. This was particularly handy in navigating the political aspects of the job--not always Summers's strong suit.
<...>
What Obama thinks of this is an open question. Several Obama insiders told me the senator has warm feelings toward both men. "Put it this way," says one. "They are both highly regarded. Very highly regarded. Very, very highly regarded." It's possible to see Obama's personal biases cutting either way. On the one hand, the president-elect has a well-known dislike of "drama," which could tilt the calculus toward Geithner. On the other hand, Obama has an equally strong preference for expertise, which could favor Summers.
Substantively, the differences may be slight. Summers, like Geithner, would likely have preferred more robust action in the case of Lehman Brothers and a more systematic approach to the financial crisis generally. Being less politic by nature, it's possible he would have piped up publicly had he been in Geithner's position, or bent Paulson and Bernanke to his will. But it's also possible that such pressure would have backfired. Markets don't generally respond well to conflict among policymakers. If Summers ends up with the Treasury job, it's more than a little reassuring that he'd still have Geithner at the New York Fed--telling him when he's full of it.
Obama's Choice
Summers -- again, setting aside the politically stupid things he has said (Summers is a smart guy, but he's the Joe Biden of economists) -- is a bit of a drama queen, and a drama queen is the last thing we need at the Treasury Dept right now, because he'd lend a feeling of chaos to the situation. If you think Bernanke is a drama queen for jumping to the rescue every time there's a hiccup, Summers would make Bernanke look sedated by comparison.
That would be, at best, a serious distraction from getting the agenda through Congress, and, at worst, an Epic Fail. Geithner, by all accounts I've read, is not a drama queen. As an NY Fed guy, like I said, he's too close to the financial markets for me to be fully comfortable, but, given that so much of Treasury's responsibility will involve managing the bailout package, the TreasSec needs to be someone familiar with the markets.
Of all the potential candidates -- those mentioned and those not -- I would've preferred Stiglitz above anybody else. But I know he said he didn't want to return to Washington. Geithner gets good reviews from the people I trust, so I'm satisfied. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
FDIC OKs backing for bank debt, deposits: Financial News - Yahoo! Finance
FDIC approves program to guarantee banks' debt, deposits as part of financial rescue WASHINGTON (AP) -- The FDIC will guarantee up to $1.4 trillion in U.S. banks' debt for more than three years as part of the government's financial rescue plan.The FDIC will provide temporary insurance for loans between banks -- except for those for 30 days or less -- guaranteeing the new debt in the event of payment default by the borrowing bank.The FDIC also will guarantee deposits in non-interest-bearing "transaction" accounts by removing the current $250,000 insurance limit on them through the end of next year. That could add as much as $500 billion to FDIC-backed deposits.The guarantee program has been in effect since Oct. 23. All federally-insured banks and thrifts have been automatically covered since then but will have to decide by Dec. 5 whether to participate or "opt out."Well over half of the roughly 8,500 U.S. banks and savings and loans are expected to tap the FDIC's temporary guarantees, which are in addition to the government's $250 billion program of directly buying shares in banks and financial companies.The FDIC will back new senior unsecured debt that banks issue to each other between Oct. 14 and June 30, 2009. It would be insured by the agency through June 30, 2012. Senior unsecured debt does not have collateral underlying it but must be repaid before other classes of debt.
WASHINGTON (AP) -- The FDIC will guarantee up to $1.4 trillion in U.S. banks' debt for more than three years as part of the government's financial rescue plan.
The FDIC will provide temporary insurance for loans between banks -- except for those for 30 days or less -- guaranteeing the new debt in the event of payment default by the borrowing bank.
The FDIC also will guarantee deposits in non-interest-bearing "transaction" accounts by removing the current $250,000 insurance limit on them through the end of next year. That could add as much as $500 billion to FDIC-backed deposits.
The guarantee program has been in effect since Oct. 23. All federally-insured banks and thrifts have been automatically covered since then but will have to decide by Dec. 5 whether to participate or "opt out."
Well over half of the roughly 8,500 U.S. banks and savings and loans are expected to tap the FDIC's temporary guarantees, which are in addition to the government's $250 billion program of directly buying shares in banks and financial companies.
The FDIC will back new senior unsecured debt that banks issue to each other between Oct. 14 and June 30, 2009. It would be insured by the agency through June 30, 2012. Senior unsecured debt does not have collateral underlying it but must be repaid before other classes of debt.
Hat tip to gjohnsit. "Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
