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We have a claim from the Irish Times that Geithner ordered the IMF to get with the program. What makes this interesting is that there is no apparent reason for this. Are we to pretend that it couldn't have happened because we can't find a ready motive? How could one expect to learn anything if one discounts everything that doesn't make sense on the first glance?

And to reiterate: I don't think anybody here is claiming that this whole austerity fiasco is an American conspiracy or that the US played an important part. It is quite clear that the responsibility for these decisions lies on this side of the Atlantic.

Von überall könnte das Volk, Urbrut alles Undemokratischen, Zelle des Terrors, über die gewählten Hüter von Wachstum und Wohlstand® kommen. - flatter

by generic on Tue May 10th, 2011 at 10:31:19 AM EST
[ Parent ]
No what we have is a claim by Morgan Kelly that Geithner "torpedoed" a plan that neither the Irish government nor the ECB/EU have advocated. We know that ECB/EU have been acting as enforcers for German/UK banks. We know that Geithner is under attack from Wall Street as they desperately try to fend off regulation. We know that the German media have sold Germans on the story that foreigners, many of them swarthy, have pissed away money and are demanding that hard working Germans bail them out. And, yet, the a large number of people on the  "left" are happy to wander off into silly speculations that don't address any of the issues at hand - at the instigation of "Reagan Democrats" and others.
by rootless2 on Tue May 10th, 2011 at 12:23:29 PM EST
[ Parent ]
There was no rescue plan. The IMF had a plan that was supported by parts of the Irish government and possibly, though that is far from clear, Osborne. No one else. And the claim is that the IMF had to give up on it once Geithner vetoed it. Everything else we knew already. So why is it silly to think about this new piece of information?

We know that Geithner is under attack from Wall Street as they desperately try to fend off regulation.

We do? What is this planned regulation that would so severely damage Wall Street?

Von überall könnte das Volk, Urbrut alles Undemokratischen, Zelle des Terrors, über die gewählten Hüter von Wachstum und Wohlstand® kommen. - flatter

by generic on Tue May 10th, 2011 at 12:49:36 PM EST
[ Parent ]
by rootless2 on Tue May 10th, 2011 at 01:04:52 PM EST
[ Parent ]
Wall Street doesn't like Elizabeth Warren and her consumer protection agency. But what is the connection to Geithner? Its not him trying to appoint her. It rather looks like Wall Street would very much prefer to be regulated by the treasury and the Fed.

Von überall könnte das Volk, Urbrut alles Undemokratischen, Zelle des Terrors, über die gewählten Hüter von Wachstum und Wohlstand® kommen. - flatter
by generic on Tue May 10th, 2011 at 01:23:09 PM EST
[ Parent ]
Warren works under Geithner.
by rootless2 on Tue May 10th, 2011 at 01:27:08 PM EST
[ Parent ]
Likely only because that was the worst place Wall Street sycophants in Congress could find to place the agency. And the only times I have seen Geithner come out for reforms has been at Obama's instigation, presumedly after he has lost the argument in the cabinet, but that is just my read. What has he done that has so impressed you?

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue May 10th, 2011 at 01:52:43 PM EST
[ Parent ]
You have no idea what arguments Geithner has had in the cabinet.

Warren works for Geithner

The auto rescue and scalping of bondholders happened under Geithner

WS was forced to repay TARP and purchase back options at open market prices under Geithner.

Billions in TARP money went to small banks, including labor banks under Geithner

That's fact. The narrative that relies on speculation about what happened in conversations nobody overheard or in dark plots that have no evidentiary basis is just narrative.

by rootless2 on Tue May 10th, 2011 at 02:05:45 PM EST
[ Parent ]
That's fact.

"Facts" without context are meaningless.

I certainly do not recall Giethner leading the bail-out of GM and Chrysler. Seemed more like he was drug along kicking and screeming. Giethner did not appoint Warren and I have seen little evidence that he supports her efforts, though I would be pleased to be wrong.

The terms on which WS "repaid" TARP and bought back options were about the minimum that would not be seen as outright gifts and the revenue to make those payments came largely from WS arbitrage of the difference between the Fed cost of funds and what they could get in the market. I.E. the public gave them free money for them to lend at interest. Oh, and they understood how much and how long these funds, including QE I and QE 2 would last and were able to "invest" them in markets, such as the stock markets, which they effectively have manipulated. The whole TARP issue is only the tip of the iceberg of Fed and Treasury assistance to TBTFs, and this has been to the detriment of the "real economy", which has continued to wither.

Small banks didn't get TARP money, but mid sized regional banks, such as my bank, Bank of the Ozarks, did, at Treasury insistence, under Paulson.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue May 10th, 2011 at 03:30:42 PM EST
[ Parent ]
"I certainly do not recall Giethner leading the bail-out of GM and Chrysler. Seemed more like he was drug along kicking and screeming. "

That's pure fiction unless you know someone in the Administration who tells you otherwise.

"The terms on which WS "repaid" TARP and bought back options were about the minimum that would not be seen as outright gifts "

More fiction - if McCain had won they would have been allowed to cancel the warrants which they were demanding strongly.

"revenue to make those payments came largely from WS arbitrage of the difference between the Fed cost of funds and what they could get in the market. I.E. the public gave them free money for them to lend at interest. "

Wrong again. By the way, the discount window was not invented by the Obama administration.

"The whole TARP issue is only the tip of the iceberg of Fed and Treasury assistance to TBTFs, and this has been to the detriment of the "real economy", which has continued to wither."

Which is why we have just had the longest period of manufacturing growth in 20 years.

"Small banks didn't get TARP money, but mid sized regional banks, such as my bank, Bank of the Ozarks, did, at Treasury insistence, under Paulson. "

And that's not even false, it's Republican PR bullshit. The records are online - look it up.

Keep reading Yves Smith and keep believing RW propaganda and calling it "left".

by rootless2 on Tue May 10th, 2011 at 09:38:50 PM EST
[ Parent ]
Well, I am certainly not going to take instruction from you.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue May 10th, 2011 at 11:52:50 PM EST
[ Parent ]
I think we may have reached the end of the productive part of this thread, then.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed May 11th, 2011 at 01:45:13 AM EST
[ Parent ]
N
O
T

Y
E
T

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Wed May 11th, 2011 at 04:41:00 AM EST
[ Parent ]
Please consider a diary "setting the record straight"...

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed May 11th, 2011 at 01:54:57 AM EST
[ Parent ]
The argument appears to be, insofar as Ireland is considered, whether Geithner was a key actor in determining the outcome of the IMF/ECB/Irish negotiations, or whether he was the fall guy, someone the ECB could use as cover for a very regressive, bank bondholder driven, austerity policy directed at Ireland.

We have Morgan Kelly arguing he was a key actor, apparently based on an account from an IMF source with knowledge of the negotiations. Morgan Kelly is an economic historian, not an insider in either IMF or Irish Government circles, and so we have to make a judgement call on how reliable his source and his account is.  Based on his track record, and based on only partial denials coming out of Washington, I would tend to believe him on this occasion, mainly because the ECB have no need of a US scapegoat:  they are doing exactly what they think they should eb doing, and making no apologies for it.

You are free to differ, and seem to be arguing that Geithner is a much misunderstood and maligned guy, both by Morgan Kelly and by US progressives more generally.  That is an argument I am not qualified to get into, but I suspect the position people will adopt depends on their view of the Obama administrator's dealing with wall street more generally.

This is a topic which deserves a diary of its own, and does not deserve to be buried in a 250+ comment stream where only 3 or 4 people are still involved.  From an Irish point of view, if we are looking for support from the US administration, it is important that we understand the internal dynamics and politics at work within that administration.

So please Rootless2, give us a diary on what you consider to be Geithner's approach to dealing with the financial crisis as it has unfolded in the US and Europe, and how it might differ from the approach of the Germans and the ECB.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed May 11th, 2011 at 06:51:30 AM EST
[ Parent ]
Oh, and they understood how much and how long these funds, including QE I and QE 2 would last and were able to "invest" them in markets, such as the stock markets, which they effectively have manipulated.

QE1&2, as I understand it, involved US sovereign bonds. Insofar as this is the case, the only extraordinary thing about them is that they are considered extraordinary.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed May 11th, 2011 at 02:40:50 AM EST
[ Parent ]
Small banks didn't get TARP money, but mid sized regional banks, such as my bank, Bank of the Ozarks, did, at Treasury insistence, under Paulson.

red herrings to throw off the scent of regulator bloodhounds?

this whole global heist analysis is becoming like an agatha christie whodunit.

and the best de-veilers are right here!

layer by layer, the obfuscatory games are laid bare, and soon the whole world will know if the butler dunnit or not.

was it the colonel with the candelabra?

i still have dreams of paulson in the stocks outside the wall street skyscrapers, getting pelted with defunct 401Ks.

here's beppe grillo's remodded 'animal farm' take on it.
Beppe Grillo's Blog


A gentleman called PIG, is about to go bust. He's got a great idea. In order to survive, he's selling his debts. He calls them State Bonds. Many people are buying them; they only want a low rate of interest and a tiny bit of interest when the capital is returned when the loan arrangement ends. Mr PIG has found the system for living above his means. He continues to get debts and to sell them. His family accounts however get worse and to protect themselves, those who buy his bonds, are asking for a higher rate of interest. Mr PIG is obliged to increase the interest rates. Over time, the situation becomes critical. The number of people buying the debt goes down as they are afraid of the risk. The debt is no longer triple A minusminus, but a triple B plusplus. The time will come when Mr PIG is no longer able to pay the interest. The neighbours of Mr PIG who have lent him most of the money, have nothing to gain by making him go bust. If he goes bust they will lose their money. Thus they offer him a loan with lots of conditions, something they call a "bail out".
Mr PIG is obliged to accept so as not to go bust. When the money from the loan dries up, Mr PIG finds he's paying more interest than before. Those who have lent him money have only gained time and now they are doubly at risk, they can lose both the State bonds and the loan that is the bail out.
Mr PIG, technically a bankrupt, is thus able to raise his voice as though it were he that had lent money to the others. He threatens to restructure the debt. In other words, those who bought his bonds at 100 will see the value halved to 50 and Mr PIG will be freed of half the debt with no one being able to stop him doing so. The creditors, who are ever more worried, don't know which way to turn. In fact, the State bonds, like those of any company quoted on the Stock Exchange, can lose their value. The creditors have one thing in common with Mr PIG, the currency. Once upon a time, Mr PIG used the Drachma, now the Euro. His behaviour is putting at risk the good name of the currency of the virtuous gentlemen that have no debts or few debts. The Euro cannot be compromised. The neighbours can throw out Mr bankrupt PIG from the Euro and see part of their credit go up in smoke for ever or continue to give him finance with one "bail out" after another. Germany and France have about 250 billion dollars in Greek State bonds and because of Mr PIG, the Euro is losing value in relation to the dollar and the yuan. Mr PIG leaves the Euro and his State bonds become waste paper. I would like to find the logic and the moral of the story, but I cannot.

i don't either, unless it's 'the cunning always cheat the weak'.

;(

"I would rather have questions that can't be answered than answers that can't be questioned." - Richard Feynman

by melo (melometa4(at)gmail.com) on Wed May 11th, 2011 at 10:36:31 AM EST
[ Parent ]
BG:s blog perhaps makes sense if he replaces PIG with "Greece," otherwise not so much.
by kjr63 on Wed May 11th, 2011 at 11:33:26 AM EST
[ Parent ]
Or Ireland, or Portugal. If any one of them publicly defaulted on a significant portion of their debt it would likely take down numerous banks in the EMU core. But the default would likely need to be public in order to prevent selective "extend and pretend" from being continued and to exceed the reach of "regulatory forbearance".  

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu May 12th, 2011 at 10:35:09 AM EST
[ Parent ]
I don't see why a default has to be widely publicised, apart from the fact that it would be difficult to avoid publicity.

From the point of view of the PIGS economies, it is actually preferable if a default is "kept in the family" until some time after the fact, so the money markets don't throw a hissy fit and crash their economies. And if German politicians want to bail out German banks and then lie to their public about it, then that's a matter between the German electorate and Mrs Merkel.

Indeed I can think of a lot of excellent reasons we might prefer her to try to keep it under wraps. Not the least of which reasons would be that such a coverup would make her politically radioactive when exposed (as it inevitably must be - you can't hide a bailout on that scale). Sadly, I think she'll prove to be too politically savvy or too ideologically committed to the fiction that Germany holds some sort of moral high ground to let such a default pass unmentioned.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu May 12th, 2011 at 11:15:13 AM EST
[ Parent ]
Especially in the USA, but probably elsewhere as well, I see ongoing damage from the fraud based TBTF banking model with its accompanying regulatory and governmental capture. The longer the system runs the more damage it does. So I would prefer a crash NOW to entropy death later. There are so many unpayable debts out there that the best thing would be an event that would take down enough bad banks that the system could not be saved and it would have to be reconstructed. Of course it could well be reconstructed along similar lines, but, at least, there would be an opportunity for something better to emerge.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 14th, 2011 at 08:08:53 PM EST
[ Parent ]
So I would prefer a crash NOW to entropy death later.

Yes, but a country with a structural import dependence on fuel and food and a foreign primary deficit may view things in slightly different terms. Especially if they have neo-Nazis rampaging through the streets, looking to take advantage of any "national humiliation."

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun May 15th, 2011 at 03:58:19 AM EST
[ Parent ]
I don't see why a default has to be widely publicised

It needs to be publicized to further discredit the system and to force recognition and write down of unpayable debts. If bad debts can be written down a better economy becomes possible. Anything that a TBTF is forced to write down is one more former bad debt that they will no longer be able to use in their ongoing attempts to squeeze blood from stones. And if it takes down the TBTF, that is a good thing.

I don't see how anyone other than the elites can benefit from the current situation and I find it surreal that the elected governments of the chief victims, the PIGs, have been turned into the enablers for the continuation of the torture of their own populations. Guess I just don't have the stomach for serial abomination.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 14th, 2011 at 08:19:56 PM EST
[ Parent ]
I recognize that such a "moral" position is totally at variance with what passes for contemporary academic economics, so I don't recommend that any that look forward to employment in that discipline publicly join me in my desire for a collapse. I really don't want it either, it is just that I think it is the least worst long term outcome and offers the best chance for a genuine improvement in governance. But, to paraphrase what Lenin said of the Romanovs: We have had 120 years of financial capitalism. Why not another 120 years?

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 14th, 2011 at 08:25:50 PM EST
[ Parent ]

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