Any tax imposed on financial transactions would have to take effect internationally to keep Wall Street jobs and related business from moving overseas, U.S. House of Representatives Speaker Nancy Pelosi said on Thursday.
“It would have to be an international rule, not just a U.S. rule,” Pelosi said at a news conference. “We couldn’t do it alone, we’d have to do it as an international initiative.”
This is wrong on a number of levels:
There is already such a tax in the UK, and it has been there for years, and London’s “The Street” still rivals Wall Street.
The US had a tax on stock purchases well into the 1960s, and it did not chase investors over seas.
The idea that much of the financial industry would go elsewhere is a bad thing is simply misguided. Above a certain proportion of GDP, it becomes a source of parasitic loss, and detracts from our economic well-being.
If we wait for international consensus, it will never happen.
he Federal Deposit Insurance Corp. may force underwriters and raters of asset-backed securities created by banks to be compensated based on the bonds’ performance, an agency official said.
Such a requirement may be part of new rules for bank securitizations that the FDIC staff proposes at an agency board meeting next month, Michael Krimminger, special adviser for policy to FDIC Chairman Sheila Bair, said today in a telephone interview.
I’m sure that Timothy “Eddie Haskell” Geithner hates this idea, because it makes his Wall Street peeps responsible for their actions, but that’s how he rolls.
Unfortunately, the scope is limited, because the FDIC’s rules only apply to banks, and not their parent companies, but this is an idea that should be implemented industry wide.
It would cost Wall Street a lot of money, but f$#@ them, they have a lot of our money to begin with.
So could the feds have negotiated a haircut? Yes. It might not have been that much money, but it would have had a lot of symbolic importance. And that matters.
Brad DeLong says that the loss of public trust due to the kid-gloves treatment of bankers has raised the probability of another Great Depression, because the public won’t support another round of bailouts even if it becomes desperately necessary. I agree — but I think the bigger cost is that we’ve greatly increased the chance of a Japanese-style lost decade, with I would now give roughly even odds of happening. Why? Because bank-friendly policies have squandered public trust in all government action: try talking to the general public about stimulus, and it’s all confounded in their minds with the deeply unpopular bailouts.
(emphasis original)
Krugman is talking about Geithner’s decision to pay off AIG’s swaps to the counter parties, like that great vampire squid wrapped around the face of humanity,* Goldman Sachs at 100¢ on the dollar, which was both stupid and highly unusual:
But Wall Street doesn’t work like that, and never has.
Big financial institutions are a small club, with a shared interest in sustaining the system. Ever since the days of JP Morgan it has been standard practice, in times of crisis, to get major players together in a room and get them to forgo short-term profit maximization on behalf of the industry interests. It happened in the Panic of 1907; it happened in the Latin American debt crisis of the 80s; it happened in the LTCM bailout, which was financed by private firms, not the feds.
I fear that these actions, amongst others, have completely soured the American public on the idea of any government bailout.
To quote a subordinate, who was speaking to Captain Tupolev as they were about to be sunk by their own torpedo, “You arrogant ass. You’ve killed us!”
Let me make this clear: This sad state of affairs is not Geithner’s fault. It would be absurd, and stupid to say, “If only the Czar knew.” This is going on, and continues to go on, because this is what Barack Obama wants.
He has people around him, like Paul Volker, who have been giving him contrary advice, and he chooses not to listen to them.
*Alas, I cannot claim credit for this bon mot, it was coined by the great Matt Taibbi, in his article on the massive criminal conspiracy investment firm, The Great American Bubble Machine.
So, you have a phony newspaper, the Moonie Washington Times, in the process of imploding (see here), and now you are seeing the people who have been kicked to the curb going after the paper.
Case in point, former Washington Times editorial editor and ” vice president of opinion” (whatever the f^%$ that is) Richard Miniter has filed a religious discrimination claim, alleging that he was “coerced” into attending a religious retreat:
The former editorial page editor of the Washington Times has filed a discrimination complaint against the paper, saying he was “coerced” into attending a Unification Church religious ceremony that culminated in a mass wedding conducted by the church’s leader, the Rev. Sun Myung Moon.
Richard Miniter, who was also vice president of opinion, made the claim in a filing Tuesday with the Equal Employment Opportunity Commission that also disclosed he was fired last month. He said in an interview that he “was made to feel there was no choice” but to attend the ceremony if he wanted to keep his job, and that executives “gave me examples of people whose careers at the Times had grown after they converted” to the Unification Church. A Times spokesman said the paper would not comment.
The paper has been a money loser for its entire existence, with its deficits being financed through subsidies from the church, and he’s surprised that doing obeisance at Sun Myung Moon’s feet is a part of the job?
This is particularly galling for someone who was their editorial page editor, since their editorial page was arguably the worst in the nation, though, unlike the Washington Post and Wall Street Journal, it does not suffer in comparison to their news gathering operation, because it is equally laughable.
It should be noted that at least a part of the right-wing nutjob community is supporting Miniter in this, as Larry Klayman, late of the whack-job Judicial Watch is his attorney, which implies that there some Scaife or Olin money behind this lawsuit.
—Barry Ritholtz discussing an article in GQ that excoriates the author.
Ritholtz himself describes her as a, “pedantic bore,” who writes, “blindingly horrific prose.”
I agree with both, though I have never been able to force myself to read anything of hers beyond The Virtue of Selfishness, a perusal of which made me <sarcasm>long for the straightforward and beautifully written prose of Immanuel Kant</sarcasm> and consider self immolation as an alternative to reading any more of hew work.
His last bit is prize:
Worst of all, Rand’s Objectivism has become the rationale for all manner of morally repugnant behaviour. However, I did take one personal lesson from Atlas Shrugged to heart: Anytime I see a parked car with a John Galt bumper sticker, I like to knock off one of the sideview mirrors, and leave it on the hood. I include a note stating my selfish, random act made me feel good, and therefore should be a perfectly fine act in their world.
There is a reason that I emphasize political pressure: It is because it is clear that the Fed is under pressure, and it is clear that the only reason that it is finally taking consumer friendly steps is because they they feel this pressure.
The effect of insulating a bank regulator from public pressure is to have them favor the banks.
Full press release after break:
Press Release
Federal Reserve Press Release
Release Date: November 12, 2009 For immediate release
The Federal Reserve Board on Thursday announced final rules that prohibit financial institutions from charging consumers fees for paying overdrafts on automated teller machine (ATM) and one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft service for those types of transactions.
Before opting in, the consumer must be provided a notice that explains the financial institution’s overdraft services, including the fees associated with the service, and the consumer’s choices. The final rules, along with a model opt-in notice, are issued under Regulation E, which implements the Electronic Fund Transfer Act.
“The final overdraft rules represent an important step forward in consumer protection,” said Federal Reserve Chairman Ben S. Bernanke. “Both new and existing account holders will be able to make informed decisions about whether to sign up for an overdraft service.”
The Board’s consumer testing shows that most consumers prefer not to be enrolled in overdraft services for ATM and one-time debit card transactions unless they affirmatively consent, or opt in. At the same time, testing shows that most consumers want overdraft services to cover important bills, such as checks they use to pay rent, utilities, and telephone bills.
To ensure that consumers have a meaningful choice, the final rules prohibit financial institutions from discriminating against consumers who do not opt in. The final rules require institutions to provide consumers who do not opt in with the same account terms, conditions, and features (including pricing) that they provide to consumers who do opt in. For consumers who do not opt in, the institution would be prohibited from charging overdraft fees for any overdrafts it pays on ATM and one-time debit card transactions.
“Overdraft fees can be costly,” said Governor Elizabeth A. Duke, the chair of the Board’s Committee on Consumer and Community Affairs. “Our rule will help consumers better understand the terms and conditions of overdraft services and will give them an opportunity to avoid fees when these services do not meet their needs.”
The Federal Register notice is attached. The final rules are effective July 1, 2010.
I’ve said it before, and I’ll say it again: When the Wall Street Journal Describes Finance With Cartoons, it Means that Someone will Get Boned, and it ain’t the “Bankers, Lawyers, and Other Advisers.”
Which means that taxpayers are about to get boned again, without lube.
In an interview, Joe Exnicios, chief risk officer of Whitney’s Whitney National Bank unit, of New Orleans, cited a hypothetical example in which a developer borrows money to develop a small retail center and gets a drugstore chain to sign a lease for one store. If the developer can’t sell the other sites, he would be unable to repay the loan. Under the new guidelines, the bank could create a healthy, performing loan supported by the drugstore lease and a nonperforming loan from the rest of the loan. “It may make a difference on whether you need to have additional capital and take additional reserves,” he said. Critics agree that regulatory flexibility might help some banks avoid failure. But the troubled loans remaining on their books will discourage them from lending, reminiscent of Japan’s “lost decade” in the 1990s. A better solution, critics said, would be similar to the approach regulators took during the commercial real-estate crash of the early 1990s. “Back then, regulators moved aggressively to force banks to take write-offs and sell off their troubled loans, and the market recovered faster,” said Mark Edelstein, head of the real-estate group at law firm Morrison & Foerster LLP.
The problem here is that Barack Obama and His Stupid Minions™ are asking the wrong question. Instead of asking, “How do we get capital flows moving again,” they are asking, “How do we save the banks.”
These two things are orthogonal.
*Like he gives a damn. I’m just a loud mouth with a blog.
I’ve been holding off talking about this, news has been coming out in dribs and drabs, but now that Dodd has released his version, I think that things will move forward more quickly, so here is what we has happened so far.
First, in both the House (Rep. Barney Frank) and Senate (Sen. Chris Dodd), we have changes to allow for resolution authority for the banking mega-giants (I prefer Sen. Bernie Sanders’ alternative of breaking them up into small and manageable pieces to both bills, but that’s just me), and for a consumer financial protection agency. (CFPA)
First, the CFPA, and it should be noted that the House bill has moved further along the legislative process, and as such, it has incorporated more bad ideas as amendments, such as sunsetting the Home Valuation Code of Conduct (HVCC), which was proposed by Rep. Gary Miller (R-Realtor).
The objection to the HVCC is not that it is inaccurate, but that it is accurate, and so it makes more difficult to move homes, because it shows that a lot of people overpaid, and are now under water.
Freddie Mac has issued a report saying that HVCC has substantially improved loan quality, which, since the taxpayers back up Freddie, and Fannie, and the FHA, means that Miller won one for his realtor friends at the expense of the taxpayers.
So the CFPA can write rules for small banks, and can investigate complaints at small banks, but can’t examine small banks, or enforce its own regulations at small banks? It all seems like a horrible mess to me.
He suggests that perhaps an online clearing house of complaints, basically “crowd sourcing” them to send to the CFPA would be a way of dealing with this.
It should be noted that this is the same office of the OCC that fought Eliot Spitzer tooth and nail when he saw evidence of banks were engaging in predatory lending against minorities. (Thankfully, while Spitzer lost this suit at the appellate court level, his successor, Andrew Cuomo, continued to pursue the litigation, and won at the Supreme Court).
Note that these are all problems because the House bill is further along, and as such, has been put through the sausage machine, and as Bismark noted, it resembles the making of sausage.
Dodd’s bill is “clean” at this point, which means that it covers all banks, and that it does not allow agencies to preempt stricter state laws, so I think that it clearly better here.
Next we have the issues of systemic risk and resolution authority, and while the Dodd and Frank bills are different, Dodd calling for after-the-fact payments in the event of a resolution/bankruptcy, and Frank calling for a before-the-fact insurance fund like the FDIC.
What has happened here, I think, is that the initial proposal, put forward by Timothy “Eddie Haskell” Geithner was that the big banks be required to pay after the fact, and as more comments came in, most notably FDIC Chairman Sheila Bair’s blistering criticisms of the idea (also here and here) in favor of an FDIC style system.
President Obama, when Congressmen are calling your Secretary of the Treasury a bitch, it’s time to reconsider his employment.
Geithner does not like an FDIC style system, thinking that it, “would encourage risky behavior by ‘creating an expectation of explicit insurance.'”
The word for this is “bullsh&^“. As Luis Gutierrez (D-IL) noted in when Geithner testified before Congress:
Let’s create the fund, just like the FDIC, so when we need to resolve [a financial institution], it stands. Your argument is, ‘oh, but Luis, moral hazard’…I don’t see banks racing to the precipice of destruction and bankruptcy because the FDIC exists. Nor do I go to an insurance company and take out a life insurance policy on myself, and the next day decide, wow, maybe I’ll just start smoking. Maybe I’ll start drinking, maybe I’ll start driving my car in a crazy manner. Maybe I really don’t care whether I live or die. I’ve got life insurance, what the hell if I die, everything is taken care of. No, that’s not the way it works.
The reason the Timothy Geithner thinks that there is a “moral hazard” problem with a prepaid insurance because, “That great vampire squid wrapped around the face of humanity,”* Goldman Sachs, told him to say this. Geithner is a poster boy for regulatory capture.
“If you wait until after the fact, you would then have to go to the taxpayer first and get the assessment to repay it and some people are afraid that would never happen,” said Frank, a Democratic representative from Massachusetts.
Which is what happened this time. If, after Lehman had gone down, we had demanded that the rest of the industry pay the costs of liquidation of the firms, it would have driven into bankruptcy too, so when there is a need, the money will never be collected. Goldman Sachs, of course, knows this, which is why they want a phony reimbursement plan.
Frank/Bair are right here, and Dodd/Geithner are wrong, but I think that we will end up with the FDIC type plan when everything settles out, because it is so clearly the best solution.†
Geithner, in testimony to the U.S. House of Representatives Financial Services Committee, said the Fed should keep its ability to act as an emergency lender of last resort, but only to solvent firms in times of severe stress in financial markets — with Treasury consent.
“Any firm that puts itself in a position where it cannot survive without special assistance from the government must face the consequences of failure,” Geithner said. “The proposed resolution authority would not authorize the government to provide open-bank assistance to any failing firm.”
I guess that no one can be wrong all the time, not even Timmeh.
Strips regulatory authority from the FDIC, OCC, and Federal Reserve.
Removes much of the authority for the Fed to make emergency loans to banks, and requires fuller disclosure of these loans.
Removes the authority that private banks have to choose directors, and places the authority in the Federal Reserve board, and makes the chairman of the board for the regional Fed banks a Presidential appointment with formal Senate confirmation.
Here, I would go further, and enact a 1-term for the Fed Chairman, because, much like the FBI, the level of power accrued by the chairman can create situations where is both unaccountable, which is necessary for managing monetary policy, and where the financial markets demand his reappointment.
Creates a CFPA.
Note here that in stripping regulatory authority from the Fed, and leaving the monetary policy there, Dodd is not moving to an untried model: The UK does this, with the Bank of England controlling monetary policy, and the Financial Services Authority doing regulation of the financial markets, and it a little (very little) bit better than our current layout.
Simply put, we cannot afford another Randroid nut-job like, Alan “Bubbles” Greenspan to be in the position he held, where he controlled all of monetary policy, and was simultaneously the most powerful person in the United States (world) in terms of financial regulation, for 18½ years….It Damn near destroyed us.
I like Dodd’s bill more than Frank’s, and I think that the concerns of people that I generally agree with, like Felix Salmon, about the curtailing of the powers of the Fed, are misplaced.
Cutting the Federal Reserve down to size is a feature, not a bug, and one of the best features, at that.
Includes a CFPA with rule-writing authority, with no federal preemption of state law. All financial institutions are subject to examination by the CFPA.
Includes a CFPA with rule-writing authority, and bank regulators can preempt state law on a case-by-case basis. Financial institutions with less than $10 billion in assets are not subject to CFPA examinations.
Consolidated Regulators
Consolidates all existing federal bank regulators into one super-regulator, the Financial Institutions Regulatory Authority (FIRA). Removes bank supervisory powers from the Federal Reserve and the FDIC.
Merges the Office of Thrift Supervision (OTS) and the Office of the Comptroller of the Currency (OCC), leaves other regulators in place.
Resolution Authority
Includes resolution authority, funded by an after-the-fact assessment on institutions with more than $10 billion in assets. Institutions must draw up a “living will,” to be used in the event they must be unwound.
Includes resolution authority, pre-funded by an assessment on institutions with more than $10 billion assets. Institutions must draw up a “living will,” to be used in the event they must be unwound.
Systemic Risk
Creates a new Agency for Financial Stability, composed of the federal bank regulators and two independent councilors appointed by the President. The council will make decisions regarding systemically risky firms.
A systemic risk council, composed of the federal bank regulators, will make decisions, to be carried out by the Federal Reserve. The Fed would be empowered to conduct “on site” examinations of any systemically risky firm.
Breaking up risky firms.
Gives federal regulators the authority to break up systemically risky firms on a case-by-case basis.
Gives federal regulators the authority to break up systemically risky firms on a case-by-case basis.
*Alas, I cannot claim credit for this bon mot, it was coined by the great Matt Taibbi, in his article on the massive criminal conspiracy investment firm, The Great American Bubble Machine. †Why yes, I am sounding like I have the political acumen of Little Orphan Annie, why do you ask?
The monoliner business model is that you create a company, get an AAA rating, and then make money by renting out that credit rating.
Among other things, it’s a way to soften the blow of the comparatively low credit ratings that states and municipalities get, and it allows for another revenue stream for the parasites on Wall Street to tap.
I think think that the entire business is essentially corrupt, and should be outlawed.
The recent news does not seem to have effected the price of Treasurys, though which were basically flat.
In energy, we have weather, specifically the fact that Ida was pretty weak by the time that it hit oil producing areas, driving oil down, and China’s gangbuster economic report drove the US dollar down.
Because, these days, they all seem to be over 100 pages long.
But , when Senator Bernie Sanders (I-VT) offered his Too Big To Fail – Too Big To Exist bill, a bill that has a body only 27 lines long, (PDF link) I thought that it deserved a read (after the break).
No big surprise though, the New York Times, all the news that’s fit to line Tweety’s (the Warner Brothers version, not the MSNBC Version) cage, subtly casts him as your crazy old uncle, “The bill has no co-sponsors…..Mr. Sanders, who has described himself as a socialist,” while Bloomberg actually covers it seriously, and notes that there are a lot of people in Congress who actually support this idea.
This may not be as long of a long shot as it seems, since, as Barry Ritholtz notes, while the big banks love this, the regional and smaller banks would like this a lot, since they are getting eaten alive by the bigs ability to borrow money at an interest rate that is very near 0%, because of the support offered by the Treasury, Fed, FDIC, etc.
A BILL To address the concept of ‘‘Too Big To Fail’’ with respect to certain financial entities.
1 Be it enacted by the Senate and House of Representa- 2 tives of the United States of America in Congress assembled, 3 SECTION 1. SHORT TITLE. 4 This Act may be cited as the ‘‘Too Big to Fail, Too 5 Big to Exist Act’’. 6 SEC. 2. REPORT TO CONGRESS ON INSTITUTIONS THAT 7 ARE TOO BIG TO FAIL. 8 Notwithstanding any other provision of law, not later 9 than 90 days after the date of enactment of this Act, the 10 Secretary of the Treasury shall submit to Congress a list
2
1 of all commercial banks, investment banks, hedge funds, 2 and insurance companies that the Secretary believes are 3 too big to fail (in this Act referred to as the ‘‘Too Big 4 to Fail List’’). 5 SEC. 3. BREAKING-UP TOO BIG TO FAIL INSTITUTIONS. 6 Notwithstanding any other provision of law, begin- 7 ning 1 year after the date of enactment of this Act, the 8 Secretary of the Treasury shall break up entities included 9 on the Too Big To Fail List, so that their failure would 10 no longer cause a catastrophic effect on the United States 11 or global economy without a taxpayer bailout. 12 SEC. 4. DEFINITION. 13 For purposes of this Act, the term ‘‘Too Big to Fail’’ 14 means any entity that has grown so large that its failure 15 would have a catastrophic effect on the stability of either 16 the financial system or the United States economy without 17 substantial Government assistance.
A day-by-day financial transaction tax is not something we are prepared to support,” Geithner said in an interview with Sky News. In his concluding press conference, Geithner was asked repeatedly to say why he opposed such a tax on banks and indicated he doubted its effectiveness.
“This idea (of a bank transaction tax) has been around for a long time…I think frankly the experiences are mixed,” he said, expressing an American view that there was no widespread backing for such a tax.
The much delayed audit of the Federal Housing Administration (FHA) has been delayed again:
A much-anticipated audit of the Federal Housing Administration was abruptly postponed just before it was supposed to be made public, after questions arose about its accuracy.
The auditor, Integrated Financial Engineering, said it notified the F.H.A. late Tuesday that its computer models were creating unexplained inconsistencies. A news conference scheduled for Wednesday morning was canceled.
The audit calculates whether or not there are solvency issues under various economic scenarios.
The fact that concerns over these models led to another delay on the release of the audit is concerning, to say the least, particularly since, “The delinquency rate on F.H.A. loans was 14 percent in the second quarter.”
Meanwhile, the Institute for Supply Management’s Non-Manufacturing survey fell to 50.6, down from September’s 50.9, but any number above 50 indicates expansion., though, as Calculated Risk notes, “the Non-Manufacturing Employment Index for October registered 41.1 percent. This reflects a decrease of 3.2 percentage points when compared to the 44.3 percent registered in September,” so the sector expanded, while employment in the sector shrank.
One interesting thing on all this is that the the market is pricing in increasing inflation expectations, as indicated by the spread between Treasury Inflation-Protected Securities (TIPS), and generic Treasuries. It’s at 2.08%, the highest level in over a year.
Unsurprisingly, the statement by the Fed regarding rates, juxtaposed with the increased inflation concerns, pushed Treasuries down, and hence their yields up.
Information received since the Federal Open Market Committee met in September suggests that economic activity has continued to pick up. Conditions in financial markets were roughly unchanged, on balance, over the intermeeting period. Activity in the housing sector has increased over recent months. Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability.
With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.
In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. The amount of agency debt purchases, while somewhat less than the previously announced maximum of $200 billion, is consistent with the recent path of purchases and reflects the limited availability of agency debt. In order to promote a smooth transition in markets, the Committee will gradually slow the pace of its purchases of both agency debt and agency mortgage-backed securities and anticipates that these transactions will be executed by the end of the first quarter of 2010. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.
But here’s the bad news: While senior debt holders will only lose 30% of their investment, we, the U.S. taxpayer, will lose the entire $2.3 billion we lent the company this summer.
William Black, professor at the University of Missouri-Kansas City School of Law is dumbfounded. “We put ourselves on the hook in a completely inept way where we lose first. We lose entirely as the taxpayers.”
….
The government was in no way obligated to lend the struggling CIT money and, in fact, initially refused to provide it bailout funds. More importantly, being the lender of last resort, the government should have guaranteed we’d be the first to get paid if CIT eventually filed Chapter 11. By failing to do so, “it’s like he [Geithner] burned billions of dollars again in government money, our money, gratuitously,” says Black.
I think that this has gone beyond mere incompetence.
Timothy Geithner is a mole for Wall Street in general, and for Goldman Sachs in particular. First, we have him making AIG pay its swaps at 100¢ on the dollar, and now this.
This is not incompetence. This is regulatory capture. This is deliberate corruption to favor people who have mentored him throughout his career, and it’s happening because Geithner knows that when he leaves, he will get a senior executive position at one of those Wall Street firms for millions of dollars a year.
Aside from the, not particularly earth shattering observation that the bloggers and the T-men talked past each other, and this was the general sense of the bloggers there, Ms. Smith makes the most notably observation far down in her post:
My bottom line is that the people we met are very cognitively captured, assuming one can take their remarks at face value. Although they kept stressing all the things that had changed or they were planning to change, the polite pushback from pretty all the attendees was that what Treasury thought of as major progress was insufficient. It was instructive to observe that Tyler Cowen [he’s a relatively sane Libertarian economist], who is on the other side of the ideological page from yours truly, had pretty much the same concerns as your humble blogger does.
(emphasis mine)
The people running the Treasury Department have been thoroughly captured by Wall Street.
To my mind, this has gone well beyond a cultural problem, and straight into outright corruption.
To quote a subordinate, who was speaking to Captain Tupolev as they were about to be sunk by their own torpedo, “You arrogant ass. You’ve killed 
