Written Q and A from Grassley to Geithner
Mr. Geithner, as you know, I wrote to you last June asking for details about the portfolio of assets received by the Federal Reserve as part of the Bear Stearns rescue last March. I received no reply for months. In fact, despite repeated requests to receive a full response before the Senate voted on the broader $700 billion dollar package, it was only after that vote that you provided the information I was seeking. It’s hard to imagine a situation where the legislative need for information was more urgent than just before that vote to authorize the spending of $700 billion.
a. Why did you withhold the information until after the vote?
I very much appreciate your frustration with the pace at which you were provided the information you requested. The review process within the Federal Reserve took longer than was necessary and appropriate. I can assure you that the delay was in no way related to the process that was unfolding around the TARP. I understand that staff at the New York Fed have met with your staff and that your staff has been satisifed with the information that has now been provided. If confirmed, I will work with you to see that you have available to you all the information you require to ensure that the taxpayer’s interests are protected.
b. What assurances can you provide that you will not be as slow to respond to my future requests for information if you are confirmed?
President Obama has emphasized his desire, which I share, to work closely with both parties on Capital Hill to ensure that we can address our nation’s urgent problems. At this point in time, it is critical that the Administration and Congress consult closely with one another. And, as I have indicated, I will make certain that your requests are given prompt responses.
Question 7:
I appreciate the briefing and answers to follow-up questions that your staff eventually provided regarding the Bear Stearns deal. However, I am disappointed with the level public disclosure about the assets being held by the Federal Reserve through Maiden Lane, LLC. Specifically, it appears that the reported valuation of those assets may be overstated. The reason is that much of the debt in the portfolio is guaranteed by Freddie Mac and Fannie Mae, which are in-turn guaranteed by the Federal Government. In other words, a rosy scenario for Maiden Lane, LLC is not necessarily a rosy scenario for the American taxpayer.
a. Isn’t it true that if the defaults on those loans are high, then the taxpayer is still left holding the bag even if the Federal Reserve gets its money back from Maiden Lane, LLC?
The Federal Reserve holds a range of government, government guaranteed and agency securities on its balance sheet. We have provided the Committee staff with the detailed composition of the assets in the Maiden Lane, LLC that are guaranteed by Fannie Mae and Freddie Mac. The risks assumed by the government sponsored entities and by the Federal Reserve have to be measured in relation to the benefits they provide the financial system and the overall economy.
b. Why isn’t general data about the loans underlying the securities in the portfolio regularly reported to Congress and the public in order to provide a more accurate picture of the true risk to the taxpayer? Specifically, is there any reason that the percentages of loans in default, the percentages of loans over 90 days late, and similar aggregated statistical information cannot be released?
As you know, the critical imperative behind all of the government’s extraordinary actions over this period has been to stabilize the financial system. Consistent with its accounting and disclosure practices, the Federal Reserve reports publically on the value of the portfolio of assets held in Maiden Lane, LLC on a regular basis. Confidentiality around the specific characteristics and performance of individual loans in the portfolio is maintained in order to allow the asset manager the flexibility to manage the assets in a way that maximizes the value of portfolio and mitigates risk of loss to the taxpayer.
c. If you are confirmed, what assurances can you provide that there will be more meaningful disclosure about the performance of the Bear Stearns deal?
The Board of Governors of the Federal Reserve System is responsible for setting broad policy on accounting and disclosure of the activities of the Federal Reserve Banks. If confirmed, I look forward to working with you and with Chairman Bernanke on ways to respond to your suggestions and concerns.
d. What specific additional disclosure would you support?
If confirmed, I look forward to working with you and with Chairman Bernanke on ways to respond to your suggestions and concerns.
e. What do you plan to do to ensure that there is improved transparency regarding the AIG rescue and the TARP program?
If confirmed, I will work with you and your committee to provide all appropriate information to strengthen transparency and safeguard taxpayer funds.
f. Do you support providing GAO with full access to the books and records of entities that received TARP funds?
If confirmed, I would be pleased to work with you and the GAO to examine way to help the GAO carried out its important oversight functions.
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January 22nd, 2009 at 4:51 pm
“Turbo Tim” Geithner to Sen. Charles Grassley: “Drop Dead.”
January 22nd, 2009 at 4:53 pm
Gaaaaaaah!
Why on earth did Grassley let Geithner get away with such non-responses to 7, d., e., and f.?
e.g., re response to e. “If confirmed, I will work with you and your committee to provide all appropriate information to strengthen transparency and safeguard taxpayer funds.”
Q: Mr. G, and who gets decide what is “all appropriate information”? you? or the taxpayers’ representatives?
It is a dog-and-pony show!
January 22nd, 2009 at 4:55 pm
Did someone say that he was linked to Goldman Sacs somehow?
January 22nd, 2009 at 4:59 pm
Did I miss something or did he not answer question 7a?
January 22nd, 2009 at 5:00 pm
“Gaaah!” That’s right.
I suppose that is bile-induced. Geithner’s responses are disgusting. What can reasonably be done?
His non-responses say, “I’ll talk to you about this beyond the public space and explain that I won’t tell you a g-d thing.”
Recourse? So many things happening that Geithner means little. Besides, he’s no bossman, he gets told what to do. Who’s doing the telling and how do we wrest power from them?
Ain’t gonna never happen, anyways.
January 22nd, 2009 at 5:01 pm
Say this once, and say it loud:
“The Cabinet exists to enforce the will of the President of the United States.”
The *only* consideration should be whether the nominee is qualified to carry out the above. If he does, he should be confirmed, and if the will of the President of the United States fails, then the President of the United States is to blame.
Geithner could not answer those questions because it was not his place to say what the President’s policy would be. That is for the President to decide.
January 22nd, 2009 at 5:44 pm
I was just on the phone with the Capitol Operator (202-224-3121) and asked: “Busy day?” She said: “Yes it has.” I spoke to staff in three Senate offices today and they say the negative calls on Geithner are running 50:0.
January 22nd, 2009 at 6:00 pm
I’m going with “Gaaaaaaah!!!” too.
January 22nd, 2009 at 6:12 pm
franklin411-
sorry, this is not Nazi Germany. Did you forget?
This quotation you “cite” is a fantasy of your own imagination which finds absolutely no Constitutional support. Amazingly, if you google the entire “quotation” you find no matches!
Your conception of the function of the US President is completely insane.
January 22nd, 2009 at 6:59 pm
I like the answer to 7.b.
“Confidentiality around the specific characteristics and performance of individual loans in the portfolio is maintained in order to allow the asset manager the flexibility to manage the assets in a way that maximizes the value of portfolio and mitigates risk of loss to the taxpayer.”
Seems to be saying: “why would we voluntarily disclose to prospective buyers of this junk how bad it really is. ”
Is this simply another way to reward Blackrock, as manager of the assets?
January 22nd, 2009 at 8:22 pm
“it was not his place to say what the President’s policy would be.”
In matters related to the Treasury, he is/will be the Presidents mouthpiece. So, that is exactly his place.
January 22nd, 2009 at 8:25 pm
“I spoke to staff in three Senate offices today and they say the negative calls on Geithner are running 50:0.”
That would be surprisingly good news to me. My preference would be for someone with no ties to either the Federal Reserve or Goldman Sachs.
January 22nd, 2009 at 9:22 pm
Just did an interview with David Kotok and Josh Rosner for Monday. Looks like the view is Summers as the puppet master and timothy as the puppet.
January 22nd, 2009 at 11:41 pm
@Chris W
I don’t have a problem with Summers as de facto SecTreas. It’s the plausible deniabilityand lack of transparency should Turbo Tim make it through that’s troubling.
January 23rd, 2009 at 2:36 am
Great story! Geithner has a long history of weasel-like behavior:
“Treasury Secretary-designate Tim Geithner knew a market crash was coming and kept silent. Perhaps it was to allow his connections in JP Morgan and Goldman Sachs to profit and gain power. This man had oversight of a market twice the size of the U.S. economy. Can he now be trusted with your retirement money?”
Geithner’s Silent Crisis
http://www.gamingthemarket.com/2009/01/geithners-silent-crisis.html
January 23rd, 2009 at 8:21 am
The Geithner link to Goldman and the conflict over the AIG bailout was discussed in the NYT:
Behind Insurer’s Crisis, Blind Eye to a Web of Risk:
http://www.nytimes.com/2008/09/28/business/28melt.html?_r=1&scp=1&sq=AIG%20+%20Goldman%20Sachs&st=cse
January 23rd, 2009 at 10:10 am
I wish Obama could break out of that Fed- Wall Street – Bank – mainstream economist circle that has cheated and looted the rest of us so badly, but it appears he will not do so until after he gets burned by the loss of public confidence that will follow his continuation of that path.
I’d like to see Grassley put in charge of a special Commission to investigate and PROSECUTE the frauds of the past decade or so. I think heads would roll… one thing it would do is bring the public back to the idea that the government is on their side. The public perception right now is that government is on the same ship as the pirates – and that’s one reason why any stimulus will be ineffective. It will be saved or used to pay down debt but not for investment or major purchases. There is currently no trust that investments won’t be looted and major purchases deflated in value. Trust is the issue. Restoring trust is more important than ‘saving’ the people who are ripping us off.
January 23rd, 2009 at 10:54 am
Look at the opening statement
“longer than was necessary and appropriate”
This is a mutually exclusive statement.
They both cannot be true.
Geithner is talkin’ out his ass!
January 23rd, 2009 at 7:14 pm
much as I hate to stand up in any way for this cheating weazel, I think it is clear that his statement should be read as
‘longer than was (necessary and appropriate)’
not
‘(longer than was necessary) and (appropriate)’
as you apparently have taken it to mean.
January 24th, 2009 at 10:42 am
First look, initially viewed the tax mistakes as forgivable. That was until I read some of the comments of folks over at the Government Executive website. Check out the comments of Dan Divieny, Anita T and In Disbelief.
http://www.govexec.com/dailyfed/0109/012209cdpm1.htm