Tim Geithner. Why did he write a book? It’s astonishing. It’s like a man writing a book justifying why it was ok for him to have an affair. And then retelling the same stupid lies in the book that he told his wife all that time. I caught his Daily Show appearance. (only the on-air part, I wouldn’t waste the additional 3 minutes on the web-only portion of the interview). It was like watching Colin Powell present the facts about Iraq to the UN. Almost like he believed the BS himself. Can’t he just be satisfied with the enormous payoffs he has now started collecting as a Wall Street employee?
Barry Ritholtz to the rescue, once again. Sir, you are a rock star and a gentleman. Well, I don’t know that for sure, but I’m making the assumption based on the fact that he never once seems to lose his temper in this terrific post about how wrong and disingenuous Geithner is really being.
I do have a couple of comments/questions about his response, though. First, he proposes FDIC receivership and bankruptcy for insolvent banks during the financial crisis. I totally agree. Those inclined to think government is good at doing stuff might also propose nationalizing the banks, which has been done with some degree of success in other countries (recently in Europe for some smaller banks/countries). But if we go back to our own existing laws, and the first preferred method, I agree with Barry. Do what Mr. Tim Private Equity Geithner would do with them now. Chop them up and sell them. My question is, when Barry says:
This would have been much more painful short term, but in the long run it would have been healthier for the economy.
what does that really mean? How much more painful? Who owned those stocks and bonds, and would have been out the money? Pension funds? Insurance companies? The other banks? And this question is pretty clearly one of ignorance, but is he talking just the bank guaranteed bonds, as in a bond issued by and guaranteed by Bank of America, or is he talking about all of the bad paper, meaning all the CDO, MBS, etc. that was issued by them but backed by bad loans they made and that was clearly valueless? What’s the total that would have been lost, and who would have felt that pain, exactly? When we say the stock would have been wiped out for each of those big holding companies, how much stock was there? Bank of America’s stock price went down around $300, now it’s at $1166, and current market cap is $155B, so ignoring changes in shares outstanding, at it’s nadir the company had a value of $40B that would have been wiped out. Since these companies had lost so much value already, it might not have been that overwhelming for them to go to zero at that point. I don’t know the answers to that, but I don’t think they are trivial. He probably does the math in his book.
I think all his other points are pretty much common sense (to us cheated spouses, I mean, taxpayers).