Too Dumb to Fail?

Secretary of Treasury, Tim Geithner appeared before Congress this week to talk to the House Banking Committee;  an update on how things were going in the US Banking Sector.  They talked about the new rules, Liz Warren, the power of the new Consumer Agency (whether the Congress will have final approval of who runs it) and some fairly important issues regarding International Banking, still over leveraged banking Institutions and what the prognosis might yeild.  Geithner started out by thanking the Republican Congress and President Bush for saving the US Banking System with the initial passage of the $780 billion dollar TARP bailout money!  He seemed especially proud of bailing out the auto industry and their 30,000 jobs!  How much did that deal cost again?  How much is 61% of GM worth again?

Having said all that, it all sort of went like this:  Geithner still would not address the many bogus lending practices that offer 30 year, APR loans which reset every year and are offered to mainly unqualified home buyers.  Many are being offered to the elderly and the unqualified, with no prior credit history.  Congresswoman Maxine Waters challenged the Secretary to punish these types of lenders and stop/ban these practices.  Geithner, tried to dodge the issue and it will be interesting to see how the Republican Caucus will respond, in the end, after the election.

Geithner talked about increasing the amount of capital that banks needed to have to make loans.  Stating that if the current US Treasury requirements were in place; that the 2008 meltdown “might not have happened”.  Geithner kept saying that International Banks needed regulation to match the US rules.  Sounded a lot like smoke and mirrors and reasons why….US banks can still slip/slide around many of the rules without penalty.  Geithner kept repeating that he didn’t want to disadvantage US Banks because of some International Rule advantage.  Again, more smoke and mirrors to ease requirements on Capital Requirements, Hedge Funds, Derivatives  and Sub-Prime Loans that are still going on.   When might we actually put a stop to the madness?  In 10 years?  More?

The fun part was when it was brought up that many Mid-West Banks didn’t fall prey to the Sub-Prime, Liar Loans or various Inventive Investment Products of Wall Street.  Today, the good banks are still having a tough time getting access to Capital Markets from the bailed-out Investment Banks like Goldman Sachs and others, so that they can loan to small businesses and qualified home buyers.  Geithner, more or less suggested for these folks who had done the right thing throughout the crisis…should now just “Go Fish” and wait for the big boys to dump the rest of their 50 to 1 leveraged products on a bunch of stupid International Markets.  So, what Geithner is saying is: “You guys that did the right thing? – you are probably just too dumb to be a success with the big boys….but we will keep you around;  You are definitely too dumb to fail – strictly in a PR sense!  Afterall, people didn’t even know we had.. honest banks anymore!”

Several Congress people mentioned the over-valued Chinese currency issue and how it was pushing all our manufacturing (that we have left) out of the country.  Geithner actually agreed on that, but said that the Trade negotiations with China were inter-connected to confronting them about their over-valued currency.  Which means of course; still no new jobs for a few years until China gets all of our manufacturing capability.  Hey, we only owe the Chinese $10 or 15 Trillion dollars……..maybe we should use the South American response and just say – we are not paying you back!  Think that would get their attention?

Finally, the Republicans are still playing  “hardball” on the middle class tax cuts and aren’t budging.  Their all or nothing strategy is not very attractive!  What this means is – nothing is happening until after the November election – and even then who knows if those of us in the middle class are going to be simple expendable pawns in the great “who screwed who debate”?  Can’t wait to see how many Republicans get thrown out of office by their Tea Party constituients!