Wednesday, 28 January 2009

Mr. Geithner Issues a Directive

The most telling news of the day was Treasury secretary Geithner’s promise to curb the banks’ lobbying for bailout money. “Geithner Limits Lobbying for Bailout Money”, The New York Times informed its readers.

Recall that in October then Treasury secretary Paulson forced the CEOs of the banks to accept the bailout money. The Times reported:
The chief executives of the nine largest banks in the United States trooped into a gilded conference room at the Treasury Department at 3 p.m. Monday. To their astonishment, they were each handed a one-page document that said they agreed to sell shares to the government, then Treasury Secretary Henry M. Paulson Jr. said they must sign it before they left.
That was then.

Now the banks are lobbying for the money. Ordinarily, you would think that the bailout money would go to banks in need of capital; emergency help goes to those who need it. Ordinarily, the Treasury should easily determine which banks need the money. That should leave no room for influence peddling. But these are no ordinary times.

That in a mere 90 days the money earmarked for saving the U.S. financial system has turned into potential loot and the Treasury has to issue directives to protect it speaks volumes about the milieu in which the financial crisis is unfolding.