Among the targets: Conservative donor David Koch, media mogul Rupert Murdoch and JPMorgan Chase CEO Jamie Dimon. The march plays into the broader themes of the 99 Percent movement by directly confronting leaders of the business and financial elite. It also specifically condemned Gov. Andrew Cuomo’s (D) proposal of a cap property taxes thought to benefit New York’s highest earners.

But Dimon has another connection to economic policy apart from his wealth, his politics and his role as head of a major financial firm: He sits on the Board of Directors of the New York Federal Reserve, one of the most important economic policymaking institutions in the country.

Dimon is a “Class A” director on the New York Fed board, meaning he is a banker who was chosen by the New York Fed’s member banks to represent them on the board. Under the Dodd-Frank financial regulation law, “Class A” directors no longer have a role in selecting the president of the regional Feds, but they did have that power during the first three years of Dimon’s tenure on the board.

When it comes to the Fed’s power to stimulate the economy by boosting spending, Dimon has mostly been a supporter. He endorsed “quantitative easing” and keeping short-term interest rates low. However, he has also been one of the leading proponents of the view that many of the current economic problems are caused by too much government regulation.

In the minds of many Wall Street observers, Dimon’s name is strongly associated with the financial crisis of 2007-2008. It was JPMorgan that initially developed the type of credit derivative that caused the failure of multiple financial firms, although JPMorgan itself managed to escape mostly unscathed from the crisis because it wasn’t as exposed as other firms.

Dimon has been a strong critic of financial regulation in the post-crisis era. He has called for the United States to withdraw from the Basel international regulatory regime after a raise was made to the minimum amount of capital that banks are required to keep on their books. He called the new rules “anti-American.” And he has publicly speculated that sluggish U.S. job growth is caused by new financial regulations from the federal government since 2008.

Most economists point to insufficient capital as the reason why so many financial firms failed or were bailed out by the government during the crisis. The New York Federal Reserve, as one of the institutions charged with regulating Wall Street banks, approved Wall Street’s use of credit derivatives, contracts that transfer risk from one financial firm to another. Wall Street banks used derivatives as a way to free up capital that they were otherwise required to keep on their books as insurance against a loan failing.

Since the crisis, Dimon has also been very involved in politics. He has close ties with the Obama administration and for a while had open access to Treasury Secretary Tim Geithner, who was president of the New York Fed during Dimon’s first three years on the board.

Many say that Dimon’s close relationship with Obama officials has cooled, and he has recently met with Republican presidential candidate Mitt Romney, who has surpassed President Obama as the biggest recipient of Wall Street campaign contributions in 2012.

Here’s video of the “Millionaires’ March” getting ready to head to Dimon’s house:

It’s strange, to say the least, to lump Geithner among any group of lefties attempting to “community organize” anything. For the last year and a half, progressive groups have fretted that he cared more about helping out his old friends and associates on Wall Street than boosting employment through large fiscal stimulus programs.

In theory, one can see a stance where the left and right might meet over their anger towards Geithner, but it would have to come from a decidedly anti-Wall Street agenda. Boehner, on the other hand, is better known for calling for the repeal of financial reform legislation meant to reel in Wall Street, so it’s hard to tell what position he’s coming from.

None of this, however, has stopped Erick Erickson, founder of RedState, from launching a mini-campaign of his own today around Boehner’s idea:

The other day in Ohio, House Republican Leader John Boehner said Mr. Obama should fire Treasury Secretary Tim Geithner and economy adviser Larry Summers.

I agree. But what do Democrats in Congress think? Back in 2006, Democrats were demanding to get Republicans on the record about whether President Bush should keep Donald Rumsfeld as Secretary of Defense.

It’s time to turn the tables. Go get your congress critter on video. Ask if he agrees with John Boehner that Barack Obama should ask for Tim Geithner and Larry Summers’ resignations.

Oh, and if you get your congressman to take a position on the Ground Zero Mosque, you just might get bonus points and maybe an extra prize!

Post your video to our Facebook page. Each person who does so will get a copy of my new book.

It seems unlikely that “fire Geithner and Summers” will become a popular rallying cry in November, but stranger things have happened. They’re approximately the least radical members of the administration, and their abrupt departure would only lead to a destabilization of the stock market.

As Lehman Brothers careened toward bankruptcy in 2008, the New York Federal Reserve Bank came to its rescue, sopping up junk loans that the investment bank couldn’t sell in the market, according to a report from court-appointed examiner Anton R. Valukas.The New York Fed, under the direction of now-Treasury Secretary Tim Geithner, knowingly allowed itself to be used as a “warehouse” for junk loans, the report says, even though Fed guidelines say it can only accept investment grade bonds.

In other words, while Geithner was head of the New York Fed, despite rules that the Fed can’t buy financial instruments that companies can’t sell in the marketplace, it was doing just that in an effort to keep Lehman Brothers solvent. Those bonds, which likely remain less than investment-grade, might well still be on the books.

Grim additionally notes that Geithner, in his position as Treasury Secretary, officially opposes a public audit of the Fed which would, not coincidentally, make public any and all worthless assets the Fed current owns or controls and what it does with its money.

Although the Fed told The New York Times earlier this month that a third party verified the market value of the bonds Lehman used as collateral for loans from the Fed, they did not specify who the third party was. Of course, Lehman’s auditors at Ernst & Young are already implicated in helping Lehman cook their books and fake the value of their derivatives, so the Fed may well have allowed a third party to determine the valuation but, as with the Goldman-AIG valuation debacle, not done a particularly good job at making sure that third party was at all independent.

According to Grim, Lehman’s own internal documents reflected the fact that, third-party valuations or not, the securities they signed over as collateral to the Fed were far from investment-grade.

In other words, the baskets of assets were created for the specific purpose of selling to the Fed for far more than they were worth.Lehman knew it too: “No intention to market” was scrawled on one of the internal presentations about the assets. A separate bank, Citigroup, later characterized the assets as “bottom of the barrel” and “junk” when Lehman tried to push them their way, according to the report.

So at least one third party thought the investments were junk.

Part of the proposed financial reform regulation would require investors to trade derivatives of the kind Lehman sold to the Fed on the open market in order to allow all investors, including the Fed, to have more information and assign them a real market-based value. It is, of course, one of the many provisions that financial companies are fighting tooth and nail, to allow them to continue marketing financial products and services they know full well are junk.

• The director of the National Economic Council, Larry Summers, paid lucrative visits to Goldman
• Treasury Secretary Tim Geithner’s chief of staff Mark Patterson was a Goldman lobbyist
• Geithner’s mentor Robert Rubin was a Goldman guy (and now serves at Citigroup)
• Commodities Futures Trading Commission chair Gary Gensler was co-head of finance at Goldman
• The National Economic Council’s deputy director Dianna Farrell did time at Goldman
• Federal Reserve Bank of New York Chairman William Dudley was Goldman’s chief economist for a decade

But one of the most prominent Goldman alumni in Europe today is Mario Draghi, currently the governor of Italy’s Central Bank — and perhaps a key player in Goldman’s backroom deals to hide Greece’s debt.

Draghi is poised to become the president of the European Central Bank, the entity in charge of the Eurozone’s common monetary policy. Despite the fact that he has denied any involvement in the 2000 and 2001 currency trades that hid enough of Greece’s debt to allow it to join the Eurozone, economist Simon Johnson reports that Draghi was, in fact, at Goldman and working on Greek issues in 2002, when Goldman helped sell Greek bonds without informing customers that Greece was hiding its debts.

Will these revelations scuttle Draghi’s chances of ascending to the chairmanship of Europe’s Central Bank? Goldman, and its derivatives, are increasingly unpopular in Europe. But Draghi should take heart: European voters don’t get to decide who heads the Central Bank — and he’ll have plenty of company atop the international banking scene. The head of Canada’s central bank, Mark Carney, is a Goldman alum too.

To date, 8.4 million jobs have been lost due to the recession. About 15 million people are unemployed; an additional 8.8 million people are employed part-time because they can’t find full-time work; and 2.5 million are considered “marginally attached” to the labor market but not officially unemployed because they’ve looked for work in the last year but not the last four months, indicating that they wanted to work but have given up trying to find any. The government considers the labor market to include 153.5 million people — counting those who are part-time employed but not those who are marginally attached — so a more accurate reflection of the overall un- and underemployment rate is about 16.8 percent.

The average U.S. unemployment rate before the economic crisis (not including the last recession) was about 4.5 percent (about 7 million people) — though, if you add in those who were involuntarily employed part time (4.2 million) and those marginally attached (1.5 million), the overall underemployment rate was about 8.2 percent. To get back to this number of employed people, you’d need to get 13.7 million Americans back to work in full-time jobs.

Geithner said today that he expects the economy to create an average of 100,000 jobs a month this year, 200,000 a month next year and 250,000 a month in 2012. But, as we know, about 100,000 new people enter the workforce each month, meaning that job creation this year will only match the number of new people needing jobs. Geithner expects the economy to create a 100,000-jobs-a-month surplus in 2011, adding 1.2 million jobs to the economy, and a 150,000 job a month surplus in 2012, or 1.8 million jobs. That means the economy, by the 2012 elections, will have added back three million jobs to the economy beyond what is needed to account for new market entrants — despite the loss of 8.4 million jobs to date and the need to get 13.7 million Americans back to work.

Even if one assumes that 100,000 new job seekers a month will be offset by 100,000 retirees a month — not an easy thing for people to afford to do with the stock market’s effect on retirement accounts and Social Security not offering a cost of living adjustment this year — the best-case scenario is that the economy adds 6.6 million new jobs by 2012, which is two million shy of the number of jobs that disappeared during the recession and less than half the number of Americans that need to get back to work full-time to bring unemployment down to pre-crash levels.

In other words, if “it’s the economy, stupid,” 2012 is going to be a bad year for Obama to face re-election.

Premier Wen Jiabao aimed sharp words at Washington on Sunday, ceding little ground on China’s currency policy and suggesting that U.S. efforts to boost its exports by weakening the dollar amounted to “a kind of trade protectionism.”

Perhaps now Treasury Secretary Tim Geithner can certify that they are manipulating their currency and Commerce Secretary Gary Locke will impose economy-wide sanctions? Don’t hold your breath. The Treasury Department declined to comment on Wen’s statement, and the State Department referred all questions on the yuan to the Treasury Department.

Even more shockingly, Wen denied that the Chinese currency was undervalued at all.

“First of all, I do not think the renminbi is undervalued,” Mr. Wen said, using the Chinese currency’s official name. “We are opposed to countries pointing fingers at each other or taking strong measures to force other countries to appreciate their currencies. To do this is not beneficial to reform of the renminbi exchange-rate regime.”

Wen’s comments come despite the fact that the yuan is pegged to the dollar but is only allowed to float within a defined band below the dollar, in order to encourage exports. The Wall Street Journal notes that earlier this month, Chinese officials even acknowledged that.

He didn’t repeat the language used this month by central bank Gov. Zhou Xiaochuan, who had said the yuan’s de facto peg to the U.S. dollar is a “special” measure that will eventually end. But Mr. Wen repeated previous statements that reforms to the currency system will continue. While he didn’t rule out the possibility that the yuan could rise against the dollar, he argued that it doesn’t need to.

Need is, of course, a matter of perspectives. U.S. exporters have been arguing for years that the yuan needs to be revalued in order to establish a fair trade system.

Wen, however, continued with his somewhat ironic pronouncements.

“I can understand that some countries want to increase their share of exports,” Mr. Wen said, in an apparent reference to the Obama administration’s goal. “What I don’t understand is the practice of depreciating one’s own currency and attempting to press other countries to appreciate their own currencies solely for the purpose of increasing one’s own exports,” he added. “This kind of practice I think is a kind of trade protectionism.”

In other words, China has an explicit policy by which it keeps the yuan weak in order to increase its exports and has constantly resisted pressure from the U.S. and EU to float its currency, which everyone (including China) believes would reduce its exports. Yet when the dollar is weak due to an economic crisis and low interest rates designed to stave off collapse — as opposed to massive monetary interventions, which would be reflected in higher rates of inflation, which the U.S. doesn’t have — Chinese leaders accuse other countries of engaging in the same trade-distorting monetary practices that China uses in order to pressure them to allow their currency to appreciate.

Volcker, of course, will be defending the proposed regulations, which would limit both the size and the trading activities of Wall Street’s largest firms. (After all, he wrote them.) Don’t expect the same enthusiasm from Gerald Corrigan, managing director of Goldman Sachs, or Barry Zubrow, executive vice president of JPMorgan.

The question remains: Can the Democrats pass tighter restrictions on the nation’s banks — a long-term strategy designed to prevent another Wall Street collapse — even as they’re pushing short-term fixes to stimulate the ailing economy?

During today’s House hearing on AIG’s bailout, a central focus was on why AIG’s counterparties — including giants like Goldman Sachs — were paid in full rather than being asked to take a pay cut, considering the degree of the taxpayer-funded intervention (particularly since no less an authority than Treasury Secretary Tim Geithner has said that those payments were insignificant to the goal of rescuing the larger economy).

Today, Geithner said that officials at the New York Federal Reserve, which Geithner headed at the time, tried to negotiate with those counterparties in an attempt to have them accept less than 100 cents on the dollar.

“Relatively quickly, and not unexpectedly, we discovered that most firms would not, on any condition, provide such a concession,” Geithner said. “One said that it was willing, but only if everybody else would agree to equal concessions on their prices.”

Later in the hearing, Neil Barofsky, special inspector general of the Wall Street bailout, revealed that the one volunteer (of eight counterparties) was UBS, the Zurich-based financial giant. Asked by Rep. Eleanor Holmes Norton (D-D.C.) why UBS might have been willing to make that sacrifice, Barofsky speculated that the firm probably simply recognized that the American taxpayers “had taken the global economy on its back.”

The question is: Why didn’t the other seven firms recognize that as well?

The controversy in recent weeks has centered not on the money that went to AIG, but the money that went through AIG to some of the other Wall Street giants to which AIG owed cash. In the process, AIG paid those firms, including Goldman Sachs, 100 cents on the dollar — an arrangement that some Fed officials lobbied (unsuccessfully) to conceal from the public. Geithner on Wednesday reiterated his earlier statement that although he was head of the New York Fed at the time, he took no part in the decisions surrounding disclosure of those payments. He also defended the decision to allow AIG to pay back Goldman and the others on par, arguing that the only legal way to ask those firms to accept less would be to allow AIG to default — a scenario, he said, that would have devastated the financial sector and the economy as a whole.

The counterparties held insurance entitling them to full or par value of the contract. We could not credibly threaten not to pay. That meant putting AIG into bankruptcy. At the time, we were working desperately to rebuild confidence in the financial system. Any suggestion that we might let AIG fail would have worked against that vital aim. We could not risk a protracted negotiation.

Lawmakers, for their part, were having none of it. Rep. Marcy Kaptur (D-Ohio) implied that finance officials put the interests of Goldman above those of taxpayers. Rep. Dan Burton (R-Ind.) said “it stretches credibility” that Geithner, as head of the New York Fed, wouldn’t have been involved in the disclosure discussions. Rep. Stephan Lynch (D-Mass.) wondered why officials “scalped” the shareholders of Bear Stearns, but made sure to pay off Goldman in full. Rep. John Mica (R-Fla.) simply asked Geithner to resign.

The hearing, called by Democrats, highlights the pickle facing the White House in a tough election year. In short, the Obama team chose Geithner because, as a friendly face to Wall Street, he could step into the Treasury spot without scaring the hell out of the banks. (Indeed, the markets soared when the country learned of Obama’s choice.) But he hardly fits the populist image that the administration is hoping to resurrect after the special Senate election in Massachusetts last week — a wake-up call to Democratic leaders who are scrambling to reframe their message before November.

Two questions for the White House: (1) Can you keep Geithner in place and still create the impression among disgruntled voters that you’re serious about taking on Wall Street? And (2) if you choose to replace Geithner, who could fill the office and be the face of populism without causing the markets to tank?

Yet, according to Reuters, that’s precisely what has happened.

Geithner, Reuters says, “has expressed some skepticism behind closed doors about the broad bank limits proposed on Thursday by his boss, President Barack Obama, according to financial industry sources.”

The sources, speaking anonymously because Geithner has not spoken publicly about his reservations, said the Treasury chief is concerned the proposed limits on big banks’ trading and size could impact U.S. firms’ global competitiveness.

Some economists are already doubting the effectiveness of the proposed reforms to prevent the types of lending that led to the economic collapse. That failure is all but guaranteed if even the administration’s own finance officials aren’t on board.

]]> http://washingtonindependent.com/74537/report-geithner-already-grumbling-about-obamas-proposed-bank-reforms/feed 5