Corporate Jets, Treasury Lobbyists and a Lack of Trust in the Financial System « The Washington Independent
When the Federal Reserve announced Tuesday that, in an effort to stem foreclosures, it plans to modify troubled mortgages it acquired with the rescues of Bear Stearns and insurance giant AIG, Rep. Barney Frank (D-Mass.) seemed quite pleased. “This is a very big deal,” said the chairman of the House Financial Services Committee.
Well, maybe it is, and maybe it isn’t — but the point is that we’ll never know for sure. Maybe the Fed tapped into its hidden bleeding heart and decided to reach out to people on the verge of foreclosure. Or maybe – and I consider this far more likely – the Fed looked a little more closely at the mortgages it now controls, figured they were in bad shape, and decided that modification was a far better alternative than taking losses on them.
Tuesday was a day for self-congratulation, as if the government had finally stepped up to the plate in the financial crisis. The Obama administration told Citigroup to can that $50 million jet. Look, there’s a new sheriff in town! But the instant pats on the back missed the reality that but for an anonymous tip to The New York Post, no one would have known about that jet. Citi executives would be high in the air above us, clinking glasses embossed with “TARP” logos, and none of us would be the wiser.
Later in the day, new Treasury Secretary Timothy Geithner laid down new rules, limiting lobbyists’ influence on the distribution of TARP money, just as he named a former Goldman Sachs lobbyist as his chief of staff.
If anything, the legacy of TARP will be a lack of transparency that has created a cynicism and mistrust in the financial system — and it isn’t going away anytime soon. It’s not just the $1,000 garbage cans and the $4 billion in bonuses snuck in under the wire, just before the sale of Merrill Lynch to Bank of America. It’s that we found out about them only by chance. It was Bank of America’d anger toward former CEO John Thain that led it to disclose his $1.2 office renovations, and the aforementioned tip from a disgusted Citi insider that revealed the jet purchase. What if BoA wasn’t mad at Thain? Would they have told us about the renovation? What if Citi had found a way to hide that jet? What else is out there? What else don’t we know, and why isn’t anyone telling us?
It’s hardly surprising that a new survey found Americans’ trust in financial institutions and leaders eroding, with only 22 percent saying they trust the financial system, and just 12 percent saying they trust the stock market. It’s true the economy is in terrible shape, but it’s also likely that some sort of recovery will come, someday. What may never be the same is the way Americans feel toward Wall Street; toward banks; toward lenders; and toward the political leaders who made the decisions in this crisis. You can ease a credit crunch, eventually, and get money flowing again. It’s far more difficult to repair a broken trust.