Geithner Asks Congress to Raise Debt Limit

Today is August 11th. I just double checked. It is not April 1st. Nor does it seem like Geithner issued the statements below for The Onion. He appears to be serious … seriously, Geithner Asks Congress to Increase Federal Debt Limit:

U.S. Treasury Secretary Timothy Geithner asked Congress to increase the $12.1 trillion debt limit on Friday, saying it is “critically important” that they act in the next two months.

Mr. Geithner, in a letter to U.S. lawmakers, said that the Treasury projects that the current debt limit could be reached as early mid-October. Increasing the limit is important to instilling confidence in global investors, Mr. Geithner said.

The Treasury didn’t request a specific increase in the letter.

It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations,” Mr. Geithner said in a letter to lawmakers.

Mr. Geithner said the that it is “clearly a moment in our history” that requires support from both Democrats and Republicans for the increase.

Congress has never failed to raise the debt limit when necessary,” Mr. Geithner said.

The non-partisan Congressional Budget Office said Thursday the federal government’s budget deficit reached $1.3 trillion through the first ten months of fiscal 2009, on track to reach a record high of $1.8 trillion for the 12-month period.

A statement like this could be out of some of the more bizarre sections of Atlas Shrugged, at the point where nobody really cares about anything or anybody anymore.

Is this for real? When I ask banks to loan me more money, and that it is of critical importance that they do so, will this instill confidence in other investors of mine?

How is it more likely that I will meet my obligations if I take on more … obligations?

Hasn’t Congress’s biggest failure been its lack of fiscal discipline, its rampant and neverending spending, its inability to pay down some of its debt? How then can we even for one second consider calling it a failure to not add to this public debt?

How badly has brain damage progressed in Tim Geithner’s head? How gullible and stupid does he think the people are? This guy needs to step down and needs to do so quickly. Listening to his nonsense is painful and insulting.

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Geithner Preps Nation for Higher Taxes

Geithner, in a recent interview, when confronted with the question, did not rule out new taxes:

STEPHANOPOULOS: I know you believe that passing health care is central for getting the deficit under control. But independent analysts say even with that you are going to need to find new government revenues. The former deputy Treasury Secretary Roger Altman said it is no longer a matter of whether tax revenues should increase but how. Is he right?

GEITHNER: George it is absolutely right and very important for everyone to understand we will not get this economy back on track, recovery will not be strong enough to sustain unless we can convince the American people that we’re going to have the will to bring these deficits down once recovery is firmly established.

The administration will break lots and lots of promises to middle class and poor people, and they are trying slowly prep them for aggravated looting, aka taxation.

Just recently the AP published Federal tax revenues plummeting:

The recession is starving the government of tax revenue, just as the president and Congress are piling a major expansion of health care and other programs on the nation’s plate and struggling to find money to pay the tab.

The numbers could hardly be more stark: Tax receipts are on pace to drop 18 percent this year, the biggest single-year decline since the Great Depression, while the federal deficit balloons to a record $1.8 trillion.

Other figures in an Associated Press analysis underscore the recession’s impact: Individual income tax receipts are down 22 percent from a year ago. Corporate income taxes are down 57 percent. Social Security tax receipts could drop for only the second time since 1940, and Medicare taxes are on pace to drop for only the third time ever.

The last time the government’s revenues were this bleak, the year was 1932 in the midst of the Depression.

“Our tax system is already inadequate to support the promises our government has made,” said Eugene Steuerle, a former Treasury Department official in the Reagan administration who is now vice president of the Peter G. Peterson Foundation.

“This just adds to the problem.”

The Coming US Tax Receipt Shortfall is no longer coming. It is here and now.

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Tim Geithner Refuses to Answer Simple Question on Derivatives

The simple answer Tim Geithner trying to avoid here: “Yes, taxpayer money will be used to bailout worthless derivatives issued today.”

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Geithner Admits – Austrian Economists Were Right All Along

Tim Geithner confirms what Austrian School economists have been blowing the whistle about all along:

Mr. Geithner: “But I would say there were three types of broad errors of policy and policy both here and around the world. One was that monetary policy around the world was too loose too long. And that created this just huge boom in asset prices, money chasing risk. People trying to get a higher return. That was just overwhelmingly powerful.”

Mr. Rose: “It was too easy.”

Mr. Geithner: “It was too easy, yes. In some ways less so here in the United States, but it was true globally. Real interest rates were very low for a long period of time.”

Mr. Rose: “Now, that’s an observation. The mistake was that monetary policy was not by the Fed, was not . . .”

Mr. Geithner: “Globally is what matters.”

Mr. Rose: “By central bankers around the world.”

Mr. Geithner: “Remember as the Fed started — the Fed started tightening earlier, but our long rates in the United States started to come down — even were coming down even as the Fed was tightening over that period of time, and partly because monetary policy around the world was too loose, and that kind of overwhelmed the efforts of the Fed to initially tighten. Now, but you know, we all bear a responsibility for that. I’m not trying to put it on the world.”

And I fully concur with this conclusion that follows in this WSJ article:

The Washington crowd has tried to place all of the blame for the panic on bankers, the better to absolve themselves. But as Mr. Geithner notes, Fed policy flooded the world with dollars that created a boom in asset prices and inspired the credit mania. Bankers made mistakes, but in part they were responding rationally to the subsidy for credit created by central bankers.

Another former Treasury official just confirmed the same:

The Fed helped to trigger the current financial crisis by keeping rates too low for too long, Taylor said.

“Low interest rates led to the acceleration of the housing boom,” he said. “The boom then resulted in the bust, with delinquencies, foreclosures and toxic assets on the balance sheet of financial institutions in the United States and other countries.”

Taylor said that though policy makers were well intended, they were mistaken in trying to “fine-tune” the economy after about a quarter of a century during which long and deep recessions had been avoided.

For more details see Credit Expansion Policy … always a good read for anyone who wants to understand the root cause of the financial crisis. Back in October 07 I concluded that article with:

As long as the central banks keep pursuing this policy, there is no need to be surprised when the next credit crunch occurs. Neither is there any need to be surprised about the fact that all countermeasures taken by the government will turn out to be utter failures that will accomplish nothing but aggravate the crisis. For if the cause of the problem has been too much government intervention, then more government intervention will only add to it.

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Geithnerish Translated into English

In case people are still trying to make sense of  Tim Geithner’s statements, here an attempt to provide some help – another day of superficial answers to superficial questions:

Most U.S. banks have enough capital to keep lending but a pile of bad debts is fostering doubts about their health and slowing a recovery, U.S. Treasury Secretary Timothy Geithner said on Tuesday.

English: “The most relevant banks have absolutely no capital left but we will try to help them obscure their true numbers for as long as we can. By ‘most’ banks I am referring to the banks by number, not by relevance. This way I can make you all think that the banking industry is ‘mostly’ fine.”

Testifying before the Congressional Oversight Panel, which monitors the Treasury’s efforts to bail out troubled banks, he said toxic assets were “congesting” the U.S. financial system and hindering efforts to get credit flowing normally.

“Uncertainty about the value of legacy assets is constraining the ability of financial institutions to raise private capital,” Geithner said, adding that he hoped a public-private investment program will improve the ability to put a price on troubled mortgage and other assets.

English: “I ‘hope’ that no one will figure out that these toxic assets are worth nothing and I am confident that we will somehow be able to bail out their owners by making the taxpayer guarantee 97% of all assets acquired in the PPIP.”

Earlier, the special inspector general for the government’s bailout effort said the toxic-asset plan offered opportunities for fraud and abuse and warned it should be bolstered by tough conflict-of-interest rules.

English: The toxic asset plan WILL be abused and fraud will be rampant. We intend to act surprised once we find out.

Neil Barofsky also said subsidies for the public-private partnerships to buy assets could expose taxpayers to higher losses without matching increases in the potential for profit. He called for tough screening of investors as well as forced disclosure of ownership stakes and any dealings by the funds.

English: The taxpayer is cooked. He will lose billions, once again.

The government has injected hundreds of billions of dollars into banks to help them weather the damage from bad mortgage loans and is running stress tests on 19 of the largest banks to see whether they are prepared to deal with a further downturn.

English: The banks are getting a free ride. We intend to do everything to shield them from the real stress test, the market, no matter how much it will cost the taxpayer.

In a letter to panel chairman Elizabeth Warren, Geithner said the Treasury still has about $134.5 billion available out of an originally approved $700 billion for bolstering banks’ capital and said he wouldn’t need to ask Congress for more.

English: Geithner will ask Congress for more. Either the Treasury will do it directly, or the underfunded FDIC will collapse under the obligations of Geithner’s Public Private Investment Program and ask Congress for more funding.

“Currently, the vast majority of banks have more capital than they need to be considered well capitalized by their regulators,” Geithner said, a comment that gave stocks a lift in morning trading.

English: “Currently, by market standards the banks absolutely don’t have sufficient capital left. But we don’t care what the market says, we let the “regulators” decide. In doing so, we minimize true regulation but maintain the appearance of it.”

But he conceded there were persistent worries about the health of the banking system and said that was impeding a broader economic recovery.

“Concerns about economic conditions — combined with the destabilizing impact of distressed ‘legacy assets’ — have created an environment under which uncertainty about the health of individual banks has sharply reduced lending across the financial system,” he said.

If the stress tests — parts of which are expected to be made public next month — show some banks need to raise more capital, then they will have options for doing so.

“Those banks that need more capital will have an opportunity to raise that capital from private sources or request capital from the Treasury in the form of convertible preferred stock,” Geithner said.

English: “No matter how lousy the banks, no matter how useless, they will get money from the taxpayer, even if private investors don’t want to touch them with a 10 foot pole.”

Some of the biggest banks have said they want to quickly repay money that they received under the government’s Troubled Asset Relief Program, or TARP, in part to avoid constraints on pay set out as a condition for getting the money.


Geithner said if regulators certify that a bank would be sound without government help, the Treasury would gladly take the money back.

“It helps to underscore the basic point that the institutions of our financial system are in very different circumstances,” Geithner said.

But he hedged on whether he thought it would be good for the banking system if some banks returned the TARP money early, and he specified that regulators, not he, would decide whether to take bailout money back.

English: “Banks are in a Tarp Trap. We’ll let them out at our whim. I prefer to alleviate myself of any responsibility by shifting it to the regulators, whoever they may be.”

“My basic obligation and our responsibility is to make sure that system as a whole … has the ability to provide the credit that recovery requires,” Geithner said, “So we need to make a careful judgment about what policies are going to best promote that objective.”

English: “My basic responsibility is to do everything I can to force lending again, no matter how destructive credit has been to our economy, no matter how broke we are, and no matter how sick and tired of debt individuals are.”

Some analysts question whether letting some banks return the TARP money would add to investors’ and borrowers’ doubts about dealing with banks that still need government help, potentially making them more vulnerable to failure.

In response to questions, Geithner said it will be important for people to see what stress tests on major banks show, though he did not shed any further light on how extensive the publicly issued comments on banks’ health will be.

Transparency is vital, he said, adding “Without that, they are going to live with a deeper cloud of uncertainty over their financial health than they need to.”

English: “Transparency is terrible. With it, we would remove the cloud of uncertainty that currently covers up the truth about how this fractional reserve banking system and its credit expansion has brought about our demise.”

Geithner said the scope of the current crisis is unprecedented, so the government has no guide to follow in its efforts to ease the situation. But he insisted there were some signs of progress.

“Indicators on interbank lending, corporate issuance and credit spreads generally suggest improvements in confidence in the stability of the system and some thawing in credit markets,” he said.

English: “I have absolutely no clue what is going on. I will cover it up with platitutes since none of you seem to have a problem with it.”

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