geithners-fed-reserve-pic.thumbnail.jpgGeithner’s testimony before the Banking, Housing & Urban Affairs Committee went on for 3 1/2 hours and was remarkably substance free.

Notable moments:

When Bunning asked whether our largest banks were insolvent, Geithner said he couldn’t say anything about individual companies because of national economic security.  When Bunning asked what he thought the ultimate pricetag would be, he punted.

Akaka asked how Bush could pay $250 billion for assets that were now worth $176 billion.  Wanted to know how that happened and how we could keep it from happening again:  

GEITHNER:  By definition in a crisis like this, there are risks the market will not take.  So if you try to value those interventions at the level prevailing in a market reflecting this level of fear and uncertainty that there will seem  to be a gap.  But again, the responsibility we have is to design these programs so we’re getting the maximum possible benefit in  restoring flow of credit with the least potential risk.  But these programs will come with risks.

Martinez asked what the priorities would be. Geithner said that it was important to create jobs first, and that the numbers in the recovery act were going to be large, but even as we moved forward to restore confidence with forceful programs, we need to bring down the budget which means — wait for it — entitlement reform!  Medicare and social security need to be "sustainable."  Defense spending?  Never heard of it.

Tester wanted to know if there were banks that were "too big to fail."  Geithner didn’t want to use those words, but said that we need to stabilize the core of our financial system which meant essentially "yes."  Tester said if there were banks that were too big to fail, where was the accountability?  Geithner waffled.

 Menendez wanted to know about valuation of toxic assets, and that’s when Geithner started to get tripped up:

GEITHNER:  Enormously difficult to decide on a mechanism that will give us confidence that the values are fair and realistic, and that the government understands the risks we are assuming.  There are no perfect ways to do this.  One approach is for the government to decide.  One approach is for the government to use independent model based estimates for valuation.  We are concerned  neither of those two approaches would give us the level of comfort we need, so instead what we propose to do is design a fund that can have private capital come in along side government financing and use that as a way to help solve this valuation problem.  And we believe doing it that way will leave us with better protections against the risk in making these basic judgments indepenently on our own.

Okay, so the assets would be valued by the creation of a market.  But Mark Warner wanted to know, was he going to stress test the banks first, or create a market first?  Because you have to assign value before you can stress test.   Geithner said that they both needed to happen close together, not necessarily at the same time, but the stress testing had already started, and then devolved into gibberish…I couldn’t follow.  

Geithner said they would be putting all the contracts with the banks up on a website, and the banks would be required to report every month, so the public would be able to see what they were paying executives and how they were using the money.  Warner said they should do that with the recipients of the TARP I funds because the lack of transparency was hurting their credibility.  No commitment from Geithner.

After a couple of hours, Senators got tired of the vaguery (paraphrase):

DEMINT:   The market doesn’t like your plan.  Where are we going to get this money — print it or borrow it?

GEITHNER:   Good question. We need to lay out a path to bring our resources into balance….

DEMINT:  Some time today.

GEITHNER:  We’re going to borrow it.

DEMINT: Who’s going to borrow it?

GEITHNER: The American people and people around the world. 

Sherrod Brown wanted to know what would be done to keep jobs from being outsourced by companies receiving public funds.  Geithner said that they didn’t want to micromanage banks or impose restrictions that would cost them money. So — nothing.

Johanns wanted to know what they’d do if stress testing meant big banks were insolvent.  Geithner dodged — wouldn’t say.

VITTER:  I appreciate the efforts at consultation, however I think having a major announcement and a major committee hearing today with the complete lack of detail we have quite frankly was a big mistake.  And I think it’s a version of the American people hearing how cataclysmic the crisis is without no solution.

GEITHNER:  I came here to testify the same day that we laid out broad principles.  We’re not giving you the details so that when we give them they reflect the care and discipline the problem requires.  You’re right, it’s not detailed, but I understand your concerns and we’re not claiming we’re doing something else.

VITTER:  I’m not saying you rush something before it’s ready, I’m saying you don’t come and talk about something for four hours before it’s ready and you have the details.  

Corker echoed this and pretty much said he caused the stock market nosedive today by talking about a plan he didn’t have the details of.

 Shelby wanted a list of all the debt that the Fed had.  Geithner said  "I commit to working to provide as honest and candid picture as we can."  Good luck getting that list, Rich.

CORKER:  We’ve been here for 3 hours and 23 minutes and we have no idea how to solve this problem.

GEITHNER: I would not want to encourage you toward that view.

CORKER: I’ve got 3 hours and 23 minutes encouraging me toward that view.  We’ve heard guidelines and platitudes, but we have neard of comprehensive plan to deal with this plan.  That creates uncertainty.  

GEITHNER:  We laid out broad set of principles and new programs, and we told you, we’re going to consult with you.  

CORKER: I rest my case.

Dodd and Schumer sucked.  Brown, Tester and Merkeley stuck up for the consumer, but didn’t really go after Geithner.  Hugh summed it up in the comments:

Geithner shorter version: I am going to take a couple trillion dollars of your money and spend it although I don’t really have any idea about how I am going to spend it other than it is going to banks and hedge funds and I’ll make up the reasons later.

The Republicans did all the hard questioning, but it was reeeeally hard to take all the sanctimonious "fiscal conservatism" from the creeps who created this mess.  But if they hadn’t been there, nobody would have pressed Geithner at all.  

Jane Hamsher

Jane Hamsher

Jane is the founder of Firedoglake.com. Her work has also appeared on the Huffington Post, Alternet and The American Prospect. She’s the author of the best selling book Killer Instinct and has produced such films Natural Born Killers and Permanent Midnight. She lives in Washington DC.
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