Tim Geithner admits that he was/still is mostly guessing when contronted with financial crises

[brentspeak]

When making trillion-dollar decisions to bail-out Wall St., Geithner claims that facts and objective data either can't be had or can't be relied upon: better just to go ahead and blindly bail-out the Too Big To Fail institutions with taxpayer dollars.

http://www.huffingtonpost.com/2011/01/13/citigroup-was-on-the-verg_n_808721.html

Even so, the consensus to give Citigroup more taxpayer cash "appeared to be based as much on gut instinct and fear of the unknown as on objective criteria," according to the report. One FDIC official told SIGTARP that policy makers "made a judgment call" on the degree of Citigroup's importance to the entire fabric of the financial system.

More than three years later, such judgment calls (to bail out Citigroup) persist. Treasury Secretary Timothy Geithner, who effectively oversaw Citigroup as the then-president of the Federal Reserve Bank of New York, told SIGTARP during an interview last month that it's not possible to create effective, objective criteria for evaluating the risk a financial firm poses to the system.

"It depends too much on the state of the world at the time," Geithner said Dec. 21. "You won't be able to make a judgment about what's systemic and what's not until you know the nature of the shock." Geithner added that lenders would simply "migrate around" whatever objective criteria policy makers developed in advance.

Taxpayers may once again have to support failing financial firms based on gut instinct alone...

[Name removed]

1. Deleted message

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[vaberella]

2. I'm trying to get your point. EVERY Economist is HYPOTHESIZING---ie GUESSING

when they are dealing with anything pertaining to real life situations and the economy. One day they might think it's good---then when put to the test, it's a failure. Or another situation works just as well. I don't see your point and why you want support over it. I thought this was common knowledge. Economics 101 might be helpful for you. I have my MA in the subject and all we did was hypothesize that if we kept so and so constant then we could get so and so and by the implications and movement of so and so, then so and so could or might happen. In actuality, reality is not predictable nor are there any constants. Everything is bloody variable. And guessing is the best anyone can do---and it's part and parcel with being an economist. They are never certain.

[Hello_Kitty]

11. And economists have no code of ethics.

So not only can they make bad guesses but they can lie outright with impunity.

[emulatorloo]

3. Your thread title is misleading and doesn't represent what the article says.

[brentspeak]

4. Boilerplate meaningless response

Meant to distract from the issue presented for discussion. Yes or no: is the information posted in the OP incorrect? If it is, please detail why.

Meanwhile, try chewing on these:

http://www.bloomberg.com/news/2011-01-13/citigroup-45-billion-rescue-based-on-fear-of-the-unknown-barofsky-says.html">Citigroup Bailout Based on `Fear of the Unknown'

http://thehill.com/blogs/on-the-money/banking-financial-institutions/137877-tarp-watchdog-citigroup-bailout-based-on-gut-instinct-and-fear-and-could-be-repeated">TARP watchdog: Citigroup bailout based on 'gut instinct and fear'

[Name removed]

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[boppers]

8. "blindly bail out".... therefore, incorrect.

It was not done blindly.

[geek tragedy]

5. He must have failed to consult the textbook you wrote on the subject. nt

[quaker bill]

7. Predictions of the future are always estimates

All money is fiction, it only becomes real because we believe in it. The moment we stop believing in it, it becomes just as useful and valuable as any other sheet of paper. The job of the Fed and the Treasury is to keep the illusion in place, because without it all thinks grind to a very unfortunate halt.

You probably think our national debt is real too. How did the Fed buy up more than a trillion in toxic mortgages? With keystrokes and mouse clicks, they don't even bother to print the stuff anymore, its all 1s and 0s in the digital realm. They can do the same with the national debt, but this will take a bit longer, because too many mouse clicks at once can cause inflation....

BTW, we, the "taxpayers" actually made a "profit" on the bailout, given you buy the fiction of money in the first place.

[karynnj]

9. This is always the case when impacts can not be computed easily or modelled

The fact is that in 2008, the circumstances that Geithner and others were faced with different than anything that had happened before. Geitner is right when he says, "It depends too much on the state of the world at the time,". As a person making policy, he would need to look at the likely range of results from any action he took on the world's economy.

If an action, such as letting a major US bank fail still had a reasonable chance of causing many other US and international banks to similarly fail, then it is clear that he would need to act. You can ask that laws have strong punishments for CEOs and other high officials who lead their firm into this need, but the greater good would likely be to consider the health of the financial system.

The fact is that where you hated the TARP bailout, that money is rapidly being repaid with interest. Almost everyone is of the opinion that letting those banks fail would have been worse. You can also argue that we should have dealt with predatory loans earlier and we should have worked faster to keep money flowing to small businesses - even if the government, via the SBA, had to do it.

[Exilednight]

10. The fact is, the bailouts caused

a credit freeze. The money, as you claimed, never flowed to small business. Geithner made a bad calculation when he endorsed Obama's deal. While it is true that the money is being repaid, it's a complete an utter lie that the government is making money off the deal. If you want proof, just look at the national deficit. No money is being subtracted, we just keep spending more. Any money that could of been made off of the bailout has been offset by the tax cuts that were in Obama's original stimulus bill - which history has proven to be the worst type of stimulus.

But here's the bigger problem, no regulations have been put in place to prevent banks from growing to be too big to fail. No regulations have been put in place to prevent banks from using our deposits to buy high-risk equities and gambling with our money. Nothing has been done to prevent another meltdown.

[seabeckind]

12. The problem I have with the repayment is

that the repayment is being made using funds that they made on the difference in interest between what we gave them and what they charged.

In effect, if our treasury had loaned that same amount at that same interest rate to the recipient of the loan, we would be more ahead.

It's much like the student loan thing, no, it's exactly like the student loan thing. Thank god the gop is going to nip that in the bud and get our taxpayer money flowing back into those banks again. I hope the gap in their funding hasn't hurt them. Maybe we should pay a penalty or something </sarcasm>

I'm not an economist but I've bought used cars before.

Geithner was over his head long ago. But then he really doesn't work for us, does he?