Geithner warns of Future Intervention

Geithner warns of future interventionGovernment ‘may have to do exceptional things again,’ Treasury secretary saysBy Alistair Barr, MarketWatch SAN FRANCISCO (MarketWatch) — Treasury Secretary Timothy Geithner warned that the U.S. government may have to take control of major financial institutions again if there’s a crisis as big as the last one, according to a report released Thursday by a group overseeing the Troubled Asset Relief Program. “We may have to do exceptional things again if we face a shock that large,” Geithner told the Office of the Special Inspector General for TARP in December. SIGTARP, as the oversight group is known, spoke with Geithner during its investigation of the government bailout of Citigroup Inc. (NYSE:C)  . The group’s findings were released Thursday. SIGTARP commended Geithner for his candor, but the group also said the Treasury secretary’s comments highlight that TARP has left a legacy of “moral hazard associated with the continued existence of institutions that. remain ‘too big to fail.’”

“It also serves as a reminder that the ultimate cost of bailing out Citigroup and the other ‘too big to fail’ institutions will remain unknown until the next financial crisis occurs,” SIGTARP added in its report.

In other words, Geithner doesn’t get what is going on in the country and it is starting already in the states and municipalities.  Look at Illinois, my state of residence.  It bit the bullet and raised income taxes 66 percent.  This is just the start of a movement.  States with Republican governors will just reduce social services, that will create more back lash than the increase in taxes in the states run by Democrat governors.  The last election said to get rid of deficits and the legislator’s that agree to the next too-big to fail bailout will find they will be joining the “we don’t need giveaway politicians group” in the next election.

The last round of bailouts gave us a period when Corporations laid off employees and built up a 2 trillion dollar war chest on the back of the unemployed.  The Fed has given away free money during this whole period, not to help the economy, but to give the banks free money.  Any monkey could look good if he borrowed at zero and loaned it out at 6 percent, ie Jamie Dimon.  If the government and fed really wanted to solve the problem the fed should loan at zero to anyone who walks in the door.  It could allow individuals to value their assets at 25 to 50 percent above market just as the banks do.  Then they could loan individuals the money to get the economy restarted.  Next they could apply emergency deficit reduction measures, applying strict compensation levels to corporations and taxing 50 percent of retained earnings.  If the corporations don’t want to invest that 2 trillion dollars, just tax away a trillion.  Trickle down and Greenspan were a joke.  Ok, I feel better.

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