New Kids on the Block

With all the recent economic whirlwinding, the Obama administration decided to invite some new faces to the party. Timothy Geithner replaced Henry Paulson as the Secretary of the Treasury, while Geithner's previous mentor Lawrence Summers sits as the Director of the White House' National Economic Council. And thus the student becomes the teacher.

If the supposed revival of Glass-Steagall has a chance of seeing the light of day, we are going to need some seriously bright minds behind our economic policies. So are Geithner and Summers the right choices for tackling our fiscal demise? Let's take a look.

Tim Geithner
During the 2006 tax year, the IRS discovered Geithner had failed to pay $35,000 in self-employment taxes for several years, even though he had acknowledged his obligation to do so, and had filed a request for, and received, a payment for half the taxes owed. But there's a cherry on top that's even funnier. As President of the Federal Reserve Bank of New York, Geithner annually completed an ethics statement noting any taxes due or unpaid, along with any other obligations.

Not convinced that he can run the US economy yet?

Under Geithner's direct endorsement, AIG received more that $170 billion in bailouts. AIG then provided $165 million in executive bonuses. Upon receiving this information, the Senate voted against legislation passed last March by the House of Representativs that would levy a 90% tax on the executive payments.

But, apparently, Geithner's corporate generosity has limits. In 2009, Geithner conspired alongside Ben Bernanke, Chairman of the United States Federal Reserve, in a successful attempt to block government provision of Lehman Brothers Holdings Inc. This resulted in their bankruptcy and is conceded as one of the major factors leading to our current economic state. Christopher Whalen of Institutional Risk Analytics offers his opinion in a statement he gave the NY Times in November 2008:

All of these ‘rescues’ are a disaster for the taxpayer, for the financial markets and also for the Federal Reserve System as an organization. Geithner, in our view, deserves retirement, not promotion.

Lawrence Summers
During the holiday season in 1991, Summers wrote a memo to his fellow World Bank employees. In the memo he encouraged the dumping of toxic waste in third world countries to increase profits.

In possibly the worst infraction of economic policy in our lifetimes, Lawrence Summers assisted in the deregulation of banking investment contracts. He argued that current restrictions on investments made by large financial institution are "overly regulated" and that banks can take it upon themselves to reduce fraud within their companies.

Excuse me? Did I hear that correctly? He thinks bank will regulate themselves? Here is Summers' testimony word-for-word.

Well, remember Geithner's old friend AIG? In an interview with Newsweek, a group of economists put it quite nicely when they stated that, "The lack of regulation that allowed A.I.G. to sell hundreds of billions of dollars in credit default swaps on mortgage-backed securities was a direct result of efforts by the Treasury."

Both Geithner and Summers teamed up in a scandal involving Chris Dodd, the Connecticut senator and Chairman of the Senate Banking Committee. Dodd, who was appointed to his position under the Bush administration and holds an extensive record of economic fraud, spearheaded a legislation in 2008 that would limit the amount of executive bonus payments allowed by financial institutions. Shortly after this announcement became public, Dodd was contacted by both Geithner and Summers and subsequently ammended the legislation to exclude the cap on executive pay. It was then resolved that Dodd, Summers, and Geithner were lobbied by AIG while ammending the pay cap. Dodd received over $220,000 in compensation from AIG employees after the controversy.

Sooooo
In essence, the Obama administration seems to think it's a good idea to head the economic front, which is responsible for re-stabilizing the US financial system, with the same people who brought about its demise in the first place. What. The. Hell. Is. Going. On?