Posted by: garispang | August 10, 2009

Given the Reputed Strong Earnings of Goldman and Other US Financial Firms, Why Won’t Secretary Geithner Commit to No More Bailouts?

Below is a partial transcript of the above video:

Congressman Brad Sherman: “Today, derivatives are being sold. And the buyers of the derivatives are looking at their counterparty and they’re saying, ‘well there may not be enough capital there’. But one additional source of capital – is there maybe more bailout?’ Can you correct that misconception and make a clear statement now that derivatives that are sold today are not going to be the subject of bailouts for either the issuer or the purchaser?”

US Treasury Secretary Timothy Geithner, in response, uses a common technique called block and bridge in which he provides an answer that has nothing to do with Sherman’s question. Sherman, clearly annoyed by Geithner’s clever avoidance of his question, responds:

“Mr. Secretary, I’m not asking for philosophy here…I’m asking a very simple statement. Is it at least theoretically possible that a derivative issued today will be subject to a bailout tomorrow.”

Geithner, not once, but twice more, uses block and bridge techniques to continue to avoid Sherman’s question.

Sherman replies: “Mr. Secretary, I can understand while you prefer to answer somebody else’s question…I want a yes or no answer.”

Giethner, backed into a corner, incredulously states, “No I’m not going to answer that way because what you’re asking me to do is to give an irresponsible answer…”

Thus, US Treasury Secretary Timothy Geithner essentially argues that he believes it is irresponsible of him to guarantee that US banks will not receive more US taxpayer money to bail them out if they choose to sell the same junk, worthless derivative products that they sold by the billions to unsuspecting consumers in the past. This, despite supposed record earnings that will be released by Goldman Sachs today and rumblings of record bonuses that will be paid to Goldman Sachs employees, essentially made possible with US taxpayer money. This, despite AIG paying bonuses of more than $1 million to each of 73 employees just several months ago, bonuses that were essentially funded again with US taxpayer money.

In the next video, Paul Craig Roberts, former Assistant Secretary of the Treasury under President Reagan, sheds some light regarding how US Secretary of the Treasury Timothy Geithner categorizes actions as irresponsible versus responsible:

At 2:49 in the above video, Max Keiser asks Mr. Roberts, “Does the US Treasury Secretary work for the people or does he work for the banking system on Wall Street?”

Paul Craig Roberts: “He works for Goldman Sachs.”

Though I believe Mr. Roberts’s reply is incomplete because Goldman Sachs is only one of the few entities and families that Timothy Geithner works for. In the end, I believe that any US bank that reports strong earnings this earnings season (including Goldman Sachs) will be taking advantage of the numerous changes in accounting rules and regulations and the capital infusions granted them via TARP (US taxpayer) money to creatively manufacture “surprise” earnings so they may pay themselves large bonuses despite the lack of any fundamental strength. So in the end, it would not surprise me one bit if the big US banks needed another round of bailout money and Mr. Geithner seeks that money from the pockets of US taxpayers.



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