Uh oh! How Citigroup Unraveled Under Geithner's Watch

[avaistheone1]

By Jeff Gerth, ProPublica
Posted on January 15, 2009, Printed on January 16, 2009
http://www.alternet.org/story/119871/

This story was co-published with Politico.


As president of the New York Federal Reserve Bank, Timothy Geithner often preached that gargantuan financial firms like Citigroup should be held to the highest regulatory standards to make sure they couldn't take on too much risk.

But when it came to supervising Citigroup in recent years, the record shows that the New York Fed eased the reins as the company blew billions on subprime mortgages and other risky deals that ultimately forced the biggest bank rescue in U.S. history.

Now, the 47-year-old Geithner heads to the Senate in coming days as President-elect Barack Obama's nominee for Treasury secretary. He's won accolades for his expertise and work ethic, but there's been little attention to his record as a Fed watchdog.

Geithner's tenure at the New York Fed – which bore the major responsibility for supervising Citigroup – covers a tumultuous span in which the sprawling conglomerate spiraled from the country's biggest banking company to one of its largest welfare cases.

Now under much closer government supervision – after a $52 billion rescue – Citigroup appears headed for dismantling amid a leadership shuffle that included last week's announced departure of former Treasury Secretary Robert Rubin as senior counselor and director.

Should the New York Fed have seen trouble coming and prevented it? As Citigroup took on risk and its capital deteriorated, what oversight did Geithner exercise? And what contacts, if any, did Geithner have about regulatory matters with Citigroup officials, including Rubin, under whom Geithner worked at Treasury in the 1990s?

All are issues that may come up when Geithner appears before members of the Senate Finance Committee at his confirmation hearing, which has been put off until the day after Tuesday’s inauguration amid questions about Geithner’s taxes and past employment of a housekeeper.

Because the Fed conducts much of its work in secret, details about Geithner's role in the Citigroup debacle remain hidden. But a review of publicly available records shows that the New York Fed, in a key period, relaxed oversight as Citigroup went on a risky spree.

CONTINUED
http://www.alternet.org/workplace/119871/how_citigroup_unraveled_under_geithner%27s_watch/?page=entire


I don't think Geithner is going to make it. I think this article is quite an indictment that he is exactly the wrong person to lead Treasury, not to mention his tax travails.

[SuperTrouper]

1. I think that you are correct. I think that Geithner is Obama's Zoé Baird

[Thrill]

2. Always blame somebody besides the execs at the failed banks

[avaistheone1]

3. Let's not blame the regulators for not regulating.

Sure. Now repeat after me: "War is peace, freedom is slavery, ignorance is strength..."

:crazy:

[Runcible Spoon]

4. It's not an either-or thing

I'm sure there was a lot of wink-nudging going on between execs and the regulators. A failure this gargantuan probably has more than one chef in the kitchen.

[avaistheone1]

5. Agreed, and that would make Geithner head supervising chef in terms of regulations.

[Grateful for Hope]

6. From what I heard on NPR on my way home from work

Citigroup is proposing splitting into two separate groups.

I wonder. Seems as if these TARP bailouts are not working.

[TheKentuckian]

7. Citi splitting up is most likely an accidental success

it is horrible for our country to have monoliths of the scope we allow today. To big to fail almost always means to big to continue to exist.

[avaistheone1]

8. Too big to fail is a myth like the trickle down theory.

Banks and financial institutions are not too big to fail if they only can only be held together by robbing hardworking taxpayers to prop up these financial casinos.

So the bigger they are the more the poor taxpayer is on the hook until the people of this country are totally bankrupted. Pretty stupid. imo $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

[TheKentuckian]

9. I think we agree but are saying the same thing a different way

If "too big to fail" exists then they are too big to continue and should be broken up.