Bank regulators get Geithner’s goat..

.. to an extent, that he resorted to expletives and obscenities out of frustration. What happened? The Obama Administration tries to install  new, tougher banking regulation and finds itself in a turf war with the existing regulatory agencies.

WASHINGTON (Reuters) – Top U.S. bank regulators will speak out on Tuesday against some key elements of the Obama administration’s plan to reshape financial regulation, saying parts of it were unneeded or could be disruptive.

The officials’ defiance, in prepared congressional testimony obtained by Reuters, came despite a warning given to them on Friday by Treasury Secretary Timothy Geithner. (read story)

We have all seen the prowess of the regulators during the last crisis and even today now that investment banks have reopened the global casino. If anybody needs a reminder why banks need to be regulated, there is always Andrew Cuomo’s report on compensation in banking.

Thus, when the banks did well, their employees were paid well. When the banks did poorly, their employees were paid well. And when the banks did very poorly, they were bailed out by taxpayers and their employees were still paid well. Bonuses and overall compensation did not vary significantly as profits diminished. (read report)

This is not limited to the US banking sytem, it is the same over here and that really gets my goat.

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The Most Powerful Financial Institution You’ve Never Heard Of – The New York Fed

This is an insightful article done by Eliot Spitzer – about who actually runs the New York Fed, what do they do, and whom does this person report to?  His article titled Fed Dread is in Slate and here are a few interesting excerpts:

Just as the millions in AIG bonuses obscured the much more significant issue of the $70 billion-plus in conduit payments authorized by the N.Y. Fed to AIG’s counterparties, the small issue of Friedman’s stock purchase raises very serious issues about the competence and composition of the Federal Reserve of New York, which is the most powerful financial institution most Americans know nothing about.

*snip*

Given the power of the N.Y. Fed, it is time to ask some very hard questions about its recent performance. The first question to ask is: Who is the New York Fed? Who exactly has been running the show? Yes, we all know that Tim Geithner was the president and CEO of the N.Y. Fed from 2003 until his ascension as treasury secretary. But who chose him for that position, and to whom did he report? The N.Y. Fed president reports to, and is chosen by, the Fed board of directors.

So who selected Geithner back in 2003? Well, the Fed board created a select committee to pick the CEO. This committee included none other than Hank Greenberg, then the chairman of AIG; John Whitehead, a former chairman of Goldman Sachs; Walter Shipley, a former chairman of Chase Manhattan Bank, now JPMorgan Chase; and Pete Peterson, a former chairman of Lehman Bros. It was not a group of typical depositors worried about the security of their savings accounts but rather one whose interest was in preserving a capital structure and way of doing business that cried out for—but did not receive—harsh examination from the N.Y. Fed.