Naked Capitalism Link of the Day

Today's link, The Banking Emperor Has No Clothes, by Simon Johnson at the NYT:

In a major speech earlier this week to the American Bankers Association’s international monetary conference, Treasury Secretary Timothy F. Geithner laid out his view of what went wrong in the financial sector before 2008, how the crisis was handled 2008-10 and what is needed to reform the system. As chairman of the Financial Stability Oversight Council and the only senior member of President Obama’s original economic team remaining in place, Mr. Geithner’s influence with regard to the banking system is second to none.

Unfortunately, Mr. Geithner’s speech contained three major mistakes: his history is completely wrong, his logic is deeply flawed, and his interpretation of the Dodd-Frank reforms does not mesh with the legal facts regarding how the failure of a global megabank could be handled. Together, these mistakes suggest that one of our most powerful policy makers is headed very much in the wrong direction.
On history, Mr. Geithner places significant blame for the pre-2008 excesses on Britain and other countries that pursued light-touch regulation. This is reasonable – though surely he is aware that the United States has led the way in lightening the touch of regulation, at least since 1980. A senior British official retorted immediately, “Clearly he wasn’t referring to derivatives regulation, because as far as I can recollect, there wasn’t any in America at the time.”

In the midst of the meltdown, when Obama appointed Geithner, I wasn't sure what to make of the move.  The stock market rallied when he was announced, which was extremely rare at the time, and it was clear that Geithner had been a major player during the roller coaster ride in September, October and November.  I didn't realize how big of a bank whore he was.  This was by far the worst appointment Obama made, with maybe the possible exception of Larry Summers.  Paul Volker would have been 10 times better in my opinion, as he would have taken a big stick to the big banks, who really need busted up.  When placed in contrast to Obama's decision to retain Robert Gates at Defense, the appointment of Geithner is dark, dark night to Gates' brilliant sunshine.  Geithner really needs to move on to some highly-paid Wall Street job, where he can steal from the outside instead of helping banks steal from the inside.  His decision to pay Goldman Sachs in full for their bets on AIG was indefensible, and in a well-run society would get him fired from any post.