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Posted by on Mar 12, 2010 in Economy | 13 comments

‘NY Fed Under Geithner Implicated in Lehman Accounting Fraud’

Yves Smith calls for his resignation. I have little to add other than that Bill Black, a leading regulator in resolving the S&L crisis has long claimed that the financial crisis was not merely a result of bad decisions, but in large part due to overt fraud that was perpetuated by the largest financial institutions and blessed (or at least given a blind eye) by the government. If this turns into anything, it gives credence to that assertion.

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  • DLS

    Who should replace him? Krugman? Stiglitz?

    I’m no fan of their slant, but either would be OK.

    • mikkel

      Well Stiglitz is tied for my favorite economist ever, partially because he is one of the few that has done any work on optimal resource utilization. My primary concern with him is that while I agree with his vision completely in theory, I believe government is too broken at the moment to implement it. I’m not a fan of Krugman because he tends to be too much into equation la la land.

      I personally am less concerned with treasury taking a role in fiscal policies in the near term and focus on financial. I think Elizabeth Warren would be the best pick honestly, or Simon Johnson another great pick. And in my fantasy world we would have a long term independent panel similar to the CBO that would study infrastructural investment and longterm issues that Stiglitz would be head of.

      • DLS

        Mikkel,

        “I think Elizabeth Warren would be the best pick honestly”

  • DLS

    “I think Elizabeth Warren would be the best pick honestly”

    Apparently the posting got corrupted — I supplied the link to her appearance on Charlie Rose, which really impressed me. She’s Cabinet level stuff. Yes, I too thought she could replace Geithner to lead Treasury, though I view her as a master regulator, so that means in my fantasy improved-lefty scenario she would be leading Commerce.

    Here she is on Rose (trying again):

    http://www.charlierose.com/view/interview/10292

    “a long term independent panel similar to the CBO that would study infrastructural investment and longterm issues that Stiglitz would be head of”

    I highly recommend the following book. I should go get my copy out of the truck (ready for me to have on hand for reading tomorrow evening after Rose) and list the contents here … it is written by the master architect of the New Deal (the perfect armchair critic of the Great Society) who wrote this, his magnum opus, on constitutional reform and complete revision of the government of this country. Among the chapters and topics he addressed was the need for assessment and guidance and planning (he was an advocate of planning as well as direction and control from Washington of the economy and natural resources and the economy and industrial production and employment, elections, regulation, everything).

    http://www.amazon.com/review/R1H74CBW0TE8Y

    http://www.amazon.com/emerging-Constitution-Rexford-G-Tugwell/dp/0061282251

    Don’t be misled by the review on that page, or if you note that his model for a new constitution is on truly far-right and often wacky Web sites and in far-right conspiracism books. The guy was legit and knows and loves government more than anybody, believe me. Think of today’s equivalent of the world view in New York City intellectual circles in the early to mid Sixties, of the prospects for government and our nation. This book argues for that equivalent, not merely constitutional reform and a model for its replacement.

    This is something like the liberal’s Bible for getting the nation back on a mainstream liberal government-centralization and “progress” track since the late 1960s. Regulation, elections, planning are made co-equal branches of government with a (revised) Congress and Presidency and re-examined judiciary…

    It’s the kind of government conducive to massive infrastructure planning. (6- and 12-year plans)

    It’s Brookings Institution and the Democratic Party on steroids…

    • mikkel

      This is definitely a book I have to check out. Honestly, I don’t believe it should be a permanent branch of government though, just a transitory apparatus for getting us on a footing to tackle health care, energy and transportation deficiencies. Once the long term fiscal state of things is on the right track then it would be disbanded. Haha I realize that is a good joke.

      • ProfElwood

        “Nothing is so permanent as a temporary government program.” — Milton Friedman

      • DLS

        “a book I have to check out”

        It’s really a badly overlooked piece of work.  And in your case, as he describes the function of government, revising what each part of it would or should do, there’s that systems viewpoint that’s a favorite of yours that comes into play.

        He originally wrote a shorter book about the new constitution and government with a short introduction or monograph, the the constitution itself (several pages), then a question-and-answer section explaining much of it.  That little book (I have it, too) is maybe 100 pages; this one is 600.

        (642 counting the index and not counting a 37-page introduction)

        Part One  The Reasoning (Or Part of It)

        1. General Criteria for Constitutionmaking
        2. Criteria Further Considered
        3. Parts and the Whole
        4. The Separation of Powers
        5. The Doctrine of Necessity
        6. The Rule of Self-Restraint

        Part Two  The Structure

        7. The Electoral Process
        8. Assessment and Guidance
        9. The Presidency
        10. The Legislature
        11. The Judiciary
        12. Regulation
        13. The Emergent Situation: A Summary
        14. A Proposed Constitutional Model for the Newstates of America

  • shannonlee

    It will be interesting to see if MSM runs with it…and if they do…will Obama fire him?

  • CStanley

    Once the long term fiscal state of things is on the right track then it would be disbanded. Haha I realize that is a good joke.

    LOL…you mentioned that I made you laugh the other day and now you’ve returned the favor.

    Re: Elizabeth Warren…I’m really impressed by her too. I have no idea if she knows economic theory well enough, and more than likely her ideology is farther left than mine…but my impression is that she is extremely trustworthy and that in itself is a qualification in such short supply that it should be rewarded whenever possible.

  • DLS

    “will Obama fire him”

    I still wonder if the time for his departure is after the November elections (like Rumsfeld after 2006).

    The earlier standard for which I believed he would be kept or have to go would be if the economy improved, in light of whatever we could wish or expect Treasury to be doing to improve the economy (as opposed to the financial condition of some favored banks).

    This or some other related scandal might cause an early departure, though.

    Now what we need to do is to pay close attention, because this Obama administration never admits they made a mistake or things didn’t work out as hoped — they just quietly get rid of people during a lull or when something else is causing a distraction, as though that way everyone can pretend they didn’t notice anything, that they can continue to pretend that everything’s fine, nothing is wrong. (The most recent example was the late departure of Desiree Rogers when other things were happening in the news.)

  • “this Obama administration never admits they made a mistake”

    yeah, I kind of miss all of Bush’s mea culpas….

  • DLS

    “just a transitory apparatus for getting us on a footing to tackle health care, energy and transportation deficiencies”

    You know better than to say “temporary.” “Transitory,” that’s it — infant industries and concepts that technically never leave the cradle.

    Well, I hope they learn from this, for example (see below). I fear that aside from deliberately enriching eco-barons, our play-pen crowd will do not better, but worse, in the next months and years — and as for people like them forming that “transitory” group…

    http://www.nytimes.com/2010/03/09/business/energy-environment/09solar.html

  • DLS

    Mikkel — if you’re still out there on this thread — my Bootle book order arrived and the book is worthwhile. It was intentionally written as #3 in a trilogy with his previous two well-known books. The central part has a very good layperson-aimed description of basic economics and a very good critique of the unfettered free market.

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