08 Apr 2009 Washington Post & Far Left Team Examine Geithner
Writing on the National Center for Public Policy Research’s Free Enterpriser blog, Tom Borelli says the Washington Post learned a few interesting things when it and a left-wing group jointly examined the role Timothy Geithner played in magnifying the banking crisis.
An investigative story published in the Washington Post charges that Treasury Secretary Timothy Geithner played a significant role in creating the economic crisis.While in charge of the New York Federal Reserve, Geithner facilitated the trading of credit derivatives – exotic financial instruments – that magnified the banking crisis and he failed to adequately regulate the banks under his control.
Specifically, Geithner was aware that the banks had not properly assessed the risks – including those posed by credit derivates – from an economic down-turn and did not take strong measures to address these issues.
“Records and interviews show that Geithner and his colleagues did not employ some of the harsher tools at their disposal to bring the banks into line. From 2006 through the start of the credit crisis in the summer of 2007, they brought no formal enforcement actions against any large institution for substandard risk-management practices.”
Had Geithner exercised his regulatory power, it’s possible we could have averted significant portions of the current economic crisis. Nevertheless, Obama promoted Geithner to head the Treasury Department. Clearly, Geithner’s selection calls into question Obama’s judgment.
Interestingly, the Washington Post story was jointly written by Post reporter Robert O’Harrow, Jr., and Jeff Gerth, a former New York Times reporter now employed by the left-wing non-profit ProPublica. ProPublica was founded and is funded (to the tune of $10 million annually) and chaired by Herb Sandler, who, with his wife, Marion, is former CEO and owner of Golden West Financial and the World Savings S&L. The acquisition of these institutions, which specialized in adjustable-rate mortgages, by Wachovia in 2006 was cited as a key factor in the substantial losses suffered by that bank in 2008. While the Post acknowledged that its story was co-written with ProPublica, it did so referring to the organization as a “independent, non-profit newsroom that produces investigative journalism in the public interest.” The Post made no mention of the rather obvious conflict-of-interest ProPublica has on this particular subject matter.