On Tuesday revelations on the depth of Treasury Secretary Timothy Geithner's complicity in disguising the instability of collapsed investment services titan Lehman Brothers were exposed in a hearing held by the House Financial Services Committee. The hearing had been called for by Congresswoman Mary Jo Kilroy as part of the Ohio Democratic Party's strategy to place blame for Lehman Brothers's collapse on Republican gubernatorial candidate and former Columbus-based Lehman Brothers employee John Kasich. Just as his name was not mentioned in the bankruptcy examiner's report released last month, Mr. Kasich's name was not mentioned in the testimonies delivered before the committee. It would seem that living and working 500 miles away from Lehman Brothers headquarters, Mr. Kasich truly was out of the loop on the questionable accounting practices.
From Congresswoman Kilroy's perspective the hearing may have been a total failure as it neglected to prove once and for all that John Kasich single-handedly--and with malice in his black heart--caused the global financial crisis. However, the hearing provided a great public service by exposing the systemic organizational failures of the Federal Reserve Bank of New York (FRBNY) as it existed under the leadership of then-President Timothy Geithner. For once some good has come out of Mary Jo Kilroy's addiction to the lowest brand of negative, deceptive politics.
In his testimony, William K. Black, a distinguished bank regulator and professor of economics and law, found President Geithner and his FRBNY team "knew that Lehman was engaged in fraud" and that Geithner's failure to take commensurate action constituted "an egregious violation of the public trust." According to Black, "The FRBNY, led by President Geithner, had a clear statutory mission -- promote the safety and soundness of the banking system and compliance with the law -- stood by while Lehman deceived the public through a scheme that FRBNY officials likened to a “three card monte routine.” Black went on, "the regulatory perpetrators [Geithner and his team] must be held accountable."
How awkward for Mary Jo! She was looking to smear John Kasich and she ended up exposing Obama's Treasury Secretary as asleep at the wheel. I sure hope this isn't going to cause a rift that would stop White House Chief of Staff Rahm Emanuel from channeling more of his dirty housing market collapse money to her!
Not what she had planned
(Photo available at http://www.c-spanvideo.org/marykilroy#)
Anton Valukas, the Lehman Brothers bankruptcy examiner, describes in his report how the FRBNY administered three consecutively less rigorous stress tests to evaluate Lehman's ability to withstand a run or a potential run on the bank. After Lehman failed all three tests, the FRBNY allowed Lehman to design its own fourth stress test which the firm then passed. Valukas concluded, "It does not appear that any agency required any action of Lehman in response to the results of the stress testing."
So, apparently, now-Treasury Secretary of the United States Timothy Geithner's mantra is "If at first you don't succeed, keep lowering the bar until you do."
How confidence inspiring.
I'll bet Mary Jo Kilroy, Nancy Pelosi, and the rest of the congressional chupacabra crew wish the American people would adopt that mantra too--it's the only way their job-killing, deficit-deepening policies could ever get a passing grade.
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