Saturday, January 19, 2013

HOT Geithner Accused of Providing Inside Information to Banks about Fed Interest Rate Moves

From Reuters (via HuffPo):
In the summer of 2007, as storm clouds gathered over the world's financial system, then-New York Federal Reserve President Timothy Geithner allegedly informed the Bank of America and other banks about the possibility the U.S. central bank would lower one of its critical interest rates, according to a senior Fed official.

Jeffrey Lacker, the head of the Richmond Fed, originally raised the allegation during a Fed conference call in August 2007, and he stuck to his 5-year-old claim against the current U.S. treasury secretary in a statement provided to Reuters on Friday.

"From conversations I had prior to the video conference call on August 16, 2007, I was aware of discussions among a few large banks about borrowing from their discount windows to support the asset backed commercial paper market," Lacker said in the statement. "My understanding was that (New York Fed) President Geithner had discussed a reduction in the discount rate with these banks in connection with these initiatives."

According to transcripts of the call released by the Fed on Friday, Geithner at the time denied that banks knew the Fed was considering cutting the discount rate. The Fed regularly releases transcripts of its policy meetings with a five-year lag.

"We don't have any comment beyond the transcript," said Treasury spokesman Anthony Coley. The Treasury declined to make Geithner available to comment.

Information about any planned interest rate move by the Fed is among the most sensitive as it can have a huge impact on a range of financial markets worldwide.[...]In his statement to Reuters, Lacker did not say which banks may have been privy to the information, although in the transcript of the Aug. 16, 2007, call he said he had discussed the matter with Bank of America's then CEO, Ken Lewis, earlier that day. The Richmond Fed supervises the Charlotte, North Carolina-based bank

If Geithner was tipping off B of A, you can be sure Citi and, possibly Goldman Sachs, were also tipped off. He's much closer to them. I believe "code talk" goes on between banksters and government on a regular basis, but it is rare for news of such talks to come to the surface. This Lacker whistleblowing is fascinating. Though, unfortunately, I think Turbo Timmy is too protected for this to go anywhere.


  1. There appears to be 'communication' between The Fed; Treasury; Fed Open Market Dealers; select Macro Economic Consutancies; member of Congrewss on Fed Actions. This offers tremendous advance market information, which in some cases could also offer great financial gain.

    No, this will not cause much ripple for Tim Geithner, nor most anyone else in today's world. But remember, we have "Fed Independence" so all is well.

    1. Seriously, this is how the fed works.

  2. Don' worry, Geithner, insider trading is not a crime unless you happen to have an Indian name. Printing money to lower rates is a crime, but no one can blame you for Ben's doings.

    1. Its not about having an Indian name, its about who benefits from the insider trading

      Using insider trading to make money for the banks is great

      Using insider trading to make money for yourself without cutting the banks in on the profits is illegal.

  3. It must be nice to be have connections in the government. This kind of corruption doesn't surprise me anymore.

  4. We would go to jail for stealing a loaf of bread.

  5. I am the George Hartzman Rolling Stone's Matt Taibbi wrote of the other week, and it appears that I am aware of a name/story that has not passed the Statute of Limitations.

    Wachovia CEO Robert Steel bought Wachovia’s stock in a breach of trust, confidence and his fiduciary duty to my clients and shareholders while in possession of material, nonpublic information.

    On July 9, 2008, Robert Steel became president and CEO of Wachovia after working for Goldman Sachs from 1976 to 2004 and the US Treasury under former Goldman Sachs CEO Henry Paulson from October 10, 2006 until July 9, 2008. Mr. Steel was “the principal adviser to the secretary on matters of domestic finance and led the department's activities regarding the U.S. financial system, fiscal policy and operations, governmental assets and liabilities, and related economic matters,” according to Wikipedia’s biography. Mr. Steel most likely knew about other firm’s borrowings via his time spent at the U.S. Treasury Department.

    On July 22, 2008, Mr. Steel personally purchased 1,000,000 shares of Wachovia’s stock as the company’s TAF borrowing reached $12.5 billion, which appears not to have been disclosed in securities filings audited by KPMG.

    In an interview with CNBC's Jim Cramer On Monday, September 15, 2008, Robert Steel said "I think it's really about...transparency. People have to understand the assets and really be able to say, this is what I own... Complete disclosure. ...we can work through this with transparency, liquidity and capital. ...Our strategy was to give you all the data so you could make your own model. We tell you what we're doing... ...we're raising capital ourselves by basically shrinking the balance sheet, cutting the dividend, cutting expenses. We can create more capital ourselves that way... for now, we feel like we can work through this..." After Jim Cramer asked "Should there be any sort of quick regulatory relief from the SEC that would make life easier to be able to make your bank much stronger?", Mr. Steel responded "I don't think it's about my bank."

    After not reporting TAF loans, Wachovia's CEO wrote "I, Robert K. Steel, certify that: I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 of Wachovia Corporation; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report" on October 30, 2008.

    Mr. Steel was at least aware of Wachovia’s Federal Reserve loans since July, 2012, if not the undisclosed loans to multiples of other financial institutions.

    If Mr. Steel was “the principal adviser…on matters of domestic finance and led the department's activities regarding the U.S. financial system, fiscal policy and operations”, how could he not have known and acted on undisclosed material information?

    On June 22, 2010, Robert Steel was appointed Deputy Mayor for Economic Development by New York City Mayor Michael Bloomberg, after which, Steel resigned his seat on the Wells Fargo board. According to Morningstar data, Mr. Steel owned 601,903 shares of Wells Fargo in 2010, which would be worth $20,446,644.91 as of October 26, 2012.

    George Hartzman
    Greensboro, North Carolina