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.The folks at Zero Hedge were the first ones to notice this, and they nail it when they say, "[J]ust when we thought our opinion of the outgoing Treasury Secretary and former NY Fed head Tim Geithner, whose TurboTax incompetence is now legendary, couldn't get lower, it got lower. Much lower."
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."
Here is the pertinent section from the transcript of the August 16, 2007 conference call:
MR. LACKER. If I could just follow up on that, Mr. Chairman.They also note that there was a sudden and unexplained jump of 50 points (4%) in the S&P 500 in just 1 hour. (Note that they also make a compelling circumstantial case that Geithner's schedule indicates that he leaked this information)
CHAIRMAN BERNANKE. Yes, go ahead.
MR. LACKER. Vice Chairman Geithner, did you say that [the banks] are unaware of what we’re considering or what we might be doing with the discount rate?
VICE CHAIRMAN GEITHNER. Yes.
MR. LACKER. Vice Chairman Geithner, I spoke with Ken Lewis, President and CEO of Bank of America, this afternoon, and he said that he appreciated what Tim Geithner was arranging by way of changes in the discount facility. So my information is different from that.
CHAIRMAN BERNANKE. Okay. Thank you. Go ahead, Vice Chairman Geithner.
VICE CHAIRMAN GEITHNER. Well, I cannot speak for Ken Lewis, but I think they have sought to see whether they could understand a little more clearly the scope of their rights and our current policy with respect to the window. The only thing I’ve done is to try to help them understand—and I’m sure that’s been true across the System—what the scope of that is because these people generally don’t use the window and they don’t really understand in some sense what it’s about.
BTW, as ZH also notes, the Fed's 5 year delay in the release of records means that Geithner has outlasted the statute of limitations.
Awfully convenient, nu?
We won't have a fix to our financial system until Geithner, and his mentor Robert Rubin are under criminal investigation for what they dud.
*Not my words, but a slight reworking of sentiments expressed by JR at the Stellar Parthenon BBS.