The Finance Club

"Last June, with a financial hurricane gathering force, Treasury Secretary Henry M. Paulson Jr. convened the nation’s economic stewards for a brainstorming session. What emergency powers might the government want at its disposal to confront the crisis? he asked.

Timothy F. Geithner, who as president of the New York Federal Reserve Bank oversaw many of the nation’s most powerful financial institutions, stunned the group with the audacity of his answer. He proposed asking Congress to give the president broad power to guarantee all the debt in the banking system, according to two participants, including Michele Davis, then an assistant Treasury secretary.

The proposal quickly died amid protests that it was politically untenable because it could put taxpayers on the hook for trillions of dollars.

“People thought, ‘Wow, that’s kind of out there,’ ” said John C. Dugan, the comptroller of the currency, who heard about the idea afterward. Mr. Geithner says, “I don’t remember a serious discussion on that proposal then.”

But in the 10 months since then, the government has in many ways embraced his blue-sky prescription. Step by step, through an array of new programs, the Federal Reserve and Treasury have assumed an unprecedented role in the banking system, using unprecedented amounts of taxpayer money, to try to save the nation’s financiers from their own mistakes."

Obama is beginning to resemble Woodrow Wilson regarding the economy; idealistic, eloquent and ineffective. Who knows, maybe Geithner is channeling Colonel House, Wilson's confidante extraordinaire.

Factoid: Congress cannot audit the Fed. Factoid II: We pay interest when we burrow our money from the Fed. Factoid III: The tax we pay to the IRS is said interest.

Addendum, check out the NY Times interactive calendar depicting Geithner's tenure as the NY Fed head. Fascinating to say the least.

Last but not least, Obama's Secret Plan by Charles Hughes really makes you think...

"If you set out to completely discredit the bankers and eviscerate their political power, you'd proceed exactly as Obama has done, enabling it to reach its reductio ad absurdum conclusion of fat bonuses and tax-funded bailouts in the trillions of dollars, at which point the public will rise up in fury, doing the work which was impossible for you, a new "liberal" president.

Imagine the uproar had Obama sought to send the bankers straight into deserved bankrupty and eliminated their looting; he would have been thwarted and second-guessed at every turn by politcos, pundits and the ultra-wealthy Aristocracy whose perks and privileges were threatened, not to mention a Republican Party spoiling to be spoilers.

What better way to discredit the bankers than to give them plenty of rope to complete their tarnished, fraudulent "plan to save Capitalism from itself"? How can they complain when their own bankrupt policies have been supported? "

In the back of my mind, I have thought about this scenario. I hope he's right and I am wrong about the Oman and the economy. Eating crow, in this instance, would be fine by me. :)