THE UNITED STATES DEPARTMENT OF JUSTICE
OFFICE OF THE U.S. TRUSTEE
David C. Farmer, Successor Trustee
Bobby N. Harmon
(Formerly Mary Lou Woo vs. Harmon and James Nicholson vs. Harmon)
United States District Court, District of Hawaii
Judges: David A. Ezra; Kevin S. Chang
~ ~ ~
President Barack Obama’s Secretary of Treasury, succeeding Henry Paulston.
~ ~ ~
NEW DISCOVERY (05-23-09): More undisclosed conflicts of interest between various parties in this case.
January 16, 2009
THE AIG CREDIT FACILITY TRUST
The Federal Reserve Bank of New York announced today, with the full support of the Treasury Department, the formation of the AIG Credit Facility Trust. The Trust is being established for the sole benefit of the United States Treasury to hold the 77.9 percent equity interest in American International Group, Inc. (AIG) that will be issued in connection with the previously announced credit facility extended to AIG.
Three independent trustees have been selected by the New York Fed, in close consultation with the Treasury Department, to oversee this equity interest in the best interests of the U.S. Treasury. They are Jill M. Considine, former chairman of the Depository Trust & Clearing Corporation; Chester B. Feldberg, former chairman of Barclays Americas; and Douglas L. Foshee, president and chief executive officer of El Paso Corporation.
Pursuant to the terms of the Trust Agreement, the trustees will have absolute discretion and control over the AIG stock, subject only to the terms of the Trust Agreement, and will exercise all rights, powers and privileges of a shareholder of AIG. The trustees will not sit on the board of directors of AIG. Day-to-day management of AIG will remain with the persons charged with such management.
To avoid possible conflicts with the New York Fed’s supervisory and monetary policy functions, the Trust has been structured so that the New York Fed cannot exercise any discretion or control over the voting and consent rights associated with the equity interest in AIG. The New York Fed will, however, continue to monitor closely the financial operations of AIG in connection with its role as lender....
Calvin A. Mitchell III
* * * * *
Jill M. Considine
Jill Considine served as senior advisor of The Depository Trust & Clearing Corporation (DTCC) and its subsidiaries (securities depository and clearing house) from August 2007 to May 2008, having served as chairman since August 2006, and as both chairman and chief executive officer from January 1999 to August 2006.
Prior to joining DTCC, Ms. Considine served as the president of the New York Clearing House Association, L.L.C. from 1993 to 1998. Ms. Considine served as a managing director, chief administrative officer and as a member of the Board of Directors of American Express Bank Ltd., from 1991 to 1993. Prior to that, Ms. Considine served as the New York State Superintendent of Banks from 1985 to 1991. Ms. Considine also serves as a director of the Atlantic Mutual Insurance Companies, The Interpublic Group of Companies, Inc., Ambac Financial Group, Inc. and is chairman of Butterfield FulcrumGroup, Limited.
Ms. Considine recently completed a six-year term as a member of the Board of the Federal Reserve Bank of New York where she served as chairman of the Audit and Operational Risk Committee.Ms. Considine is a member of the Council on Foreign Relations and the Economics Club of New York. She served on the Group of Thirty Steering Committee on global clearance and settlement and as a member and speaker at the World Economic Forum in Davos. Ms. Considine was a Presidential appointee to the Advisory Committee for Trade Policy and Negotiations from 2003-2004. She was named Six Sigma CEO of the Year Award in 2006 and one of Crain’s New York Business 100 Most Influential Women in Business.
Ms. Considine earned a Bachelor of Science degree, with honors, from St. John’s University and a Master of Business Administration degree, with honors, from Columbia University. She also attended Bryn Mawr College.
Chester B. (Chet) Feldberg
Chester B. Feldberg served as Chairman of Barclays Americas from 2000 until his retirement in 2008. Prior to joining Barclays Americas, Mr. Feldberg had been executive vice president in charge of the Bank Supervision Group at the Federal Reserve Bank of New York from 1991 through 2000. In total, Mr. Feldberg was an employee of the New York Fed for 36 years, starting as a lawyer in the Bank’s Legal Department before moving to the Credit and Capital Markets Group and then the Bank Supervision Group. He was also a member of the Basle Committee on Banking Supervision from 1993 through 2000.
Mr. Feldberg serves on the Board of Directors and Audit Committee of Mizuho Securities USA, a subsidiary of the Mizuho Financial Group. Mr. Feldberg earned a Bachelor of Laws degree in 1963 from the Harvard Law School and a Bachelor of Arts degree in economics in 1960 from Union College. He also attended the advanced management program at the Harvard Business School in 1974.
Douglas L. Foshee
Douglas L. Foshee is president, chief executive officer and a director of El Paso Corporation, which owns North America’s largest natural gas pipeline system and one of North America’s largest natural gas producers.
Prior to joining El Paso in 2003, Mr. Foshee served as executive vice president and chief operating officer for Halliburton. He joined Halliburton in 2001 as executive vice president and chief financial officer. Prior to that, Mr. Foshee was president, chief executive officer and chairman of the board at Nuevo Energy Company. From 1993 to 1997, Mr. Foshee served Torch Energy Advisors Inc. in various capacities, including chief operating officer and chief executive officer. He held various positions in finance and new business ventures with ARCO International Oil and Gas Company and spent seven years in commercial banking, primarily as an energy lender.
Mr. Foshee earned a Master of Business Administration degree from the Jesse H. Jones School at Rice University in 1992 and a Bachelor of Business Administration degree from Southwest Texas State University in 1982. He is also a graduate of the Southwestern Graduate School of Banking and Southern Methodist University.
Mr. Foshee serves on the boards of Cameron International Corporation, Children’s Museum of Houston, Texas Business Hall of Fame Foundation and Greater Houston Partnership. He also chairs the board of directors of the Federal Reserve Bank of Dallas, Houston Branch, and Central Houston, Inc. He is a member of the Independent Petroleum Association of America, Houston Producers’ Forum, 25 Year Club of the Petroleum Industry, National Petroleum Council, the Council of Overseers for the Jesse H. Jones Graduate School of Management at Rice University, Rice University’s board of trustees and KIPP’s board of trustees. Mr. Foshee is a recipient of the 2007 Ellis Island Medal of Honor for his commitment to helping children succeed and his leadership role in the business community.
In 2008, Mr. Foshee was named Distinguished Alumni at Texas State University.
...Continued at: http://www.kycbs.net/AIG-Bailout.htm
~ ~ ~
NEW DISCOVERY (05-23-09): More undisclosed conflicts of interests between Judge Barry Kurren, Faye Kurren, AIG, El Paso Corporation, Tesoro, James Ahloy, Paradise Petroleum, Kamehameha Schools/Bishop Estate, Timothy Geithner, Barack Obama, etc.:
~ ~ ~
NEW DISCOVERY (04-17-09): More factual evidence of undisclosed conflicts of interest:
April 17, 2009
Fannie Mae CEO to Run Bank Bailout
By JIM KUHNHENN, AP
WASHINGTON (April 17) - The White House turned to an experienced former investment banker Friday to run the federal government's $700 billion bank rescue effort, selecting the head of mortgage giant Fannie Mae as an assistant Treasury secretary.
Herbert Allison Jr., Fannie Mae's president and CEO, will replace Neel Kashkari, a holdover from the Bush administration.
Allison, who must be confirmed by the Senate, would bear the title of assistant Treasury secretary for financial stability and counselor to Treasury Secretary Timothy Geithner.
He would be in charge of the Troubled Asset Relief Program, the fund that has injected billions of dollars into banks in hopes of unclogging credit. He would inherit a program that has been sharply criticized in Congress and which banks have come to view warily because of the restrictions attached to receipt of its funds.
President Barack Obama's administration has been slowly filling Treasury positions, hindered by candidates who have either withdrawn from consideration or been caught up in the vetting process.
Fannie Mae, seized by federal regulators in September, is closely overseen by federal regulators, making the chief executive's job tough to fill in the private sector. The company, therefore, appears likely to turn to an insider as Allison's replacement.
The Wall Street Journal reported on Friday that Fannie Mae was expected to name Michael J. Williams, the company's chief operating officer and a longtime executive as Allison's replacement. Fannie Mae declined to comment.
Allison's selection presents the administration with yet another challenge. If Allison is confirmed, both Fannie Mae and Freddie Mac would be without chief executives. David Moffett, formerly Freddie Mac's CEO, resigned in March.
In Allison, the White House selected a former Merrill Lynch investment banker who became chairman of the retirement fund manager TIAA-CREF. Allison served as finance chief for John McCain's 2000 campaign for the Republican presidential nomination. But politically, Allison has shown himself to be bipartisan in his allegiances, contributing to both Democrats and Republicans, according to Federal Election Commission records.
Since taking over in September at Fannie Mae, where he took no salary, Allison, the son of an FBI agent, developed a reputation for open-mindedness with consumer advocates, even those who have had an a contentious relationship with the giant company.
"Mr. Allison is well-positioned to lead the TARP," said Scott Talbott, chief lobbyist for the Financial Services Roundtable, an industry group. "He has a wealth of experience with buying, selling, protecting, and managing assets to protect the taxpayer investment and strengthen the economy."
Some industry officials said that by pulling Allison away from Fannie Mae, the White House was signaling that TARP would remain a viable component of the government's stabilization efforts for the financial industry, even in the face of hostile lawmakers and wary bankers.
Bert Ely, a banking industry consultant, said Allison has the advantages of being a known quantity to the Obama administration who is "much more of a financial heavyweight" than Kashkari.
Plus, he said, the new job would likely be more of a challenge than running Fannie and Freddie, which have been operating under tight government oversight since last September. "In this new situation, he's going to be much more of a policy maker," Ely said. "I can understand why he would want to take it."
~ ~ ~
March 6, 2009
Treasury secretary's choice for deputy withdraws
By DANIEL WAGNER, Associated Press
Treasury Secretary Timothy Geithner is two steps further away from filling the ranks of his senior staff.
As markets quake and Treasury confronts the worst economic crisis in decades, Geithner has seen two people he had hoped to name to key posts withdraw from consideration.
Annette Nazareth, a former senior staffer and commissioner with the Securities and Exchange Commission, made "a personal decision" to withdraw from the process, according to a person familiar with her decision.
The decision followed more than a month of intense scrutiny of her taxes and multiple interviews. No tax problems or other issues arose during Nazareth's vetting, said the person, who requested anonymity because Geithner's choice of Nazareth was never announced officially.
"She did put a great deal of consideration into the potential of taking the position, and she concluded that she really enjoys what she's doing now," this person said.
Though popular in policy circles, Nazareth has drawn criticism for her role in creating what some considered to be lax oversight of the banking industry.
Nazareth, 53, a partner at the law firm Davis Polk & Wardwell, could not be reached for comment. Treasury and White House officials said they would not comment.
Geithner has been criticized for staffing his department too slowly as it grapples with a banking crisis that has crippled the economy. Uncertainty about Treasury staff also has unnerved financial markets.
Five weeks into his tenure, he has yet to name a single top deputy or assistant secretary. This has left Treasury with too few people authorized to make decisions or represent the department in meetings with stakeholders.
After initially declining to comment, Treasury spokesman Isaac Baker emailed a statement saying 50 political appointees at the department already are hard at work.
"Any rumors of vetting problems or delays in the process are simply not true," Baker's statement read.
The department has been meeting with members of the financial services industry as it oversees the government's $700 billion financial bailout and other parts of President Barack Obama's financial stabilization plan.
But at a Senate hearing Thursday about failed insurance giant American International Group Inc. - which has received four separate bailouts totaling more than $170 billion - Sen. Chris Dodd said he had asked Treasury for someone to appear, but that no one was available.
"I am not pleased that we don't have someone here from Treasury to explain what their role in this is," Dodd said.
Geithner's choice for undersecretary of international affairs, Caroline Atkinson, also withdrew from consideration, the Wall Street Journal reported Thursday.
Some at Treasury and other financial regulators had looked forward to Nazareth's appointment. She is well-known in policy circles and is close with Geithner and Obama economic team members, including Paul Volcker, a former Federal Reserve chairman.
Nazareth joined the SEC in 1998 as senior counsel to then-Chairman Arthur Levitt, later directing the Division of Market Regulation. She is credited with creating numerous key policy changes.
She created the voluntary program intended to supervise large investment banks including Goldman Sachs, Morgan Stanley and the now-defunct Bear Stearns and Merrill Lynch. The program was canceled in September as the financial crisis erupted and the remaining investment banks converted themselves into bank holding companies.
Some on Capitol Hill had expressed concern that Nazareth was too closely associated with the weak federal oversight that contributed to the banking collapse. Among her responsibilities at Treasury would have been overseeing the creation of a new regulatory system for large financial institutions.
Geithner told a Senate panel Wednesday that he hoped "to come up for the committee soon with a full slate of very strong people."
"We're doing this carefully, as you would expect, and ... trying to make sure we have the best talent in the country," he said.
Geithner's lack of a senior staff has raised concerns on Wall Street.
"This doesn't help confidence," said David Wyss, chief economist at Standard & Poor's in New York. "Geithner is stuck there all by himself trying to do everything. They don't have anybody confirmed, and Treasury is a big shop to try to run with one person, especially right now."
Wyss, who previously worked at the Federal Reserve, said the administration needed to have made a much bigger push before taking office to get people cleared to take over the top jobs at Treasury so that Geithner could assemble his team quickly.
David Jones, head of Denver-based economic consulting firm DMJ Advisors, said that Geithner's missteps in putting together a financial rescue program and his inability to assemble a team at Treasury were raising concerns about whether the new administration's economic team is up to the challenges confronting them.
"There is no question that Wall Street is losing patience," said Jones, who for more than three decades served as a top economist at a major bond trading firm. "If there was ever a time when we need an effective and strong Treasury secretary, it is now."
Jones said that investors had initially viewed the economic team that Obama was assembling favorably because it included experienced hands such as Summers and Volcker.
"There were high expectations for this team, but at this time of crisis, it doesn't seem to be functioning effectively," Jones said.
~ ~ ~
NEW DISCOVERY (03-07-09): More factual evidence of undisclosed conflicts of interest between Timothy Giithner and dozens of other witnesses connected with this case:
~ ~ ~
January 15, 2009
How Citigroup Unraveled Under Geithner's Watch
By Jeff Gerth, ProPublica
Obama's pick for Treasury Secretary has some serious strikes against him -- especially when it comes to regulation.
As president of the New York Federal Reserve Bank, Timothy Geithner often preached that gargantuan financial firms like Citigroup should be held to the highest regulatory standards to make sure they couldn't take on too much risk.
But when it came to supervising Citigroup in recent years, the record shows that the New York Fed eased the reins as the company blew billions on subprime mortgages and other risky deals that ultimately forced the biggest bank rescue in U.S. history.
Now, the 47-year-old Geithner heads to the Senate in coming days as President-elect Barack Obama's nominee for Treasury secretary. He's won accolades for his expertise and work ethic, but there's been little attention to his record as a Fed watchdog.
Geithner's tenure at the New York Fed – which bore the major responsibility for supervising Citigroup – covers a tumultuous span in which the sprawling conglomerate spiraled from the country's biggest banking company to one of its largest welfare cases.
Now under much closer government supervision – after a $52 billion rescue – Citigroup appears headed for dismantling amid a leadership shuffle that included last week's announced departure of former Treasury Secretary Robert Rubin as senior counselor and director.
Should the New York Fed have seen trouble coming and prevented it? As Citigroup took on risk and its capital deteriorated, what oversight did Geithner exercise? And what contacts, if any, did Geithner have about regulatory matters with Citigroup officials, including Rubin, under whom Geithner worked at Treasury in the 1990s?
All are issues that may come up when Geithner appears before members of the Senate Finance Committee at his confirmation hearing, which has been put off until the day after Tuesday’s inauguration amid questions about Geithner’s taxes and past employment of a housekeeper.
Because the Fed conducts much of its work in secret, details about Geithner's role in the Citigroup debacle remain hidden. But a review of publicly available records shows that the New York Fed, in a key period, relaxed oversight as Citigroup went on a risky spree.
Geithner, following practice common among Cabinet nominees with pending confirmation hearings, declined an interview for this story. Neither the New York Fed nor Rubin responded to written questions about Citigroup.
The New York Fed's supervisory unit reports directly to the bank president, Geithner. The unit's job is to ensure that firms manage risk and have enough capital to cushion against losses. Large companies tend to be held to more stringent capital standards.
Yet poor risk management and weak capital levels were central to Citigroup's undoing. One enforcement agreement in place before Geithner took office in 2003 – an order requiring quarterly risk reports – was lifted during his watch. A ban on major acquisitions also was eliminated a year after it had been imposed in 2005.
Afterward, in 2006 and 2007, Citigroup aggressively expanded into the subprime mortgage business and bought a hedge fund and Japanese brokerage, among other assets.
A year later, as the global financial crisis took hold, Citigroup took losses and writedowns of more than $50 billion. The New York Fed brought no public enforcement case, although examiners privately sent a critical letter to the company in the first half of 2008.
Compared with its peers, Citigroup had a thinner capital cushion and relied more heavily on less-desirable types of capital, records show. The New York Fed knew – in 2007 it allowed Citigroup to count as capital securities that some regulators and credit agencies frown upon or discount.
Last May, after the collapse of investment firm Bear Stearns set off alarms, Fed regulators and Citigroup were in lockstep about risk and capital levels. "Perfect agreement" is the way CEO Vikram Pandit described it at a meeting with analysts.
A month later, Geithner gave a speech saying regulators needed to do more to make sure that companies had fatter capital cushions – but not until the financial system had stabilized.
When Geithner was named president of the New York Fed five years ago, he was youthful but experienced. As undersecretary of Treasury in the late 1990's and later, at the International Monetary Fund, he was no stranger to problems in global credit markets.
Rubin, his former boss at Treasury, described Geithner to The New York Times in 2007 as someone with a "calm way" no matter the circumstance. Rubin, a senior counselor and director at Citigroup after leaving Treasury, called Geithner "elbow-less," referring to his widely recognized collaborative skills and easy manner.
Geithner inherited two Citigroup enforcement matters.
One, stemming from examinations in 2001 and 2002, involved allegations that Citigroup's consumer finance subsidiary converted personal loans into home equity loans without properly assessing credit risk. By May 2004, the Fed filed an action against Citigroup and ordered the firm to pay a record $70 million in penalties.
The other case involved Citigroup's role in helping Enron structure dubious off-balance sheet transactions that first propped up but later brought down the high-flying energy company. In July 2003, Citigroup agreed to pay $120 million to the SEC and entered into an agreement with the New York Fed to beef-up its risk management practices. Fed supervisors were to be informed of the company's progress every three months.
Citigroup's investment bank had run afoul of regulators around the world by 2004. Japanese supervisors forced the company to shut down a private bank. In Great Britain, Citigroup paid $25 million for an improper bond trading scheme, dubbed "Dr. Evil," that regulators said resulted from a corporate request "to increase profits by taking more proprietary market risk."
Higher risk can lead to more profit – or big losses. To cushion against the latter, financial firms must set aside capital, especially shareholder equity, or common stock.
Regulators closely watch a firm's "Tier 1" capital ratio, a percentage of stockholder equity and other stock against total assets, after risk adjustments. Regulators require a well-capitalized holding company to hold at least 6 percent Tier 1 capital, but very large firms or rapidly growing firms are expected to have significantly more.
Geithner made his views on the subject clear at a risk management forum in January 2005. He said the biggest firms needed "exceptionally strong" capital cushions and risk management systems because of their influential role in the financial system.
Citigroup's ratio exceeded 8.5 percent between 2003 and 2006, filings show. Although the company had a Tier 1 target of 7.5 percent, a top executive told securities analysts in 2004 it was "substantially more than what our risk analysis says we need."
As Geithner noted in his speech, the economy was "broadly positive" in 2005. But as Citigroup looked to grow, the Federal Reserve gave mixed signals.
In Washington, Citigroup was asking the Fed Board of Governors to let it buy First American Bank in Texas. The board assessed Citigroup's risk management in conjunction with the New York Fed and OK'd the deal in March 2005, concluding that controls were sound.
Taking note of the firm's problems abroad, however, the governors also put a hold on any "significant expansion" until Citigroup could enact a new risk and compliance plan it had developed to address the previous problems.
Citigroup was back in good graces a year later. After the head of bank supervision for the NY Fed wrote Citigroup indicating the company had made "significant progress" in managing risk, the pause on acquisitions was lifted in April 2006.
Then, the Friday before the Christmas weekend, the Fed announced that it had terminated the 2003 enforcement agreement and its requirement to file quarterly risk management reports. No explanation was offered.
Flurry of deals boosts risk
By then Citigroup was racing ahead at full speed. In 2006, Citigroup's issuances of collateralized debt obligations – securities in which mortgages and other debts are bundled and sold based on risk – grew to $40.9 billion, more than double the prior year.
The number of subprime mortgages originated by Citigroup rose 85 percent that year, while other top originators had begun reducing subprime output, Fed data show.
Then the nation's largest banking company, Citigroup also began buying other financial firms. "They became very aggressive on the acquisition front, with a whole flurry of deals," said Joseph Scott, a senior director at the credit agency Fitch Ratings.
These deals pumped up Citigroup's balance sheet. Assets went from $1.2 trillion at the end of 2003 to $2.3 trillion by September 2007. But the bank's defenses weakened during the same period. By the end of September of 2007, records show, Citigroup's once comfortable Tier 1capital ratio had fallen to 7.32 percent, below the bank's target.
Geithner, in a 2006 speech on risk management, foresaw some of the troubles ahead. He said continued success required major institutions "to strengthen their capacity to withstand a less favorable" environment by better calibrating risk and capital.
Trouble became a reality for Citigroup by the end of 2007, when exposure to subprime loans caught up.
The bank's belated attempts to protect itself proved to be too little. Citigroup tried to hedge by purchasing credit default swaps and other instruments from insurance companies that themselves took on too much risk and couldn't cover all their contracts. That added billions to the company's record losses.
"They were late to hedge to begin with," said Scott, and "a lot of the hedging didn't work."
Other indicators of a flawed risk strategy surfaced in 2007. For instance, Citigroup repeatedly revised or "reclassified" its exposure to subprime losses, its definitions for accounting valuations and its reserve allowances.
Analysts say an inability to accurately account for losses is a sign of inadequate risk management.
A management shuffle in late 2007 led to the selection of Pandit, who helped run a hedge fund bought by Citigroup, as chief executive. He later concluded that what "went wrong" at Citigroup was a "tremendous concentration" in U.S. real estate deals.
Pandit quickly put in a new risk management team, a tacit acknowledgement that previous efforts failed. Last March a Citigroup director, testifying before Congress, was more direct: "We as an institution missed this pitch," said Richard Parsons, referring to mismanaging the risks of real estate lending.
Instead of enforcement, a strong letter
Around this time, examiners from the Fed wrote a letter to Citigroup very critical of its risk management practices, The New York Times later reported, citing an unnamed source. The Times report also said Citigroup responded with a plan for a sweeping overhaul of risk management. Although examination letters are part of the supervisory process, they are not considered enforcement actions, which carry more weight.
Scott, the Fitch senior director, called the firm's new risk team impressive, but "they inherited a lot of problems."
The problems cut into Citigroup's all-important capital base.
When it comes to valuing that base, regulators and credit rating agencies favor using common stock. But Citigroup, beginning in late 2007, relied increasingly on "hybrid" capital forms, such as trust-preferred securities, to prop up its Tier 1 ratio.
Even with these hybrids, its capital ratio dipped to 7.12, well below peers like JP Morgan Chase, at 8.44 percent, or Bank of New York Mellon, at 9.32 percent. In general, the NY Fed and the Federal Reserve allow the use of hybrid capital but apply limits and ask firms to obtain prior approval. In 2007, Citigroup exceeded the limit, the only bank among its peers to do so.
The Federal Deposit Insurance Corporation opposes the Federal Reserve's allowance of trust preferred securities for Tier 1 calculations. In 2005, when the Fed was drawing up the rules for trust-preferred securities, the FDIC argued that they should not qualify as Tier 1 capital because they are reported as debt on the balance sheet of banks.
Though the Federal Reserve is the primary regulator of Citigroup, the bank holding company, other regulators have jurisdiction over pieces of the firm and work closely together: the Comptroller of the Currency supervises Citibank; the FDIC insures Citibank's deposits; and the Securities and Exchange Commission oversees investment banks, like Smith Barney. As part of the bailout, Citigroup indicated it had previously entered into regulatory agreements with bank supervisors but did not disclose details.
When Citigroup executives spoke with securities analysts last May, they were questioned extensively about their capital adequacy.
By then Bear Stearns had collapsed, the result of too much subprime exposure, and had been swallowed up by JP Morgan Chase in a government-backed deal that Geithner helped broker. Analysts wondered if Citigroup and others faced such risk.
Surely, one analyst told Citigroup brass, you are being asked by your supervisors to hold more capital, given the market strife and the normal "tension" with regulators and auditors. Pandit, in reply, said there was no tension; all were in "perfect agreement."
The analyst said he didn't believe Pandit. But another Citigroup executive followed up, saying there was "unusual symmetry" with regulators and auditors.
In choppy seas, a tempered approach
A few weeks later, Geithner was publicly backing a cautious approach to building stronger capital margins and saying supervisors could not be omnipotent.
Speaking at a conference in New York in June, Geithner discussed the role of regulators in reducing risk or building capital, especially at major firms. He didn't mention Citigroup; regulators avoid talking about specific institutions.
It wasn't "realistic" to "expect supervisors to act preemptively to defuse pockets of risk and leverage," he said, but they could make the "shock absorbers stronger."
That meant "inducing institutions to hold stronger cushions of capital and liquidity in periods of calm."
But mid-2008 was not the time.
"After we get through this crisis and the process of stabilization and financial repair is complete," Geithner said, "we will put in place more exacting expectations on capital, liquidity and risk management for the largest institutions."
The crisis Geithner hoped would recede only got worse. Lehman Brothers went bankrupt, insurance giant AIG had to be rescued and credit markets froze up.
By far the biggest banking casualty was Citigroup. The firm received a $25 billion capital infusion in October, as part of the rescue plan Geithner helped engineer. That plan was designed to help "generally sound banking organizations." But the markets continued to lose confidence in Citigroup; its stock slid and its cushion of capital grew still thinner.
Last November, the government announced further aid for Citigroup under a new program for less healthy firms. The deal called for $20 billion in exchange for preferred securities, and a fee – paid by Citigroup – in the form of $7 billion more in preferred securities, for Treasury and FDIC to guarantee about $250 billion in bad assets.
A few hours later, President-elect Obama announced his selection of Geithner to replace outgoing Treasury Secretary Henry Paulson, with whom Geithner collaborated to design the government's program to bail out banks and Wall Street firms.
Rave reviews poured in from the street to Washington. One of the financial executives quick to praise Geithner was Citigroup's chief executive, Pandit.
"It's good to have him," he said.
See more stories tagged with: banks, citigroup, treasury, geitner
Jeff Gerth worked as an investigative reporter at The New York Times from 1976 through 2005. His work has twice been honored with the Pulitzer Prize. He also won a George Polk Award.
January 15, 2009
Dear Mr. Farmer; Mr. Guttman; Ms. Muranaka; Attorney General Mukasey, President Obama, and All Concerned:
Due to the discovery of new facts, I am adding the above news article as a new Exhibit.
You will find related information on-line at:
As these new facts clearly show, there are a large number of undisclosed conflicts of interest between various involved parties, which I believe will support a Motion to reopen this case. However, I am providing these new facts at this time in hopes that you, and your insurance carriers, will agree to attempt a settlement through negotiation or mediation.
If you are NOT willing to attempt to negotiate or mediate a settlement, however, then I ask that, in light of all the new facts presented in these Exhibits and witness descriptions, you advise me whether or not you intend to OBJECT to my filing a Motion to reopen this case.
Your immediate reply is requested. If I do not receive a response from you within 15 days, I will assume that you have found no "prohibited subject matter" in these updated pages, and that you will NOT file any objections to my Motion to reopen this case.
Very truly yours,
Bobby N. Harmon, CPCU, ARM
Related internet pages:
* * * * *
SONGS OF THE WHISTLER
* * * * *
THE CATBIRD’S FORUM
* * * * *
THE CATBIRD STORE
* * * * *
THE CATBIRD SEAT ARCHIVES
~ o ~
August 16, 2000 to August 5, 2002
~ o ~
October 13, 2002 to March 18, 2007
~ ~ ~
NEW DISCOVERY (01-09-09):
January 9, 2009
Rubin to leave Citigroup, Wall Street Journal says
By Alistair Barr
SAN FRANCISCO (MarketWatch) -- Robert Rubin, President Clinton's former Treasury Secretary, plans to leave Citigroup Inc. after criticism of his role in the financial crisis, the Wall Street Journal reported Friday citing an unidentified person familiar with the situation.
Rubin is senior counselor and a director at Citi, which has suffered $20 billion in losses in the past year and succumbed to a government bailout of at least $45 billion. Citigroup's troubles cast an awkward spotlight on Rubin, who received $115 million in pay since 1999, excluding stock options, the newspaper said.
Rubin has defended his performance since joining Citigroup in 1999, insisting that the bank's problems were due to wider turmoil in the financial system, not failures by Citigroup, but he is "tired of it," the person told the Journal. Rubin wants to focus instead on non-profit work and other interests.
~ ~ ~
ROBERT RUBIN AND THE ETHICAL CONFLICTS OF
THE REVOLVING DOOR
By Timothy A. Canova
This past November, President Clinton signed into law the Financial Services Modernization Act, thereby repealing the 1933 Glass-Steagall Act and permitting commercial banks, securities firms and insurance companies to merge with each other on a scale not seen since the 1929 stock market crash. In reporting of this watershed moment, the mainstream press refused to offer any criticism of the substance of the legislation or the corrupt political process that brought it about.
For instance, the New York Times completely white-washed the ethical conflicts of Robert Rubin, the U.S. Treasury Secretary until this past summer, who openly boasted of lobbying his former employer to abolish the Glass-Steagall Act while also negotiating an incredibly lucrative position for himself with Citigroup, a company that stands to benefit greatly by the legislative compromise brokered by Mr. Rubin (‘Former Treasury Secretary Joins Leadership Triangle at Citigroup,' N.Y. Times, news report, Oct. 27th). In fact, repeal of Glass-Steagall was a high priority for Citigroup, which faced the possibility of having to sell off its insurance underwriting subsidiary if Glass-Steagall was not repealed.
Mr. Rubin made assurances that, in his new position as chairman of the executive committee of Citigroup's board of directors, he would take a "belt and suspenders" approach to ethics questions, and that he would be involved in business and not lobbying. But rather than adopting such ethical double-protection, Mr. Rubin let his pants fall down completely when he simultaneously engaged in lobbying and job hunting.
Instead, the Times report implied that we should actually thank Mr. Rubin for "urging Congress and the White House to preserve the Community Reinvestment Act [CRA], which requires banks to channel a portion of their lending to poor, inner city areas." In an obvious appeal to liberal sentiment, the Times further reported that Mr. Rubin had professed his great concern for the poor and his satisfaction that his lobbying for CRA was reflected in the final legislative compromise.
Behind this cynical justification of revolving-door opportunism and flagrant self-dealing lies a complete mischaracterization of the Community Reinvestment Act as an effective vehicle for allocating credit to poor neighborhoods. In fact, there is widespread evidence that CRA already falls short of its legislative mandate by permitting banks to engage in public relations, meaningless reporting requirements, and token charitable contributions in place of substantive investment in low- and moderate-income communities.
But despite such deficiencies, Mr. Rubin's-brokered compromise included significant dilution of the Community Reinvestment Act by exempting small banks from regular compliance reviews (‘Deal on Bank Bill Was Helped Along By Midnight Talks,' N.Y. Times, news report, Oct. 24th). Unfortunately, this weakening of CRA comes at a time when it should be strengthened to extend prosperity to poor neighborhoods that have not shared in our present economic expansion. Instead, Mr. Rubin peddled his influence to his own advantage by selling the Community Reinvestment Act down the river.
Several days after the Glass-Steagall repeal was signed into law, a coalition of consumer and community groups (including consumer advocate Ralph Nader) submitted a letter to the Office of Government Ethics calling for an ethics investigation into Mr. Rubin's simultaneous job hunting and lobbying activities (‘Inquiry Urged on Taking of Job By Former Treasury Secretary,' N.Y. Times, news report, Nov. 18, 1999). Federal law requires retired Government officials to refrain from lobbying their former agency on behalf of a new employer for at least one year after leaving public service. A violation of such lobbying restrictions is a federal criminal offense under the Ethics in Government Act, 18 United States Code Section 207.
In addition, the Clinton Administration has continually patted itself on the back for requiring its top officials to pledge that they will not lobby their agencies for at least five years after leaving office. In his assurances that he would take an overly-safe approach to ethics questions, Mr. Rubin also said that he would regularly consult with lawyers to make sure that his work for Citigroup did not raise questions about influence peddling or conflicts of interest. Mr. Rubin's lawyers should now be asked to justify how his simultaneous lobbying for himself and Citigroup's interest does not violate federal law.
In light of Mr. Rubin's brazen activities, one wonders just what it would take for Congress or the Clinton Administration to investigate ethical violations of former top officials. If only the stakes were confined to Mr. Rubin's new eight-digit annual salary. But with the repeal of Glass-Steagall, the weakening of the Community Reinvestment Act, and the prospect that our banks will now get caught up in today's casino stock market, Americans may eventually pay a much higher price for Mr. Rubin's ethical conflicts.
Timothy A. Canova is an Assistant Professor of Law at the University of New Mexico.
~ ~ ~
The Long Demise of Glass-Steagal
A chronology tracing the life of the Glass-Steagall Act, from its passage in 1933 to its death throes in the 1990s, and how Citigroup's Sandy Weill dealt the coup de grâce:
~ ~ ~
NEW DISCOVERY (08-15-08): Undisclosed conflicts of interests between Senator Dan Inouye, Senator Ted Stevens, VECO Corporation, George W. Bush, John McCain, Dick Cheney, Halliburton, Shell Oil, Barack Obama, Aloha Petroleum, James Ahloy, Chevron-Texaco, Mark Bennett, Linda Lingle, Tesoro Petroleum, Faye Kurren, Judge Barry Kurren, Enron, Goldman Sachs, Robert Rubin, Henry Paulson, Henry Peters, Paul Alston, etc.:
December 6, 1996
ENRON and Shell Win Bid in
Capitalization of YPFB's
LA PAZ, BOLIVIA – Enron Development Corp. and Shell International Gas Ltd. announced today that the government of Bolivia has named the companies the successful capitalizing company for the transportation segment of the state oil and gas company, Yacimientos Petroliferos...
~ ~ ~
March 30, 1998
The following is an excerpt from a 10-K SEC Filing, filed by TESORO PETROLEUM CORP /NEW/ on 3/30/1998:
ACCESS TO NEW MARKETS
A lack of market access has constrained natural gas production in Bolivia. With little internal gas demand, all of the Company's Bolivian natural gas production is sold under contract to the Bolivian government for export to Argentina.
Major developments in South America indicate that new markets will open for the Company's production. Construction of a new 1,900-mile pipeline that will link Bolivia's extensive gas reserves with markets in Brazil commenced in 1997 and is expected to be operational in early 1999.
The owners of the new pipeline include Petrobras (the Brazilian state oil company), other Brazilian investors, Enron Corp., Shell International Gas Ltd., British Gas PLC, El Paso Energy Corp., BHP, and Bolivian pension funds. When completed, the new pipeline will have a capacity of approximately 1 billion cubic feet ("Bcf") per day.
For more, see...
Googling the Ghost of Ken Lay
Aloha, Harken Energy
Citigroup: Vampires in the City
Dirty Gold in Goldman Sachs
Shell Oil: The Shell Game
The Story of Enron
Vultures Up to their Necks in Tesoro Petroleum
~ ~ ~
NEW DISCOVERY (07-12-08):
Harken Energy & The SEC
~ ~ ~NEW DISCOVERY (04-22-08): David Farmer’s undisclosed connections with AIPAC and former U.S. Treasury Secretary Robert Rubin:
From Exhibit: “CONNECTING THE DIRTY DOTS TO AIPAC”:
David C. Farmer, Successor-Trustee vs. Harmon
(Formerly Woo vs. Harmon & Nicholson vs. Harmon)
CV05-00030 DAE KSC
U.S. District Court For the District of Hawaii
Judges: David A. Ezra; Kevin S. Chang
A few words of explanation:
In his "MEMORANDUM IN OPPOSITION TO DEBTOR'S MOTION FOR ORDER TO DISAPPROVE APPOINTMENT OF DAVID C. FARMER AS SUCCESSOR TRUSTEE", filed with the Court on August 24, 2007, the Trustee's attorney, Steven Guttman, Esq., of the law firm, Kessner Umebayashi Bain & Matsunaga, stated to the Court:
"... Harmon is once again attempting to create issues of conflict where none exist by attempting to draw connections between phantom dots."...
Mr. Guttman does not elaborate beyond this simple statement of HIS PERSONAL OPINION, as to WHICH of the thousands of connections I have cited that he wishes the Court to accept, without question, as being merely "phantom dots". In other court filings, Mr. Guttman has characterized my Motions as consisting of "conspiracy theories" -- again with no specific references.
Despite these unnamed "phantom dots" and "conspiracy theories", the Court has blithely and unquestionably gone along with Mr. Guttman's opinions and has repeatedly denied ALL Motions that I have made. In fact, both Courts involved have ruled that the Court Clerk shall not accept any future filings from me without the Courts' prior approval - which it has repeatedly declined to give.
Therefore, due to the fact that I continue to discover new, material FACTS almost daily, I am preparing a set of NEW EXHIBITS in which I intend to document the financial, professional, personal, and political connections between the many various entities involved in this case.
~ o ~
The following is a listing of named witnesses in this case who have factual connections with the subject entity. Each underlined name has been linked to a detailed description of that witness to enable the reader to more easily CONNECT THE DOTS TO...
Judge David Ezra
George W. Bush
Judith Neustadter Fuqua
James B. Nicholson
James B. “Jim” Nicholson
LEARN MORE ABOUT AIPAC:
~ ~ ~
NEW DISCOVERY (04-12-08):
April 12, 2008
David C. Farmer, Esq.
Office of the United States Trustee
c/o Steven Guttman, Esq., Kessner Duca Umebayashi, et al.
220 S. King Street, Floor 10
Honolulu, HI 96813
Re: 99-04339 - David C. Farmer, Trustee vs. Bobby N. Harmon
Ref. New Exhibit: “THE DIRTY MILLIONS FOR ARMAGEDDON”
Dear Mr. Farmer:
Due to new discoveries regarding the Integrated Resources securities fraud and illegal U.S. political campaign funding by foreign nationals (Israel), I am adding the subject Exhibit. You will find this new Exhibit and related witness descriptions at:
Mr. Farmer, I again suggest that we try to resolve this matter through negotiation rather that your continuing indefinitely this illegal SLAPP lawsuit.
Very truly yours,
Bobby N. Harmon, CPCU, ARM
cc: U.S. Attorney General Michael Mukasey
Curtis Ching, Office of the United States Trustee
Fax: (808) 522-8156
~ ~ ~
Timothy Geithner is expected to testify regarding his business, professional, political and personal relationships with Robert Rubin, Hillary Clinton, Henry “Hank” Paulson, James A. Baker, John Snow, “Hank” Greenberg, Marsh & McLennan, Chubb Group, Matsuo Takabuki, Henry Peters, William S. Richardson, Rodney Park, Wally Chin, Mark McConaghy, PricewaterhouseCoopers, Gerard Jervis, John Waihee, Nathan Aipa, Colleen Wong, Lyn Anzai, Gilbert Tam, Robert Kihune, Columbia/HCA, Bill Frist, Richard Rainwater, John Schilling, Barack Obama, Laurence Summers, Carol Muranaka, James B. “Jim” Nicholson, James B. Nicholson, David Farmer, Henry Paulson, William A. Wise, El Paso Corporation, Faye Kurren, Tesoro Corporation, McKenzie Methane, Aloha Petroleum, Harken Energy, Enron, American Express, and others to be determined upon discovery.
TO GO TO THE WOO VS. HARMON WITNESS INDEX
* * * * *
~ ~ ~
THE CATBIRD SEAT ARCHIVES
The Catbird Seat Archives: 2000-2002
The Catbird Seat Archives: 2002-2007
* * * * *
Originally posted: January 15, 2009
Last updated: May 25, 2009