Where Is Our Money?

According to the Associated Press (AP), the banks will not say what they are doing with the taxpayer bailout money they have received. Basically, the $700 billion Troubled Asset Relief Program (TARP) is a bank loan on steroids. Banks who received loans in the billions of dollars are saying things like “We've lent some of it. We've not lent some of it,” according to a spokesperson for JPMorgan Chase, which received $25 billion. “We have not disclosed that to the public. We're declining to."

Need I ask what is wrong with that picture? A business management consultant by trade, I am used to preparing banking presentations and helping my clients ask for business loans. I can guarantee you that one of the most important questions that banks ask is, “What are you going to do with the money?” I can also guarantee you that answering, “We're choosing not to disclose that," would get me and my client shown the door, but that is what Bank of New York Mellon said and they received about $3 billion.

If you ever wondered why the Federal government is not in the banking business, here is a little insight. Just ask the Treasury department what it is doing to monitor the spending of those TARP billions. It is a fair question, right? Now ask yourself what you would think if you got an answer like this one: "What we've been doing here is moving, I think, with lightning speed to put necessary programs in place, to develop them, implement them, and then we need to monitor them while we're doing this. So we're building this organization as we're going."

You might think that your question had been answered by Sarah Palin.

However, it is much worse than that. For the record, those are the words of Treasury Secretary Henry Paulson. After all, he was the banker who put the rush job on Congress, which at last look was part of the same Federal Government and is not in the banking business.

For argument’s sake, let’s overlook the “lightening speed” bit and focus on Paulson’s central point. If he had said “We are making it up as we go,” he would be telling the truth. It would also explain why Geo. Bush picked him. We can only hope that before the next $350 billion is released in the next administration, Tim Geithner will have a plan he can show to congress, which must confirm him to replace Paulson.

Tax payers deserve more in the way of policy than “making it up as we go.” Banking’s top executives deserve to be shown the door. As to being paid bonuses on their way out, to quote one of their spokespersons, “We’re declining to.”

Conjecture No More

Today, the name of cabinet designates swirling around in the media ceased to be conjecture. They are no more. They are as leaked. Curious, isn’t it, how names get strategically leaked by “a person close to” the Obama transition team who “spoke on the condition of anonymity” presumably because they were “not authorized” to do any speaking? If it was my team, I would want to know who that person is and stuff a sock in them. Perhaps the real question is who authorizes the unauthorized leak agent? But I digress.

Secretary of Defense Robert Gates is hardly a “holdover,” as the Washington Post editorialized today. Nor is the significance of the Obama decision to retain him, as the NY Times reported last week, as much “a show of bipartisan continuity in a time of war that will be the first time a Pentagon chief has been carried over from a president of a different party” as it is good international politics. Besides, being the Secretary of Defense is not a show.

Donald Rumsfeld was a show. He liked having his picture taken. He liked being on television. He liked being the 400 pound gorilla in the Pentagon. He did not mind being a criminal. Unfortunately, he enjoyed his ego rather much and was more or less put out to pasture by his crony the vice president, the 500 pound gorilla at the White House.

Mr. Gates, on the other hand, does not like having his picture taken. He is a career bureaucrat who serves at the will of the president, regardless of political party. In a way he reminds me of the late Caspar Weinberger, Reagan’s SecDef. Prior to Defense he chaired the Federal Trade Commission in the Nixon Administration and later ran the Office of Management and Budget. However, it is doubtful that Gates will need a presidential pardon, as Rumsfeld and Cheney may.

The president-elect’s choice of Senator Hillary Clinton to become Secretary of State is a bit more problematic. Her job will be to represent the president to the world as opposed to representing herself, which lost her the Democratic presidential nomination. It is that serving at will of the president that is important. It will remain to be seen whether Mrs. Clinton gets that part. It will also be interesting to see whether New York's Governor Patterson offers to appoint the former-president Clinton to replace her in the senate.

If there is any conjecture other than that, it will be about the senate’s questioning of Timothy Geithner in his confirmation hearing to become Secretary of the Treasury. His tenure at the New York Fed may be an asset, if he learned anything as the Wall Street came tumbling down. He too will serve at the will of the president. I suspect he gets that, even if it is conjecture on my part.