Welcome to the Reality-of-Timmeh Based Caucus, Brad

Brad DeLong has discovered that Timmeh Geithner has feet of clay, or at least a brain that is not worthy of a Very Small Bear:

So, yes, Geithner started out January 2008 well behind the curve, and far, far to the right of the expectations of the Yellen Tendency and others with beliefs marked-to-market.

And–whether it was the vulnerability of the “too big to fail” money-center banks, the state of financial system, the state of aggregate demand, the state of the labor market, or the dysfunction of the Republican Party–I do not think that he ever managed to catch up to the curve.

Why not?

Let us remember that in January of 2008 Timmeh was not Secretary of the Treasury. He was the long-standing (since October 2003) President of the Federal Reserve Bank of New York, working closely with those major firms that were absolutely solvent.

By which time, Bear Stearns had reported a quarterly loss for the first time (Sep [Q3] 2007) in the firm’s history, and was fully expected to (and did) report its second loss ever for Q4 2007.

By which time, Lehmann and Bear had both issues securities (July and August, 2007) at yield levels that were barely above junk status.

By which time, the Late Great Tanta (who would have made a more rational choice for Treasury Secretary, including that she died 30 November 2008 [ETA: not to mention the still extant Duncan “Big Shitpile is so 2007” Black) had declared that IndyMac would be in the middle of a serious “liquidity crisis” if it weren’t a thrift. (IndyMac failed in July of 2008, four months after Bear, two months before Lehmann.)

By which time, Countrywide was holding a fire sale of itself. To a firm that had exited the Wholesale Mortgage business.

By which time, Thornburg Mortgage was threatened with (and would file eventually) bankruptcy, leading Tanta to observe that “we are all subprime now” and in November of 2007 after that to reconfirm that the damage had spread to at least the 90th percentile:

“If 100% or near 100% financing is required to keep these neighborhoods stable (loans over $400,000 for houses in the $400,000-$450,000 price range), then in what sense are they neighborhoods of the “upper and middle classes”?”

The ballpark household income required to buy a $400-450K house is $130-150K per year. As of 2012, that range would placed a household solidly about the 90th percentile of the US.

So a female blogger in the Midwest–in the midst of a battle with cancer, not working full-time in Financial Services Risk Management with full access to C-level personnel–knew before the head of the FRB of NY that the bottom 90% of the population was seeing credit constraints and strong indications of major equity issues that would affect their personal balance sheets. (Anyone who was directly involved in mortgage origination or securitization–including several of the people who spoke with Timmeh on a regular basis–knew that the well had dried up more than a year before.)

Why not, indeed?


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