Alan Beattie

Somewhat as predicted, or at least predicted by me, Tim Geithner went as far as he could go in suggesting that various options were on the table for trying to push the Chinese into letting the exchange rate rise without giving any hostages to fortune.

The Murphy-Ryan bill (similar to Schumer-Graham in the Senate) got respectful attention and the possibility of support, though no commitment. Naming China as a currency manipulator, though, seems still to be off the tableRead more

Alan Beattie

No doubt in a valiant attempt to feed our insatiable curiosity ahead of time, some excerpts from Tim Geithner’s written testimony and prepared oral statement have come out tonight, before Thursday’s appearance in front of two Congressional committees. The key passage:

“We are concerned, as are many of China’s trading partners, that the pace of appreciation has been too slow and the extent of appreciation too limited. We will take China’s actions into account as we prepare the next Foreign Exchange Report, and we are examining the important question of what mix of tools, those available to the United States and multilateral approaches, might help encourage the Chinese authorities to move more quickly.”

It’s not explosive stuff but it does show that: 1) the administration is considering (or at least wants to give the impression that it is considering) a range of options, which could include classifying exchange rate undervaluation as an illegal export subsidy or taking a case to the WTO; 2) It is not a given that the Treasury will repeat its previous decision to resist naming China as a manipulator in the twice-yearly currency report. Read more

Alan Beattie

Big day on the Hill on Thursday as Mr Secretary does the rounds talking about China: the Senate banking committee in the morning and the House of Reps ways and means committee (which spent yesterday on another auto da fe hearing about the Chinese currency) in the afternoon. He faces a Blondinesque balancing act of being mad enough at Chinese foreign exchange intervention to placate angry lawmakers while not committing to precipitous and possibly WTO-illegal action like agreeing to currency tariffs.

Last time he was in this position, on June 10, Geithner rather neatly managed to amplify the complaints of senators in the hope that they would be heard in Beijing without necessarily endorsing them. Nine days later, China unpegged the renminbi. He will most probably try some version of this again on Thursday and hope that puts enough pressure on Beijing to take its foot off the renminbi brake for a while. Would that placate the senators and the congressmen? No. (Appearing in front of congressional committees, Geithner somewhat resembles a put-upon nephew who has been deputed to break some bad news to a gang of irascible uncles.) But would it do enough to stop them forcing currency legislation on to a crowded fall legislative schedule? Probably, yes.

Ralph Atkins

Much secrecy surrounds US Treasury secretary Tim Geithner’s trip to Frankfurt this evening, after his London stop-off. The European Central Bank is not saying when or where he will meet Jean-Claude Trichet, ECB president (although it is safe to assume Mr Geithner will not be enjoying the local beers and sausages). Instead, the theatre will be left until Thursday, when Mr Geithner will talk to journalists in Berlin.

But this does not mean it will be a tough meeting. When, earlier this month, the US was urging a vigorous European response to the eurozone debt crisis, Mr Trichet was on message and the ECB president has played a big role in cajoling the German government into supporting effective emergency measures. Mr Trichet, a former French Treasury director, thrives at times of crisis – even if some on the 22-strong governing council have worried about the loss of the ECB’s reputation for conservative, gradual decision making. Read more

Alan Beattie

A communique that more or less acknowledged disagreement over the great bank taxes debate and a Canadian finance minister, Jim Flaherty, thinking that the debate was swinging Canada’s (anti-bank levy, pro-contingent capital) way. I think one of two things could happen at this point:

1. The US and Europeans who support the bank tax will keep pushing it at G20 level, perhaps soft-pedalling until after the Canadian-hosted G7/G20 summit in June and then resuming the campaign in the second half of the year.

2. As Secretary Geithner suggested tonight, the US might just forge ahead anyway and hope that the rest of the world follows behind once they see what a great idea it is. My notes (not precise quote) say: “We are going to move in the US and I suspect you will find when other countries see what we do, they are going to take similar measures”.

Not entirely sure that 2. is a sustainable option, since other countries might well think it is worth taking the risk of funding a bank bailout down the line to steal business from American and European banks now. Then again, Canadian banks aren’t particularly known for buccaneering adventurism in other developed country markets (some are quite big in emerging markets), so perhaps they are an exception that can be tolerated without too much risk of being undercut. Japan, on the other hand, another opponent of bank taxes, could be a different matter. Read more

Simone Baribeau

As the Senate prepares to vote on the financial regulation bill, Ben Bernanke, Fed chairman, Mary Schapiro, SEC chairman and Timothy Geithner, Treasury Secretary, appeared before the House Financial Services Committee to dissect what went wrong with Lehman.

Lots went wrong, of course, but the regulators (Mr Geithner was head of the NY Fed, at the time of the Lehman bankruptcy) shed little fresh light on their response (or lack there of) to Lehman’s ‘bad behaviour’. The Fed said it had no authority to regulate. The SEC, according to Ms Schapiro, didn’t have the ‘staff’, ‘resources’ or ‘mindset’ to be a prudential regulator. Lehman repeatedly failed stress tests, even those that did not exclude real estate, and the market was left blissfully unaware of the impending catastrophe. Read more

Simone Baribeau

It’s been a rough day for “TFG75″ – the email name for Tim Geithner. At least, it’s been a rough day according to intrade, which is giving Treasury secretary a 40 per cent chance of losing his job by the end of June, after a day of being grilled by the House oversight committee.

For a wrap of today’s hearings, see: Read more

Simone Baribeau

Ok, they’re not secret any more. But the New York Fed did, early on, put some effort into not disclosing the names of AIG counterparties. And so, in the run-up to Geithner’s testimony tomorrow, Darrell Issa, the Republican ranking member of the House oversight committee, has released the results of his investigation.

The report reads more like a Washington political thriller than a Congressional document. Just look at its title: “Public disclosure as a last resort: How the Federal Reserve fought to cover up the details of the AIG counterparties bailout from the American people”Read more

Simone Baribeau

AIG is back on the House’s radar.

Earlier this week, Edolphus Towns, the Chairman of the House oversight committee, said he would subpoena the NY Fed for documents related to AIG counterparty payments and today he said that Tim Geithner had confirmed that he would speak before the committee later this month.

And separately, in a tersely worded response to Spencer Bachus, the Republican Ranking Member on the House Financial Services Committee, Barney Frank, the committee’s Democratic Chairman, said the Fed’s role in the AIG bail-out would be back on his committee’s agenda.

It is not, of course, the idea of looking into Chairman Ben Bernanke’s role that has Mr Frank up in arms. Mr Bernanke was, after all, a Republican appointee, and the decision to bail-out AIG and its counterparties came while Mr Bush was still president. It’s that Mr Bachus is continuing to focus on Tim Geithner, then head of the NY Fed and now Treasury Secretary.

But enough background, here’s the statement: Read more

Krishna Guha

Unwind financial market support first, then fiscal stimulus, then monetary stimulus. Looks like the Fed has the right exit strategy sequence to me, writes Krishna Guha of the Financial Times Read more