Archive for the ‘finance’ Category

What’s Behind the Geithner Debate?

March 27, 2009

If the United States was an aircrft, Obama has already touched every dial and lever in the cockpit.  And what does that mean?  Only one thing for sure: Uncertainty.  And a lack of confidence.  That’s why businesses are not yet rehiring and people are holding on to their money.  People are looking for more certainty and Geithner at Treasury isn’t offering that….

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By Will Marshall
Real Clear Politics

Progressives, who have so far marched in rare lockstep behind President Obama, are falling out over Treasury Secretary Tim Geithner’s plan to get credit flowing again. At issue are conflicting visions of exactly what kind of economy should emerge on the other side of today’s crisis.

Pundits and columnists traffic in certitudes, but the rest of us can be forgiven for not knowing whether the Geithner plan will actually work. We’re in terra incognita here, and analogies to the Great Crash of 1929, or more recent banking crises in Japan and Sweden, may be of limited utility. Amid all the complexity and uncertainty, the debate over Geithner’s proposal is a kind of ideological ink-blot test.

Some liberal critics charge that it is nothing more than a continuation of the Bush-Paulson policy of propping up failed banks and financial institutions until the crisis somehow resolves itself. They question whether Geithner, a former governor of the New York Federal Reserve, is capable of administering sufficiently harsh medicine to his former peers in the realm of high finance. Many conservatives, relieved by the voters of primary responsibility for fixing the mess, are hoping to exploit populist anger over the massive wealth transfer from taxpayers to Wall Street.

The essence of Geithner’s plan is to reanimate the market for the securitized mortgages and other loans that no one wants to buy now. Until banks can take these toxic assets off their books, they won’t be able to resume lending. Geithner proposes to use what’s left of the TARP (Troubled Assets Relief Fund) money to entice private actors, such as hedge funds, to buy the assets.

Treasury Secretary Tim Geithner.  (AP Photo/Gerald Herbert)

The basic idea here is that these private money-managers will do a better job of pricing the assets than the government ever could. If the spoiled assets regain their value, these private buyers win–but so do taxpayers, who would no longer have to foot the whole bill for the failures of the past.

Conversely, if the assets do not regain their value, then everybody loses. Well, almost everybody. In order to persuade private buyers to take the plunge into the toxic pool, the Geithner plan insures them against downside risk.

Despite their admiration of Obama, many liberals are unhappy with this arrangement. They decry the plan as yet another subsidy to the very people whose reckless risk-taking in search of outsized profits got us into this mess. They complain that Geithner’s plan is, at best, a palliative that doesn’t address the underlying cause of seized-up credit markets — namely, the fact that major U.S. banks are, for all practical purposes, insolvent. Elizabeth Warren, a Harvard law professor who heads the panel Congress set up to oversee TARP, likens the Geithner plan to an IV drip for “zombie banks.”

Putting the big banks on life support, in this view, merely prolongs the agony and could lead to a long period of Japanese-style stagnation. Better to follow the sterner Swedish model: Nationalize insolvent banks, wipe out equity holders, and return a smaller number of healthy banks with clean balance sheets to private hands.

But nationalization could wind up costing taxpayers a fortune, while also causing collateral damage to the secondary market for securities backed by mortgages in other loans. Congress’ hot-headed reaction to the AIG bonus scandal did little to inspire confidence in the federal government’s ability to manage financial companies. Furthermore, Obama’s economic team seems willing to bet that bank assets are worth more than today’s depressed market prices suggest.

In short, Obama and Geithner are working to restore the financial sector as it existed roughly a decade ago….

Read the rest:
http://news.yahoo.com/s/realclearpolit
ics/20090326/cm_rcp/whats_behin
d_the_geithner_deba

Related:
http://michellemalkin.com/2009/03
/27/the-strange-sacking-of-a-to
p-treasury-official/

Obama Buys Into Anger, Fear as Political Tool

March 27, 2009

There is a clear message being sent of “we’ll get this, or else.”

Radicals protesting  the G20 summit transmit the message clearly.

Even President Barack Obama has gently used veiled threats and insinuations that he’ll go to any lengths to get what he wants.

“We won” flies in the face of bipartisanship and comity.

When Obama made his “outrage” remarks about the AIG bonuses, that was quickly followed up by Rep. Barney Frank asking for the names of all the AIG bonus recipients.

Then ACORN showed up to protest at the homes of some of those same AIG people.

Yesterday, two Washington Post reporters said the President of the United States is “attempting to harness public anger over the financial crisis” to pass his budget.

Once or twice, the president has lamely, limply, really, tried to mimic FDR’s “nothing to fear but fear itself” speech; but more often than not, “No Drama Obama” has hinted at other emotions beyond calm.
Obama is banking that his strong poll numbers will translate into the public trust and confidence he’ll need to reform, some say overhaul, and some say radically attack the financial system and Wall Street.

But pollster Frank Luntz and others say although the public approves of Obama himself, they reject some of his policies.

Public anger as a political tool?  That’s been used before but rarely by the president.

And the use of fear by the President of the United States at this time is disconcerting at the least.  Americans have plenty of fear and anger already: after losing jobs, retirement funds, and homes.

What American need is trust.  But at a time when trust in Wall Street, bankers and others is at low ebb, the president is talking about fear, crisis, catastrophe, anger and “outrage.”

Laughing on Leno and “60 Minutes” was a lame attempt to blind the facts.

My imagination running amok?  Hardly.  In Scotland, protesters attacked a bank executive’s home and inflicted thousands of dollars of damage.  In Paris the protesters rioted, setting tires on fire in the streets frequented by tourists.  Around the world, the economic crisis is turning from simmering outrage to a boil of fear and violence.

The G20 will be something to watch: not just because of the usually boring diplomatic and financial talk.  This time there are real issues and differences and the future of the American and world banking systems could surely hang in the outcome.

But added to that is an atmosphere of fear and even violence: and that is not a good way to do business.

Related:
Anger, Lawlessness Fueling U.S., Global Economic Revolution?

http://michellemalkin.com/2009/03/
27/the-coming-g20-riots-the-spread
-of-mob-rule/

Obama, Geithner, Summers Plan for “Toxic Assets” May be Toxic Itself

Obama’s public overexposure

Obama Still Thinks After Economy Recovers; Bank, Finance Good Times Can Return?

 Obama’s Economic “Rescue;” “The plan is very, very clever. Maybe too clever.”

Obama, Geithner, Summers Plan for “Toxic Assets” May be Toxic Itself

March 27, 2009

 Barack Obama’s economic team is in serious  jeopardy  of getting bogged down as they attempt to extricate America from the “toxic asset,” bad bank and financial crisis.The objective is to get lending going and they centerpiece is trust and confidence.

Obama is banking that his strong poll numbers will translate into the public trust and confidence he’ll need to reform, some say overhaul, and some say radically attack the financial system and Wall Street.

But pollster Frank Luntz and others say although the public approves of Obama himself, they reject some of his policies.

It could just be that Geithener, Larry Summers and Barney Frank are ill suited to carrying the load they are under.  And then again, maybe they created a load that is a load of c**p.

The Geithner, Summers, Obama plan may be too radical, too complex and too elusive to even explain — if and when the details become known….

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“You’re talking about seizing private businesses and you don’t consider that radical?” Manzullo [Rep. Donalsd Manzullo; R-Ill] replied, his voice rising.

Manzullo is trying to get [Treasury Secretry Timothy] Geithner to give details of the plan — that’s where Geithner got stung before — but Geithner doesn’t have them yet.

If the plan were not radical, Manzullo said to Geithner, “you would have answers to some of my questions, such as, what size business would be subject to this?”

From The Washington Post
http://voices.washingtonpost.com/econom
y-watch/2009/03/geithner_new_rules_o
f_the_game.html?hpid=topnews

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By MARTIN CRUTSINGER, AP Economics Writer

Wall Street wizards

have proved adept at designing complex financial products to sidestep existing regulations. And Vincent Reinhart, former director of monetary affairs at the Federal Reserve, says, “You’re going to see firms try to figure out how to be under the radar.”

For example, private equity investors might try to buy large hedge funds and chop them into funds that would be small enough to operate unregulated, Reinhart said.

Treasury Secretary Timothy Geithner, unveiling the plan Thursday, said the nation’s economic crisis demands bold action.

“We need much stronger standards for openness, transparency and plain commonsense language throughout the financial system,” he told the House Financial Services Committee.

House Financial Services Committee Chairman Barney Frank, D-Mass., ... 
House Financial Services Committee Chairman Barney Frank, D-Mass., concludes a hearing on President Obama’s proposals for an extensive overhaul of financial regulations with Treasury Secretary Timothy Geithner there to defend the plan, on Capitol Hill in Washington, Thursday, March 26, 2009. (AP Photo/J. Scott Applewhite)

Read the rest:
http://news.yahoo.com/s/ap/200903
27/ap_on_go_ca_st_pe/financial_regulation

Related:
Obama’s public overexposure

Obama Still Thinks After Economy Recovers; Bank, Finance Good Times Can Return?

 Obama’s Economic “Rescue;” “The plan is very, very clever. Maybe too clever.”

Obama Still Thinks After Economy Recovers; Bank, Finance Good Times Can Return?

March 27, 2009

On Monday, Lawrence Summers, the head of the National Economic Council, responded to criticisms of the Obama administration’s plan to subsidize private purchases of toxic assets. “I don’t know of any economist,” he declared, “who doesn’t believe that better functioning capital markets in which assets can be traded are a good idea.”

By PAUL KRUGMAN
The New Yok Times

Leave aside for a moment the question of whether a market in which buyers have to be bribed to participate can really be described as “better functioning.” Even so, Mr. Summers needs to get out more. Quite a few economists have reconsidered their favorable opinion of capital markets and asset trading in the light of the current crisis.

But it has become increasingly clear over the past few days that top officials in the Obama administration are still in the grip of the market mystique. They still believe in the magic of the financial marketplace and in the prowess of the wizards who perform that magic.

The market mystique didn’t always rule financial policy. America emerged from the Great Depression with a tightly regulated banking system, which made finance a staid, even boring business. Banks attracted depositors by providing convenient branch locations and maybe a free toaster or two; they used the money thus attracted to make loans, and that was that.

And the financial system wasn’t just boring. It was also, by today’s standards, small. Even during the “go-go years,” the bull market of the 1960s, finance and insurance together accounted for less than 4 percent of G.D.P. The relative unimportance of finance was reflected in the list of stocks making up the Dow Jones Industrial Average, which until 1982 contained not a single financial company.

It all sounds primitive by today’s standards. Yet that boring, primitive financial system serviced an economy that doubled living standards over the course of a generation.

After 1980, of course, a very different financial system emerged. In the deregulation-minded Reagan era, old-fashioned banking was increasingly replaced by wheeling and dealing on a grand scale. The new system was much bigger than the old regime: On the eve of the current crisis, finance and insurance accounted for 8 percent of G.D.P., more than twice their share in the 1960s. By early last year, the Dow contained five financial companies — giants like A.I.G., Citigroup and Bank of America.

And finance became anything but boring. It attracted many of our sharpest minds and made a select few immensely rich.

Underlying the glamorous new world of finance was the process of securitization. Loans no longer stayed with the lender. Instead, they were sold on to others, who sliced, diced and puréed individual debts to synthesize new assets. Subprime mortgages, credit card debts, car loans — all went into the financial system’s juicer. Out the other end, supposedly, came sweet-tasting AAA investments. And financial wizards were lavishly rewarded for overseeing the process.

But the wizards were frauds, whether they knew it or not, and their magic turned out to be no more than a collection of cheap stage tricks. Above all, the key promise of securitization — that it would make the financial system more robust by spreading risk more widely — turned out to be a lie. Banks used securitization to increase their risk, not reduce it, and in the process they made the economy more, not less, vulnerable to financial disruption.

Sooner or later, things were bound to go wrong, and eventually they did. Bear Stearns failed; Lehman failed; but most of all, securitization failed.

Which brings us back to the Obama administration’s approach to the financial crisis.

Much discussion of the toxic-asset plan has focused on the details and the arithmetic, and rightly so. Beyond that, however, what’s striking is the vision expressed both in the content of the financial plan and in statements by administration officials. In essence, the administration seems to believe that once investors calm down, securitization — and the business of finance — can resume where it left off a year or two ago.

To be fair, officials are calling for more regulation. Indeed, on Thursday Tim Geithner, the Treasury secretary, laid out plans for enhanced regulation that would have been considered radical not long ago.

But the underlying vision remains that of a financial system more or less the same as it was two years ago, albeit somewhat tamed by new rules.

As you can guess, I don’t share that vision. I don’t think this is just a financial panic; I believe that it represents the failure of a whole model of banking, of an overgrown financial sector that did more harm than good. I don’t think the Obama administration can bring securitization back to life, and I don’t believe it should try.

Obama’s Economic “Rescue;” “The plan is very, very clever. Maybe too clever.”

March 27, 2009

“The parties may elect in respect of two or more Transactions that a net amount will be determined in respect of all amounts payable on the same date in the same currency in respect of such Transactions, regardless of whether such amounts are payable in respect of the same Transaction.”

By Michael Kinsley
The Washington Post

Got that? It’s a sentence, chosen more or less at random, from the most recent (2002) Master Agreement of the International Swap and Derivatives Association. These are the people who brought you the “credit default swap,” the mysterious financial transaction that almost destroyed the world, and might yet do so if the Obama administration’s rescue plan doesn’t work. The Master Agreement is used for credit default swaps the way a standard real estate broker’s lease is used for renting a one-bedroom apartment.

Except that we all know what a one-bedroom apartment is. How many of us know what a credit-default swap is? The media do their best to explain it, often using attractive drawings with arrows showing money going hither and thither. Or sometimes they throw up their hands, as I’m doing, and simply describe them as “exotic financial instruments,” and leave it at that. Part of the hostility that banks and Wall Street now enjoy comes from a popular suspicion that the mystery and complexity are part of the point — that these things are made impossible to explain on purpose, as a way of avoiding scrutiny. “Don’t criticize what you can’t understand,” as the financier Bob Dylan once put it in another context.

One problem with the Obama financial rescue plan is that it is almost as complicated and obscure as the problem it is designed to solve. Treasury Secretary Tim Geithner, testifying yesterday on Capitol Hill, called for greater simplicity in financial regulation. Good luck with that. Here is a sample passage from one of the explanatory documents released by Treasury this week. “Private investors may be given voluntary withdrawal rights at the level of a Private Vehicle, subject to limitations to be agreed with Treasury including that no private investor may have the right to voluntarily withdraw from a Private Vehicle prior to the third anniversary of the first investment by such Private Vehicle.” All this talk of getting into and out of private vehicles may be a sly reference to the car and driver that did in Tom Daschle. Otherwise, who knows?

The government’s most urgent goal is to cleanse the financial system of “toxic assets.” These used to be known as “bad debts” until somebody decided that a more hysterical term was needed to reflect the gravity of the situation. Nobody gives a hoot about bad debts anymore. The government could have just swallowed hard and bought up these toxic assets itself. Then it could have buried them at Yucca Mountain in Nevada, where it has almost completed a $13.5 billion nuclear waste dump, just in time to promise never to use it, at least not for nuclear waste. Unlike nuclear waste, credit default swaps are unlikely to leach into the groundwater. And even if they do, there is no detectable difference between trading in derivatives such as credit default swaps and Nevada’s principal industry anyway. Except that the amounts involved in Nevada-style recreational gambling are much smaller. Oh, and the government doesn’t bail out petty gamblers. Yet.

But the administration decided that it would be more exciting to let private financiers in on the fun. This is an odd echo of what created the mess in the first place. Government-chartered entities such as Fannie Mae and Freddie Mac operated with an implicit government guarantee, whereas firms we all thought were private, like AIG and Citicorp, were deemed “too big to fail.” One way or another, the government got sucked in against its will. It felt it had no choice. The private firms now pondering whether to join the party do have a choice, so they will have to be subsidized.

The plan is very, very clever. Maybe too clever. It depends on convincing smart financiers that there is a killing to be made investing, with government help, in toxic assets. Inevitably, when the dust settles, it will turn out that some private firms and individuals actually have made a killing, which will cause another eruption of populist resentment like the one over the AIG bonuses. Fear of such an eruption, and any retrospective mischief coming out of Congress as a result, is going to make private money harder to entice, which means the subsidies will have to be larger, which means the killings will even be greater.

Read the rest:
http://www.washingtonpost.com/wp-dyn
/content/article/2009/03/26/AR20090
32603113.html?hpid=opinionsbox1

U.S. Seeks Expanded Power to Seize Firms

March 24, 2009

The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, according to an administration document.

The government at present has the authority to seize only banks.

By Binyamin Appelbaum and David Cho
Washington Post Staff Writers

Giving the Treasury secretary authority over a broader range of companies would mark a significant shift from the existing model of financial regulation, which relies on independent agencies that are shielded from the political process. The Treasury secretary, a member of the president’s Cabinet, would exercise the new powers in consultation with the White House, the Federal Reserve and other regulators, according to the document.

The administration plans to send legislation to Capitol Hill this week. Sources cautioned that the details, including the Treasury’s role, are still in flux.

Read the rest:
http://www.washingtonpost.com/wp-dy
n/content/article/2009/03/23/AR200
9032302830_pf.html

Australia Stresses “Global Economy,” Asks More From China

March 24, 2009

US Treasury Secretary Timothy Geithner has commended efforts by Prime Minister Kevin Rudd to cushion the economy against the global credit crisis and bolster Australia’s financial system.

Sydney Morning Herald

Mr Rudd is “A+ on these issues”, Mr Geithner said, speaking at a Wall Street Journal conference in Washington overnight. “If we did what he advised, we’d all be in a better place.”

The Federal Government last month said it would spend $42 billion in cash handouts to families and on infrastructure.

The Government also guaranteed bank deposits last year and indicated in January it might establish a fund to lend directly to companies should foreign banks fail to roll over as much as $75 billion of maturing debt.

Mr Rudd, who spoke after Mr Geithner, said US President Barack Obama’s plan to finance as much as $US1 trillion in purchases of illiquid real-estate assets was an important step.

“None of the above works unless it’s globally co-ordinated,” Mr Rudd said.

When asked whether there was a need for a global reserve currency, Mr Rudd said: “The dollar’s position on that score remains unchallenged.”

He also said everyone was waiting for China to “come alive”.

“I detect some modest signs of optimism [about China],” he added.

Mr Rudd also said China must be part of efforts to raise more money for the International Monetary Fund, and that the Asian nation should have voting rights at the fund.

Shelby: Geithner Needs “180 Degree Change” To Stay At Treasury

March 22, 2009

“We are on a fast road to financial destruction,” Senator Richard Shelby (R-AL) said today.

Shelby, speaking on “Fox News Sunday,” said Mr. Obama was going to have to scale back his budget in light of the new estimates: “He’s going to have to. We’re on a — on the fast road to financial destruction, and I see a 20 billion — a $20 trillion deficit in the few years to come,” he said.

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The top Republican on the Senate banking panel says he doesn’t think the treasury secretary can survive in his job without a 180-degree turnaround.

Treasury Secretary Timothy Geithner is on “shaky grounds” these days with Congress and many in the country, according to the Senate Banking Committee’s top Republican.

Sen. Richard Shelby said Sunday he doesn’t think Geithner will last long unless he starts doing a better job.

Shelby, who voted to confirm Geithner, said he has less confidence in the treasury secretary each day — over the AIG bonus mess, solving the nation’s financial troubles and helping turn around the economy.

“I said competence brings confidence to anything. I don’t see a lot of things positively thus far that Timothy Geithner’s been involved in,” Shelby said Sunday on “Fox News Sunday.”

“He’s going to have to do a 180-degree turnaround, I believe, to be a successful treasury secretary,” he said.

But President Barack Obama has faith in Geithner. The president tells CBS’ “60 Minutes” that if Geithner offered to resign, the answer would be, “Sorry buddy, you’ve still got the job.”

While Shelby did not specifically call for Geithner to resign, at least two Republicans — Reps. Connie Mack of Florida and Darrell Issa of California — did.

White House economic adviser Christina Romer said those calls are “silly.”

“I think all of this discussion is — is really silly. Tim Geithner is an excellent secretary of the treasury. He has been dealt an unbelievably difficult hand to deal with. But he’s actually doing a fantastic job,” Romer said on “FOX News Sunday.”

From Fox News

Related from the New York Times:
http://www.nytimes.com/2009/03
/22/us/politics/22cnd-talkshow
.html?_r=1&hp

Orlando ‘Tea Party’ Rally Draws 4,000; Protests Obama,Taxes, Economy

March 22, 2009

Singer Lloyd Marcus told the crowd assembled in Lake Eola Park on Saturday that he was going to give them his take on the first days of the Obama administration.

Then he shrieked.

| Orlando Sentinel Staff Writer

That pretty much summed up the mood in the park Saturday afternoon, when more than 4,000 people attended the Orlando Tea Party, a conservative rally aimed at expressing discontent with Washington.

“This is maybe the greatest single gathering of God-fearing patriots in the history of Orlando, Florida,” local conservative radio host Bud Hedinger, who emceed the event, told the crowd.

 The attendees, many of whom said they’d heard about the rally on Hedinger’s radio show, brandished flags and homemade signs bearing slogans such as “Repeal the pork or our bacon is cooked” and “Obama lied, liberty died.”

“We’re really scared about what’s happening in our country,” said Debby Whisenand, 71, of Largo in Pinellas County. She waved a sign that read “The problem with socialism is that you eventually run out of other people’s money” on one side, and “You can’t blame Bush anymore” on the other.

'Orlando Tea Party' attendees

Valerie Rike, 52, (left) with sister Christy Bishop, 59, attend the ‘Orlando Tea Party,’ a conservative rally Saturday at Lake Eola, downtown Orlando. (Helen Eckinger, Orlando Sentinel / March 21, 2009)

Her feelings were shared by Lisa Feroli, one of the event’s organizers, who said that a similar fear motivated her to e-mail Hedinger with the idea for the Orlando Tea Party.

“The goal was to get people united, to let people know that they aren’t alone in their feelings on despair,” Feroli said. “We want to speak out against the push toward socialization that we feel is taking place in our country.”

Several speakers addressed the crowd, estimated by Orlando police and event organizers at 4,200, on a variety of topics, including gun rights, freedom of speech, the dangers of communism and, most prevalently, the economy, especially the Obama administration’s bailout plan.

“We have had enough of massive government-driven bailout using our money,” Hedinger said, prompting the crowd to start chanting “U.S.A.” over and over.

The country’s economic woes weighed heavily on attendees, such as Ed Squire, 52, of Winter Springs. Holding a sign that read “Obama — he’s robbin U.S. not Robin Hood,” he said that he was worried about the current rate of government spending.

“There’s absolutely no way as a nation that we can sustain that kind of spending,” Squire said.

Several members of the crowd said they’d recently been laid off, including Ross Iannarelli, 66, of Port Orange, who said he’d just lost his job at an electrical-equipment company.

“They need to shove that bum out,” he said, referring to President Obama. “I hate seeing them spend my grandchildren’s money.”

Read the rest:
http://www.orlandosentinel.com/news/
local/orl-locteaparty21032209mar2
2,0,426670.story

Related:
Geithner’s Toxic Asset, Bank Plan Offers Nothing New To A Bad Idea

Sen. Gregg says Obama budget will bankrupt US

Related:
Obama Talks Too Much: Time For Action
(Fire Geithner, for one….)

Obama Overexposed

 Threat of inflation sky high

Obama’s Katrina Moment Is Here Now

Obama Administration May Not Understand Economy

 Public Outrage Could Devour Obama Presidency

Financial Advice, Recovery, Trumped by Obama, Congress, Media, Polls
(Maybe Axelrod is giving better advice than Summers, Geithner…)

Protesters At Homes Of AIG Execs
.
Obama, Biden Chat Up Economy; Congress Talking “Stimulus II”

Rosy Talk From Obama and Gang is BS

Michelle Malkin
http://michellemalkin.com/2009/0
3/21/liveblogging-the-lexington-k
y-tea-party/

Government To Have Bigger Role in All American Lives; Obama Seeks to Increase Oversight of Executive Pay

March 21, 2009

The Obama administration will call for increased oversight of executive pay at all banks, Wall Street firms and possibly other companies as part of a sweeping plan to overhaul financial regulation, government officials said.

By STEPHEN LABATON
The New York Times
.
The outlines of the plan are expected to be unveiled this week in preparation for President Obama’s first foreign summit meeting in early April.

Increasing oversight of executive pay has been under consideration for some time, but the decision was made in recent days as public fury over bonuses has spilled into the regulatory effort.

Related:
Financial Advice, Recovery, Trumped by Obama, Congress, Media, Polls 

Wall Street Journal: “Geithner Incapacitated;” President Voices Support

The officials said that the administration was still debating the details of its plan, including how broadly it should be applied and how far it could range beyond simple reporting requirements. Depending on the outcome of the discussions, the administration could seek to put the changes into effect through regulations rather than through legislation.

One proposal could impose greater requirements on the boards of companies to tie executive compensation more closely to corporate performance and to take other steps to assure that outsize bonuses are not paid before meeting financial goals.

The new rules will cover all financial institutions, including those not now covered by any pay rules because they are not receiving federal bailout money. Officials say the rules could also be applied more broadly to publicly traded companies, which already report about some executive pay practices to the Securities and Exchange Commission. Last month, as part of the stimulus package, Congress barred top executives at large banks getting rescue money from receiving bonuses exceeding one-third of their annual pay.

Beyond the pay rules, officials said the regulatory plan is expected to call for a broad new role for the Federal Reserve to oversee large companies, including major hedge funds, whose problems could pose risks to the entire financial system.

It will propose that many kinds of derivatives and other exotic financial instruments that contributed to the crisis be traded on exchanges or through clearinghouses so they are more transparent and can be more tightly regulated. And to protect consumers, it will call for federal standards for mortgage lenders beyond what the Federal Reserve adopted last year, as well as more aggressive enforcement of the mortgage rules.

The plan is being put together in advance of the meeting of the Group of 20 industrialized and developing nations in London, an annual event that is expected to be dominated by the global financial crisis and discussions about better oversight of large financial companies whose problems could threaten to undermine international markets.

An important part of the plan still under debate is how to regulate the shadow banking system that Wall Street firms use to package and trade mortgage-backed securities, the so-called toxic assets held by many banks and blamed for the credit crisis.

Officials said the plan would also call for increasing the levels of capital that financial institutions need to hold to absorb possible losses. But in a sign of the fragility of the economic system officials said the administration would emphasize that those heightened standards should not be imposed now because they could discourage more lending. Rather, they would be put in place after the economy began to rebound.

“The argument some are making is that they don’t want to be stepping on the gas pedal and the brake at the same time,” said Morris Goldstein, a senior fellow at the Peterson Institute for International Economics and a former top official at the International Monetary Fund.

Administration officials are also debating how tightly to supervise hedge funds. A broad consensus has emerged among regulators and administration officials that hedge funds must be registered and more closely monitored, probably by the Securities and Exchange Commission. But officials have not decided how much the funds will have to disclose about their investments and trading practices.

A central aspect of the plan, which has already been announced by the administration, would give the government greater authority to take over and resolve problems at large, troubled companies that are not now regulated by Washington, like insurance companies and hedge funds.

Read the rest:
http://www.nytimes.com/2009/0
3/22/us/politics/22regulate.htm
l?_r=1&hp

NYT:
http://www.nytimes.com/

Bankers Press Case Against Punitive Tax 

Obama, Geithner, Congress Squandering Confidence Needed For Recovery

Bonus backlash hits Wall Street

American Democracy With Checks and Balances is Broken; Media, Congress Failing

Obama’s Radicalism Is Killing the Stock Market

 Obama Spending, Tax Plans Likely Out The Window As CBO Predicts Much More Debt

Obama: Why Are We Saving Geithner and His Incestuous Relationship With Wall Street?

Finance, one of America’s great industries, being destroyed by Congress during crisis?

For Cuomo, AIG, Financial Crisis Is His Political Moment

 Did Obama White House Fuel AIG Bonus Mess To Enact Tougher Rules With Public Support, “Outrage”?

Michelle Malkin:
http://michellemalkin.com/2009/0
3/21/liveblogging-the-lexington
-ky-tea-party/