CONTACTING TIM: An Open Letter To Treasury Secretary Geithner (Sent By Certified Mail)
Guest post submitted by Mark McHugh.
I'm still waiting for Geithner to respond to these questions I sent last year:
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By now we are all intimately familiar with the kind of group psychosis that creates price bubbles. You can hear the irrational exuberance crackling in voices surrounding the subject. You can feel the earth shake from the stampede as people scramble to get in on the latest surefire way to get rich.
And then there’s the Treasury bubble.
The US Treasury has sold more than $3.74 Trillion in debt in the last 24 months, which I can only describe as unbelievable. It took almost 8 years for the world to digest the previous $3.7 Trillion. But this time around, the enormous surge in supply has been met with an even bigger surge in demand, that has pushed prices to nosebleed levels. It has all the earmarks of a bubble, except one. Identifiable buyers. I mean, the whole concept of a bubble is predicated on a glut of buyers, isn’t it?
For quite some time now, I’ve been trying to figure out where the never-ending supply of nit-wits lining up to buy ultra-low yielding paper comes from (don’t they understand how bonds work?). I have no answers. I can tell you that despite all the recent TV chatter about the popularity of US treasuries, mutual funds sold more than $100B in 2009 and the holdings of the US saving bond program have been drifting lower since 2006. So don’t go blaming this bubble on ordinary Americans. It’s not China either.
As I discussed in Candy from Strangers, the fastest growing group of buyers for Treasuries is known to us only as “Other Investors.” Don’t get me wrong, I love a good conspiracy theory as much as anyone, but the notion that fantastically wealthy entities are emerging from the shadows to snap up Treasuries at ridiculously high prices sounds more like a fairy tale to me, and I just can’t let this go. On the advice of the founder of The Daily Bail, it was decided that asking some questions directly to Treasury would be a reasonable way to proceed.
I’d like to thank the readers and staff at both Zerohedge and The Daily Bail for all the help and advice they offered. This was truly a group effort, but what would be the point of all of us ending up on some “enemies” list? Anyway, what follows is a list of 15 questions, exactly as submitted to Treasury via snail mail (Treasury has no public email). The United States Postal Service has promised delivery by 3:00 pm Monday August 23. I have no idea what kind of response to expect, but I’ll keep you posted.
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Dear Treasury Secretary Geithner,
In perusing the 2010 Q1 Treasury Bulletin, released June 11, 2010, I am left with many questions concerning the ownership of US Treasuries (Table OFS-2). What follows is a list of specific questions I submit to you on behalf of the American people. Please be advised that your responses (or lack thereof) will be made public.
Question #1 – Why is the table incomplete? Treasury has more than 70 days to compile data from Q1, yet table OFS-2 does not include data for more than 62% ($287 Billion) of the Q1 National debt. The Federal Reserve released the flow of funds data referenced on table OFS-2 on June 10; The bulletin was released June 11.
Question #2 – Why is Treasury dependent on data from the Federal Reserve and is communication so poor that Treasury is unable to obtain data from the Fed prior to public release?
Question #3 – Why doesn’t Treasury update table OFS-2 when the Fed data is released?
Question #4 – Is this right? I have attempted to parse the Fed data and complete Table OFS-2 for the benefit of all Americans. I used data from the Fed flow of funds (Table L.209). Please feel free to comment on the accuracy (my calculations are highlighted).
Question #5 – Why does Treasury fail to more clearly identify “Other Investors”? Approximately $200 Billion (43%) of Treasuries purchased in Q1 were bought by entities only identified as “Other investors”. Treasury defines this group as:
Individuals, Government-sponsored enterprises, brokers and dealers, bank personal trusts and estates, corporate and non-corporate businesses, and other investors.
The Fed flow of funds identifies the purchase amounts of several of these sub groups:
GSEs – $38.2 Billion in Q1
Brokers and Dealers – $8.4 Billion in Q1
Why are these groups hidden as “other investors”? The vast majority of “other investors” fall into the Fed’s Household Sector ($148 Billion) which includes Domestic Hedge Funds. Does Treasury include purchases by Domestic Hedge as “Other Investors” on Table Bulletin? If so, why are they not specifically identified as “other investors” in Table OFS-2?
Question #6 – What was the total dollar amount of Treasuries purchased by Domestic Hedge Funds in Q1?
Question #7 – What was the dollar amount purchased by Individuals in Q1? Treasury limits the purchases of securities by individuals to $5 million per auction, so treasury must keep records of individual purchases. If this information is not available under the FOIA, please explain why.
Question #8 – How could the GSEs possibly have been responsible for purchasing more the $38 Billion in Treasuries in Q1? I am under the impression that the GSE are a taxpayer liability, yet the Fed Flow of funds (Table L.209) claims the GSEs purchased more that $38 Billion in Q1 (see chart). How? And specifically, which GSEs?
Question #9 – Is the $66.8 Billion of Treasuries purchased by Commercial Banks in Q1 the direct result of the Federal Reserve’s Zero Interest Rate Policy (ZIRP)? More than 40 commercial banks were taken over by the FDIC in 2010 Q1, so I am puzzled by the 32.5% increase in Treasury holdings in Q1.
Question #10 – Are there any regulations to prevent banks from borrowing money at zero percent from the Fed and purchasing Treasuries? The Fed will exchange Treasuries for cash through various programs, so in reality purchases made with money borrowed from the Fed are actually “stealth” Fed purchases, unless there are rules to prevent this kind of systemic abuse. Are there?
Question #11 – Are TARP recipients (like Citigroup) allowed to take free money from the Fed, purchase Treasuries and collect interest from taxpayers? This kind of behavior should be prohibited for obvious reasons, please comment on any restrictions.
Question #12 – How are the holdings of the Primary Dealers accounted for? Most are members of the Federal Reserve, as well as Depository Institutions, and “Brokers and Dealers.” Please explain how they are accounted for on Table OFS-2.
Question #13 – What percentage of the debt issued in Q1 was purchased by entities not insured in any way by the FDIC, or any government or government agency, and who do not have access to any Treasury or Federal Reserve programs? In other words, what percentage were purchased by entities who bear the full risk of sovereign default. It is my estimation that no more than 50% of the Q1 Treasury purchases could be classified in this manner.
Question #14 – Why does Treasury issue debt in excess of deficit? This has been an area of some speculation recently. Is this merely the effect of rolling over maturing debt? If not. What happens to proceeds from surplus issuance?
Question #15 – Does Treasury provide information on maturing debt? The US has run deficits for 22 consecutive months as of this writing and issued more than 3 Trillion dollars in debt during that time. Unless drastic changes in policy are made, that $3 Trillion will need to be rolled again, along with any other maturing debt. If the Treasury tracks maturing debt schedules, would you please direct me to that information?
Closing Remarks
Thank you for reviewing these questions. The Emergency Economic Stabilization Act (US Title 12 Chapter 52) granted the Secretary of Treasury extraordinary powers, but requires “public accountability for the exercise of such authority.” Under that authority, I humbly request answers to these questions on behalf of all Americans.
I hope you understand that without clarification the public will be left to speculate about the veracity of Treasury’s auctions. It would seem that either the owners of hundreds of billions of Treasuries are being hidden to disguise free transfers of taxpayer money to major banks, or being made by entities that do not wish to be identified, thus raising questions about other potential “exchanges” (influence over policy, weapons, military intervention, etc.).
You have the power and obligation to provide the transparency Americans deserve regarding our future. I urge you to seize this opportunity.
Sincerely,
Mark McHugh
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Check out Mark's blog:
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Aug 31, 2010 at 1:00 AM
Reader Comments (45)
http://acrossthestreetnet.wordpress.com/2010/07/28/who-owns-the-us-debt/
http://acrossthestreetnet.wordpress.com/2010/04/27/goldman-sachs-worlds-biggest-lemonade-stand/
http://www.washingtonexaminer.com/opinion/blogs/beltway-confidential/philly-requiring-bloggers-to-pay-300-for-a-business-license-101264664.html#ixzz0xR1NuHSK
That's for you mark...
As the Sino-American showdown in the South China and Yellow Seas escalates into the gravest superpower clash since the Cold War, the United States cannot wisely rely on China to help fund its budget deficit for any longer.
http://www.telegraph.co.uk/finance/comment/7958823/America-no-longer-needs-Chinese-money-for-now.html
Mark...this by ambrose evans pritchard touches on the themes raised in your story..sort of....
I have to wonder though, Geithner ignores everything else about the majority of all Americans, do you think he will even read your letter? I hope so cause I really want to see his answers to your questions.
I bet he turns around and faces the corner....? Tex !
http://www.youtube.com/watch?v=j7GJcKuVGm8&feature=related
Sincerely,
Tim
By the way, do you really think it is Timmy doing the work. Does Turbo Tax incorrectly do that stuff?
Question 16...Timmy, when you and Barry were kids playing in the fields of Indonesia (Timmy's father was Barry's mother's boss), did Barry ever talk about one day destroying America?
p.s. Mawk, change Tim Geithner to Paul Volcker and you will be that much closer to your answers.
Dear Mark,
If I knew the answers to those question, I would be golfing in the Vineyard with Barry.
Besties,
Timmy
p.s. I think Barry is my brother from the same mother.
But to expostulate anyway:
There's the message or "the truth" sometimes called religion, sometimes socialism, free enterprise, existentialism, Keynesian economics, propaganda, advertising ...
There's the messenger or, Reputation, degrees from X university, power, money, book sales, website hits, television ratings ....
There's the targeted audience, or interpreter of the message: the judge, the army, beer drinkers of America, Republicans, the Black Panther Party, Hummer drivers ....
The cynic in me doesn't expect a reply, but remember this, these are PUBLIC SERVANTS we are talking about and if they can't be bothered responding, we need to find people who will.
I think Philly trying to tax bloggers sucks, but fortunately I live outside of the city, and since I have never made a single red cent as a writer, no one could ever misconstrue this as a business, could they?
It isn't complicated to say that people listen to power and not truth.
It's simple.
Mark:
Politicians are not public servants. We are their servants and they are our masters.
I'm surprised you haven't memorized that truth by now.
All revolutions, including the American, have tried to reverse that equation and all have failed.
Our political masters use the rhetoric of the American revolution while shoring up the power of the oligarchy.
It's really quite simple.
fuck you mark...
Sincerely,
tim geithner...
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I actually think geithenr might be compelled to answer...most letters like this contain some personal attack...this one doesn't...much of the questions are technical in nature regarding reporting...he just might respond...
I don't try anymore. I don't have to.
As Picasso said, I don't search, I find.
D.B.:
People in power only talk to other people in power.
The usual misunderstanding of this truth is encapsulated in the Groucho Marx joke:
I would never be a member of a club that would have a guy like me as a member.
This video reminded me of you...
http://www.youtube.com/watch?v=b24sxy76it8
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Actually james...geithner is open to speaking with bloggers...maybe you missed these links last week...and this is the 2nd meeting with economic bloggers...treasury did the same thing 1 year ago...i think you are perhaps too cynical...and that is saying something coming from me...
http://blogs.reuters.com/felix-salmon/2010/08/19/what-treasurys-thinking/
http://blogs.reuters.com/felix-salmon/2010/08/20/why-treasury-briefings-are-off-the-record/
http://blogs.reuters.com/felix-salmon/2010/08/17/why-banks-find-it-so-easy-to-borrow/
http://www.creditwritedowns.com/2010/08/an-afternoon-at-the-treasury.html
http://www.marginalrevolution.com/marginalrevolution/2010/08/afternoon-at-the-treasury.html
A ton of fascinating info inside those links...all about geiuthner's meetings with bloggers...so again i will say i think the odds are decent that geithner responds....
May the farce be with you.
I don't think of myself as cynical. I'm reading Don Quixote at the moment and I often identify with the old madman.
We have to learn from these hoary old wise men or we are doomed.
Of course America speaks the rhetoric of democracy and goes through all the paces. Barack Obama and almost every other politician reads carefully crafted speeches and congressmen respond to their constituents. The same is true of the president's cabinet members.
But real influence comes from money and power.
After all, America is still making the world safe for democracy and has been for at least fifty years. And that is not a deeply bitter and ironic statement, it's just a smirk directed towards fifty years of tragic duplicity and naked aggression hiding under American revolutionary rhetoric.
I'm not being cynical, just realistic. Do you need quotes from the King James Bible or Shakespeare to be convinced?
American politicians manipulate the masses with rhetoric and political gesturing which is paid for with money. It isn't guaranteed that Meg Whitman will be the next governor of California and it wasn't written that Arnold would be the last governor of California.
But money talks and talk walks as the saying goes.
But I'm not trying to convince you. In fact, we Americans don't seem to be able to change each others minds about anything from Keynesian economics to gay marriage.
So why should I try?
I'm going to hang it up for awhile and consult the Knight of the Sad Countenance for guidance.
Miniver Cheevy, child of scorn,
Grew lean while he assailed the seasons;
He wept that he was ever born,
And he had reasons.
[...]
Miniver scorned the gold he sought,
But sore annoyed was he without it;
Miniver thought, and thought, and thought,
And thought about it.
Miniver Cheevy, born too late,
Scratched his head and kept on thinking;
Miniver coughed, and called it fate,
And kept on drinking.
I don't see any point in accusing Geithner of anything. If he refuses to answer those questions, that will be proof enough for all of us. It's an opportunity for him to prove, one way or the other, what kind of man he is.
Thinking that you don't have to justify witch inventions is the very insanity that is the heart of witch hunting itself.
Mark:
Generals talk to privates but for the most part, people in organizations only communicate to other people who are just above, just below or equal to them in rank.
Since most human organizations are far from being pure meritocracies, when people are too intelligent for the rank they occupy they are often fired because they make their superiors uncomfortable. The higher ranks of these organizations are mostly occupied by people who went to the right colleges, are related to the owner of the company or have some other non-meritorious advantage.
Even when intelligent people are promoted for the survival of the company or organization they often rise to their level of incompetence (to paraphrase the Peter Principle) which complicates things even further.
Whatever the case, generals and their superiors hash out their ideas and strategy among themselves and then package them for general consumption. Then they give orders to their subordinates to carry out their mission.
If Geithner's people decided to craft a response to your questions (Geithner would never respond all by himself of course) it would be simple publicity and damage control and responding to you would almost be a random act.
However, the simple act of selecting your questions for a response would immediately give you a reputation and make you into a guy who needs to be listened to.
Most people don't understand this process because they are so used to dealing with people on the basis of status and rank instead of ideas, that they aren't aware of any other way of relating. It's like the fish who isn't aware of the water he swims in because it's always been there.
The process becomes transparent if you are captipulted into a much higher rank or lose rank, quickly. Most people stay at the same level most of their lives or rise and fall slowly so they don't notice it.
It is also made visible by studying history. An exmple would be the change of the America character that existed from 1776 to 1865 (Tocqueville) to the American character that exists from 1975 to the present or the change in the nature of baseball say from the 1920's to the 1990's.
But we can't learn this stuff out of books, we have to experience it to make it real. So maybe I'm just making so many black marks against a white background and only amusing myself and other people who already agree with me.
CLEVELAND — The rollout of John Boehner’s campaign for speaker of the House went public Tuesday morning here in his home state, as he outlined an economic agenda that combined old GOP economic ideas with a few new ones and called for the firing of President Barack Obama’s economic team.
Read more: http://www.politico.com/news/stories/0810/41396.html#ixzz0xYaqVfAw
Read more: http://www.politico.com/news/stories/0810/41396.html#ixzz0xYZrnYCR
http://www.politico.com/news/stories/0810/41396.html
I think I understand what you're getting at and I don't think I have any delusions about what I'm up against. It's more making sure that I go through the exercise of asking questions to the powers that be. For me, it would be far more embarassing to say you never tried to question the authority, then to say you tried to no avail. Is this an exercise in futility? probably, but so what? It's one more data point of all the hypocrisy about "transparency".
To put it another way, it's like asking just to make sure that the most beautiful woman in the world would never go out with you. (Z's should have a field day with that).
Try telling your seventeen year old son not to smoke. You've got to do it but so does he.
He who takes on the greatest risk, stands to gain the most................!
Sit on yr Fu*king Ass, you will gain nothing but "Fat".......
Ask a question, you may get an answer............its not a garentee.......................
He who sits and dose Nothing, recives "Nothing"...............
He who trys, is already a winner ?
Tex !
One of the other very important things I'm trying to get across here is that NOBOBDY in the general population knows what the hell is going on with these treasury auctions. Anyone who says they know is lying. People think it's China (it's not) or the Fed (if it is they're lying about how much they're buying). is it wealthy individuals (I'm not buying that). This seems like a giant shell game. People should really care about this....
I know it seems like a pain in the ass, but it would probably just take about 10 minutes to send a few emails...just a thought...
You just may hit the "G Chord" on my guitar, and get a come-back on yr question. Ya neaver know. If you do get a responce, you got bigger balls than anyone of us guys do, thats fer sure..................
The Swuer-Rats in the goverment know whAre to huttle, and ol Barnney Frank knows whAre to poke them.
The questions are great and valied. Shoved in front of his face, how can you not respon, its out in the open. You got him so backed into a corner, he has to respond. Time will tell.
Dont ya just love living today.....? Were making histroy, and re-writing the histroy books as we speak. Nobody could of seen this comming just 30 years ago.....................? Tex !
Let me be blunt. I don't like the idea of Treasury and bloggers cuddling behind closed doors one bit. In my opinion, that's probably the main reason nobody is reporting on how bad the stench from Treasury auctions is. Do they get free danish and deputy propagandist pins?
I wanted to make sure this dialogue was public. No secrets. And I thamk you for allowing me to do it this way.
Felix Salmon (or anbody else) is allowed to chime in if they want, but I'm not chasing them down. If they can't find a story this big, right in front of their faces - F 'em.
This guy must have gotten a really nice danish:
"As Tyler [Cowen] said after an earlier visit, Geithner is smart and deep. Geithner took questions on any topic. Bear in mind that taking questions from people like Mike Konczal, Tyler, or Interfluidity is not like taking questions from the press. Geithner quickly identified the heart of every question and responded in a way that showed a command of both theory and fact. We went way over scheduled time. He seemed to be having fun."
http://www.marginalrevolution.com/marginalrevolution/2010/08/afternoon-at-the-treasury.html
As commenter Bill Stepp asked on the same blog:
"Why not rename your blog 'Court Intellectuals in the Service of State Power'?"
Yves Smith has remained decidedly un-cozy, however. Bravo for that.
There's a great quote in that link from a senior official from Treasury:
"•“Markets believe we can borrow. The public doesn’t. We need both to move forward on the fiscal front."
What market #@A^ is he talking about? There's nothing to suggest that Treasury auctions even remotely resemble anything that can be called a "market."
AAAHHHHHH!!!!!!!!!!!
When ever I see him talk, I'm actually expecting him to say, "the dog ate my homework...."
(Yes you've found a raw nerve here).
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"Gabe" comments:
So Geithner gives 1 trillion of taxpayer(us) money to banksters...who then use the money to buy bonds, which the taxpayers(us) will pay interest on to the banksters...and Geithner tells us how wonderful things are because the "market" is willing to lend us money?!
(maybe I'm just pissed because I'm not important enough to get free danish)
(maybe I'm just pissed because I'm not important enough to get free danish)
You know better than to eat it if they gave you one, Mark....But the thought is good. Sugar is always better tasting, than Goverment "Poop" ?