Geithner tackles demons in gripping new book
The main takeaway: History still haunts the banking sector, which remains a terrible investment.
After you read "Stress Test" by former Treasury Secretary Tim Geithner, you may never want to buy a bank stock again. That may be my chief takeaway from this newly indispensable book about the financial crises that plunged this country into the Great Recession. I certainly intend to ask Tim, when I sit down with him at the Barnes & Noble in Union Square after "Mad Money" tonight, why anyone would even contemplate investing in one of the behemoth banks that were so integral to the near-collapse of the U.S. -- not just the banking system but the whole country.
If you are as enthralled with the turmoil of that period as I am -- seeking every nuance of what went wrong, who went wrong and what was done to stem the collapse and what could have been done better -- then the aptly named book will become your quick-turning bedside reader.
They are all there: Bear Stearns, Lehman Bros., AIG (AIG), Washington Mutual, Citigroup (C), Countrywide, Bank of America (BAC), Merrill Lynch, Wachovia, Fannie Mae (FNMA), Freddie Mac (FMCC). They're depicted not so much in living color but in stark reality -- as the true ne'er-do-wells of the era.
The behind-the-scenes denouement or near-death of each is detailed with an exactitude that makes me feel Geithner is a totally honest broker, even as I am sure he would be the first to admit that he lacks a dramatic hero-villain flare -- not that there weren't any.
In fact, we've got bums galore. They almost seemed drawn to the industry. It's impossible to imagine a group of trucking-company executives -- or retailing CEOs or health care professionals -- systematically performing as horrendously and as heinously as these bank bosses have done. They are, at times, laughably villainous, as in one anecdote about John Thain. According to the book, in an incredibly tense meeting regarding the Troubled Asset Relief Program (TARP), Thain -- who was at that point running Merrill Lynch and is one of the richest men in the world -- inquired about assurances on his executive compensation during a discussion of the government's program to save the financial system. Good grief!
I know Geithner didn't write the book as an investor guide to banks. But as with any good book, you can extrapolate what you wish from the rich composite of regulators and the regulated populating the text. For me, this has got to be one of the most cautionary tales about a subset of an asset class. Lightly buried within "Stress Test" are the reasons, both before and after the crisis, that bank stocks are valued as low as they are these days.
First, going into the Great Recession, bank financials and non-bank financials were meaningless, as we now know. Everything you saw on paper was pretty much a lie. You simply could not look at anything publicly issued by these banks and make a judgment of what they owned, what exposure they had, what they even really were.
Second, if you think you were clueless but the regulators had a handle on it, remember: Going into the meltdown, Geithner was running the New York Fed and didn't know, either. Whose fault was that? This is unanswered by the book. But it sure didn't help that some of the biggest and most important scofflaws in the book, like Richard Fuld, who built and ran Lehman into the ground, served on the bank board.
Third, look at the eventual consequences of that period. Coming out of the Great Recession, many of these bankers belonged in handcuffs -- and I say "belonged" because the statute of limitations has sadly run out on these ne'er-do-wells. Yet we know these bankers' actions were so egregious that the government, led by Geithner, had no choice but to put the whole system in handcuffs via the aptly named "stress test" regimen that now prevails.
Put simply, I know now that banks are far more enslaved and straitjacketed than I had realized. The ability for them to earn a real return on anything other than fees and conservative lending may be gone for the foreseeable future -- the only real punishment meted out from the era. Given the boneheaded mistakes that have been made since the crisis, like the London Whale at JPMorgan Chase (JPM) or the $4 billion error just discovered in Bank of America's bond portfolio, I don't expect the rules to change anytime soon.
The bottom line? The demons of the past haunt this group far more than we realize, and when you read "Stress Test," you might want to thank Geithner for recognizing that someone had to check the greed, or at least grade it and flunk those institutions that just don't get that the world has changed. Unfortunately, the whole class gets held back because of the errors of a few -- hence why the group is just such a terrible place to put your investment dollars.
Jim Cramer's Action Alerts Plus: Check out this charitable trust portfolio to see the stocks Cramer thinks could be winners. The portfolio is long JPM and BAC.
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Jimmy, all these lying SOB knew exactly what was going from the Federal Reserve to those in Congress. Now they all want to behave as if everyone one was completely clueless. The First Defense of a Criminal is to LIE. The Second Defense is to make sure all the Criminals involved spread the same LIE.
The Talking Heads of Wall-street are terrified to tell folks that the Main Problem which cause the Great Recession, Scam Banking Derivatives, has only gotten Worse. All anyone has to do, just look at the information freely available from sites via the Fed Reserve and the Bank for International Settlements (BIS) 2014 site.
Big Banks basically cooked up phony investments aka scam Derivatives and Sold them to anyone and everyone. These Scam derivatives have been sold to individuals, corporations, governments and municipalities worldwide. The truly terrifying part, they are still there waiting to once again wreck havoc throughout the global Economies.
override of a veto - The process by which each chamber of Congress votes on a bill vetoed by the President. To pass a bill over the president's objections requires a two-thirds vote in each Chamber. Historically, Congress has overridden fewer than ten percent of all presidential vetoes.
Repeal of Glass Steagall was passed by a 90% margin in the Senate, do the freaking math. 52 Republicans voting Yes along with 38 Democrats voting yes. There was only 8 Nay votes with 1 voting present and 1 not voting.
Repeal of Glass Steagall was passed by a 83% margin in the House, do the freaking math. 208 Republicans voting Yes along with 152 Democrats voting yes. There was only 57 Nay votes. with 15 not voting.
How is it that Clinton received a Veto Proof Bill but a posters for the nth time tells everyone how Clinton was at fault for getting rid of Glass Steagall. You can shout to the Mountain Top how you voted 50 plus times to Repeal the ACA but you are quiet as a mouse on your vote on this Bill.
"Portfolio manager Patrick O’Shaughnessy was talking with friends last year when he told them he invests only in stocks. “They thought that this was an incredibly risky proposition,” said O’Shaughnessy, 29, of O’Shaughnessy Asset Management in , , which has about $7 billion under management. “I found pretty universal skepticism.”
They don't have stability, Patrick. You don't either. In fact, financier isn't a career so how will you fare starting over at the burger flipper level... Patrick? Your RACKET has destroyed everything. Why are "smalls" hurting? Because "bigs" are well-funded by the same future everyone except YOU see as indentured by today's DEBT, Patrick. Your "generation" has plenty of commonsense by staying out of the markets. Being in them means they will be paying the tab for today's stupidity. Staying out is the only way they will achieve a replacement currency for the one being ruined now and firm regulatory CONTROL over your sector. Forget writing the book... Patrick... open your eyes, gain a skill set and join the REAL world.
My take-a-way on your explanation....NTU..
Is most PHD's don't know shidt, or are all liars.....Which is it..??
Maybe good at Philosophical discussions, questions and broad non-specific answers.
And horrible at Practical Applications, outside of meaningless trial and error attempts.
There are still more greed crisis out there just waiting to be realized when the ponzi schemes collapse
Like I have been saying the dollar collapse is going to be on Sept 15, 2015
CGT11 can you share with us what these scumbags control "off the floor"? Just curious.
I mean do they yell out "Give Me 50" and you drop down to do push ups?
Hard to believe this is an ah hah moment Jim. This all started with the S&L fiasco and nothing was ever done to punish the banksters over that one. Just wait until we have the mass fraud uncovered in China and emerging markets. Who will pay for that one? Yes the three foolish to be Trusting American Taxpayer as usual. Everything about Banking needs to be out in the open. But like most Guberment activities they get away with either hiding their actions or telling the R & D believers a line and getting away with it.
NTU....I tend to think you understand little of my so-called liberal values....
A miss-calculation, that sometimes confuses conservatives or some over the top...?
THINK MY WAY, or YOU ARE COMPLETELY WRONG...
Being judged a liberal, I find somewhat humorous, and it may be apparent that others use a wide brush out of their tool boxes..
Also a fact to me, that many and everyone that thinks an education is the only pathway to success,
have sometimes been mislead down primrose paths...?
Although degrees and sheepskins are potential door openers...
Schools, Colleges and Universities; Cannot teach "Intelligence and Common Sense"...IMO
Along with the a miss-conception, with myself not understanding or maybe even being jealous of others having educations, actually not true...I encourage all to partake of schooling and experiences in life as much as possible.
Many in our Family have and most are quite successful in life, even when they haven't.
I'm proud of that, and content with what we have.
Oh yeah, almost forgot, I don't go to my Garage Mechanic to have my Heart diagnosed or worked on....But I've seen many Cardiologist, that are very POOR at what they do...
And others that don't understand what ABS brakes do, or what a carburetor is...
I wonder who or what cramer was "gripping" as he read this book ......
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