Why on earth would your librul media not want to investigate how outgoing Treasury Secretary Tim “Turbo Tax” Geithner was accused of leaking inside information to Wall Street –by the Richmond Fed president? I can’t imagine, because it does seem like a story to those of us outside the Beltway bubble. Maybe the complicit ladies and gentlemen of the corporate media could get up off their knees and, you know, actually cover this story? Maybe earn those paychecks for doing something other than parroting the conventional wisdom of the elite?
Columbia Journalism Review’s Ryan Chittum, about the 2007 Federal Reserve transcripts released last week:
Of all the majors, Reuters does the best, and it advances the story by getting Lacker to stand by his 2007 comments about Geithner and to expand them to include other banks beyond BofA:
“My understanding was that (New York Fed) President Geithner had discussed a reduction in the discount rate with these banks in connection with these initiatives.”
But Reuters still falls well short of telling the whole story here. It doesn’t take the obvious next step and look at what happened in markets that day.
For that we turn to… Zero Hedge, which appears to have been the first to spot the Geithner-Lacker exchange last Friday:
What makes this much more interesting, as Zero Hedge notices, is that the Lacker-Geithner spat came at about 6:15 p.m. on August 16, four hours after stocks had jumped a stunning 4 percent in the span of sixty minutes.
Many shorts ended up being carted out of the front door that day, unsure what has just happened. Sure enough, the next day at 8:00 am the Fed did what it had decided the previously it would do, and announce the 50 bps cut to the discount rate to fed funds rate spread…
…the S&P futures moved from a low of 1320 (and 1330 at the 2:00 pm moment that the market saw a mysterious “invisible hand” pushing it higher), all the way to well over 1410 the next day: an unprecedented 90 ES point move in a few hours!
The Times headline called it a “tiff” and stuck the story deep inside. Chittum notes, “The Wall Street Journal, the Financial Times, and Bloomberg haven’t even touched the story.”
Gee. I wonder why. As Zero Hedge’s “Tyler Durden” says, “If he leaked one, he leaked them all.” From the transcript:
MR. LACKER. If I could just follow up on that, Mr. Chairman.
CHAIRMAN BERNANKE. Yes, go ahead.
MR. LACKER. Vice Chairman Geithner, did you say that [the banks] are unaware of what we’re considering or what we might be doing with the discount rate?
VICE CHAIRMAN GEITHNER. Yes.
MR. LACKER. Vice Chairman Geithner, I spoke with Ken Lewis, President and CEO of Bank of America, this afternoon, and he said that he appreciated what Tim Geithner was arranging by way of changes in the discount facility. So my information is different from that.
CHAIRMAN BERNANKE. Okay. Thank you. Go ahead, Vice Chairman Geithner.
VICE CHAIRMAN GEITHNER. Well, I cannot speak for Ken Lewis, but I think they have sought to see whether they could understand a little more clearly the scope of their rights and our current policy with respect to the window. The only thing I’ve done is to try to help them understand—and I’m sure that’s been true across the System—what the scope of that is because these people generally don’t use the window and they don’t really understand in some sense what it’s about.
Maybe Tim is telling the truth. But it sure is odd that so many people made so much money such a short time after he ‘splained things!