Running 'Cause I Can't Fly: Karl Denninger, "Bald LIES From The Right (This Is IMPORTANT)"

Running 'Cause I Can't Fly: Karl Denninger, "Bald LIES From The Right (This Is IMPORTANT)"
Excerpt:
Michelle Malkin wrote: “If you don’t feel like throwing up today, you’re not paying attention.”

Oh really? This is the worst sort of bald-faced half-truth mixed in with utter falsehood. Let us remember a few things that bear directly on this matter:

1. Hank Paulson - yes, that same Paulson - went to the SEC not once but twice when running Goldman to petition for a removal of the leverage limits enforced against investment banks. The first time he was told to pound sand. But the second time his request was granted. Why is this so important? Two reasons: (1) The blow-off top in housing prices could not have happened without the ability to continue to fund those loans, which required ever-increasing debt leverage and (2) both major investment banks that failed - Bear Stearns and Lehman - had more than double the former 12:1 legal leverage limit when they blew up. In other words but for Paulson's successful lobbying effort neither failure would have happened and neither would have the final three years of the housing bubble.

2. Tim Geithner was running the NY Fed during this time period. The NY Fed has primary surveillance responsibility over all of the major investment banks that got in trouble in 2008 as they are the nexus of essentially all tri-party "repo" activity in the financial markets. The NY Fed did nothing to curtail the leverage these firms were amassing - it did not raise an alarm with Congress, it did not raise an alarm with the OCC and it did not raise an alarm with the public. Instead it intentionally averted its eyes, including but not limited to the fact that AIG had written some $500 billion in credit protection with about 1/100th of that in capital behind it, an effective leverage ratio of 100:1, and it permitted repo operations with MBS even though Fannie and Freddie were running 80:1 leverage, until all of the above blew up in everyone's face. For this act of "remarkable stewardship" Tim Geithner was handed the Treasury Secretary's job by President-elect Obama...