Spitzer Gets in on the D.C. Circus Act

While an out of control Congress remains my biggest fear at the moment, I am troubled by the resurgence of people that I thought were dead and buried. Would AIG have blown up the world if Eliot Spitzer would have left Hank Greenberg alone? We will never know. But Eliot is right to focus on the bigger picture - the counterparty payouts from AIG to Goldman et al.

At least we now know where the money went - we had a right to know after all, and the stonewalling was outrageous. Goldman's stock very well would be at zero without Hank Paulson's intervention last fall - they got the money they needed and later Warren Buffett cut them a check, both of which added badly needed liquidity and saved 85 Broad from ending up like Lehman and Bear. But the shop is of course greatly hobbled, and now Wall Street is paying for the sins of many Goldman alums over the years.

More on that later, but this Spitzer interview with Fareed Zakaria might be of interest:

Bernanke Ends His Dithering, Decisively

Today was a huge day, even for a market that has seen history unfold at a blistering pace over the last 18 months. While I am often too pragmatic to put much faith in the writings of dead economists, it has been an interesting few months of reacquainting ourselves with the likes of Irving Fisher. It became abundantly clear last week, - Bernanke has found the most politically feasible policy solution available, in the form of quantitative easing, and now I cannot wait to hear the squeals from the Europeans.

Shooting down our pleas for Keynesian stimulus last week at the G20 meetings will put a hurt on them given the move in the currency markets today..and although I think many of Bernankes moves today were foretold, paybacks are a bitch. There were a few easy trades int he currency markets...did you take them? Poor John Maudlin...I hope he covered his Euro short coming into this week. I would expect several Global Macro hedge funds to turn in a killer of a month when March performance is released in a few weeks....assuming they did not get killed in the fixed income markets.

Hammer Time? Not in my House

Traditionally ex-Treasury Secreatary's of the United States have had a voice in shaping policy decisions after they left, or at least being accorded a stage to voice their views. But Hank "Hammer" Paulson is not a typical ex-government employee. The stench from his tenure as the head of Goldman Sachs and Treasury is wafting around the world, and I am not sure I am ready to listen to the Hammer opine about anything, thank you very much.

But he is, penning an Op-Ed in the FT over the future of the regulatory structure:

Last March the Treasury proposed a system of three primary federal regulators: one charged with maintaining market stability across the entire financial sector, one for supervising the soundness of those institutions with explicit government support and one responsible for protecting consumers and investors. Our proposed structure recognised that there would sometimes be a need for the Federal Reserve to provide liquidity support to institutions that it did not regulate historically. This would be a drastic realignment and simplification of regulatory agencies – in order to clarify responsibilities, provide powers commensurate with those responsibilities and improve accountability. A regulatory structure organised by objective is far more likely to withstand the test of time. In an objectives-based model no business can change regulator simply by changing its form. FT

Maybe Hank can spend a few years bird watching, which is his passion after all, before suggesting any further improvements. Quite Frankly I am not in the mood to hear it - he is no John Snow, after all. Good ideas, but go away Hank. I am not quite ready to hear from you, just yet.

Reform the architecture of regulation
FT

Policy Makers in the Spotlight as They Fire up the Printing Presses

I certainly don't envy Tim Geithner heading into this week's G20 meetings - does he have the gravitas and bearing to sway the world and accomplish his goals? The Europeans do not seem be in a mood to listen to lectures, but they are sure giving us a lot of grief:

American politicians simply don't seem to understand the existential threat that their economy is now facing. Instead of uniting to deal with a national emergency far more threatening to their way of life than the terrorist attacks of 9/11, they have responded by dividing more sharply than ever into hostile partisan camps. Telegraph

It is an interesting day in Macroland - quantitative easing is the order of the day and currency markets are going bonkers:

The Swiss franc lost the most against the euro since the 16-nation currency debuted in 1999 and tumbled versus the dollar as the central bank said it began intervening to weaken the currency....“The SNB has unleashed a hail of bullets against the franc,” said Todd Elmer, a currency strategist at Citigroup Global Markets Inc. in New York. “It’s getting crushed here.” Bloomberg

Tough Weekend for Tim Geithner

A lame skit parodying Tim on Saturday Night Live is the least of the Treasury Secreatary's problems heading into another long workweek. Late last week several of his picks for Deputy Treasury Secretary abruptly withdrew their names from consideration, and the situation appears to be turning desperate in what might be the most crucial period in the institution's august history:

"People think Wall Street and our economy are in a mess? They have nothing on what we're going through here," said a career Treasury Department official after learning yesterday that former U.S. Securities and Exchange Commission member Annette Nazareth had withdrawn from consideration to serve as deputy Treasury secretary.....associates of Nazareth familiar with the situation say that there were other reasons for her to pull out.

"She simply lost confidence in Geithner," says a colleague of Nazareth's at the law firm, Davis Polk & Wardwell. "There's a lot of that going around, we hear." The American Spectator

Of course, priorities on Wall Street are shifting away from the morning Squawk Box to the Sunday Morning News Shows. Richard Shelby put on a cranky performance on This Week with George Stephanopoulos, echoing the concerns of many people across the country who are tiring of the bailouts and Geithner's snail-like pace and half measures:

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