Curious Meeting at Treasury Department

The Treasury invited a small group of bloggers for a “discussion” with senior officials on Monday. Initially, the meeting was to be background, which is a sort of journalistic “FYI but you can’t use it” but we were told at the meeting that we could discuss the meeting as long as remarks were not attributed to particular individuals.

None of us knew in advance how many attendees there would be; there were eight of us at a two-hour session, Interfluidity, Marginal Revolution, Kid Dynamite’s World, Across the Curve, Financial Armageddon, Accrued Interest, and Aleph (and of course, others may have been invited who had scheduling conflicts). There was a place card for Megan McArdle as well.

I was surprised that the powers that be would bother with financial bloggers, and I wondered at the decision rule behind the selection (besides wanting a mix, particularly from a political standpoint). This was also not an anonymous briefing of the sort that has come under criticism (but the anonymity request is still peculiar; is this a Team Obama fixation?) Given that the efforts have Administration has been made efforts to bring critics from the left into the fold, I was wary of attending (I’m not keen about the idea of being propagandized) and expected a higher control format (10-15 people, which would have limited the opportunity to interact).

It wasn’t obvious what the objective of the meeting was (aside the obvious idea that if they were nice to us we might reciprocate. Unfortunately, some of us are not housebroken). I will give them credit for having the session be almost entirely a Q&A, not much in the way of presentation. One official made some remarks about the state of financial institutions; later another said a few things about regulatory reform. The funniest moment was when, right after the spiel on regulatory reform, Steve Waldman said, “I’ve read your bill and I think it’s terrible.” They did offer to go over it with him. It will be interesting to see if that happens.

Four of us had a drink afterward and none of us felt that we learned anything (not that we expected to per se; if the ground rules are “not for attribution” in an official setting, we are certainly not going to be told anything new or juicy). But my feeling, and it seemed to be shared, was that we bloggers and the government officials kept talking past each other, in that one of us would ask a question, the reply would leave the questioner or someone in the audience unsatisfied, there might be a follow up question (either same person or someone interested), get another responsive-sounding but not really answer, and then another person would get the floor. The fact that the social convention of no individual hogging air time meant that no one could follow a particular line of inquiry very far.

My bottom line is that the people we met are very cognitively captured, assuming one can take their remarks at face value. Although they kept stressing all the things that had changed or they were planning to change, the polite pushback from pretty all the attendees was that what Treasury thought of as major progress was insufficient. It was instructive to observe that Tyler Cowen, who is on the other side of the ideological page from yours truly, had pretty much the same concerns as your humble blogger does.

It was also striking to see that the Treasury officials did not articulate vision for a banking system for the 21st century that was materially different that the one we have now. The flip side is if they did, stating that publicly might get them accused of doing Communist central planning, but I didn’t hear second level arguments that said they had considered the issue in a serious way, save not winding the clock back to much more on balance sheet intermediation, aka traditional banking, as opposed to “market based credit”. Nevertheless, at a McKinsey alumni meeting months ago, a partner who has been advising the Treasury and Fed told the group that the Administration wants to make being systemically important very costly to force firms to do what is necessary to get out of that category. That of course is structural reform, but we got no acknowledgment of that as an aim. And aside from raising capital requirements more for big firms than smaller ones, it is not clear how far Treasury could go down that path on its own (and strictly regulatory measures can be rolled back by a new Adminisitration).

Several of us raised questions about whether what their vision for the industry’s structure was and that the objective seemed to be to restore the financial system that got us in trouble in the first place. The answers instead focused on more stringent regulations, higher capital levels, and of course the derivatives regulation bill. I tried twice to engage them on how the bill has so many loopholes that it is not going to make any difference as far as the real problem is concerned (the out for customized derivatives, in the Administration proposal, gave the industry an easy and obvious way to evade the rules; the House pretty much gutted what was left) but I was not specific enough in saying what “loophole” constituted and was basically deflected (and was also told the derivatives on balance sheet would be subject to tougher capital requirements, and the industry was complaining that the bill would make things more costly for them. Ahem, it has become standard practice of all the powerful lobbies to make a great deal of noise about any change on principle, so the level of complaining is not a valid indicator of the efficacy of reform).

I also asked about the size of the financial services industry (as in one of the distortions that resulted from deregulation and rates being too low was that the financial sector had grown too large, which by implication means it needed to shrink. I was told it had shrunk and that the Fed was winding down its programs. Yes, but the expectation is that as the Fed winds down, the private markets will step into be breach, which means more credit private credit extension. There was no acknowledgment of the issue raised by Joseph Stiglitz, that if credit intermediaries are making too much money, the banking system tail is wagging the economic dog. Another argument was that our financial system had not gotten to be there, five, or eight times the size of GDP. Again, while narrowly true, it finesses the fact that those European banks absorbed a lot of toxic US paper, and perhaps more important, the US has for the last 15 years actively pushed deregulated financial markets (a US financial firm friendly policy) so our hands are not exactly clean here either.

They also defended the stress tests as being serious, and again did not seem to win converts.

One area that we didn’t get into was the special resolution regime, which is receiving considerable pushback from Congress. Treasury has asked for open-ended authority to resolve large financial institutions, which is pretty much a blank check. That’s a breathtaking power grab by the Executive and should not be acceptable in a democracy. It wasn’t surprising that post the TARP that Congress would be completely unwilling to go there. Any decision to wind up a large bank is going to require Congressional authorization; the amounts at stake are too large for this not to be a political decision. The Resolution Trust Corporation working capital needs ($50 billion, if I recall correctly) were authorized by Congress, and Congress also became impatient and called for it to be wrapped up sooner than Treasury wanted (some studies have argued that the faster sales that resulted gave the taxpayer a lower return than the RTC would have gotten otherwise). And even if you could solve the political impasse (remember, Bear failed in ten days; think Congress could agree to a big backstop in that short a period of time?) I am not certain this change will be salutary in the absence of trading counterparties knowing exactly what would happen to them while an organization was being wound down. One of the things that makes securities firms decay quickly is that no one wants to have their accounts frozen, as happens now in a bankruptcy. You need considerable detail on mechanics, and it does not appear to have been disclosed yet (my buddies at the Roosevelt Institute conference on Monday said Rodgin Cohen, who was presenting and advocating the Administration plans, was also scarce on details).

But the other fact is that these guys are very smooth, very smart, and seemed quite sincere, which made it difficult to discern how much they really did believe and how much of what they said they had to say because they need to defend official policy and maintain confidence. Let’s face it, they get prodded and roughed up by big dogs with some frequency. There was nothing we asked that would be new. They’ve covered this ground with other people of more consequence and therefore have answers ready. We are a pretty unimportant audience (yes, they did bother making time for us, but let us not kid ourselves on how far down the food chain bloggers are) and we cannot argue from a position of advantaged information, so it was inevitable that we would not get beyond standard responses.

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  1. lark

    Their real problem is not critical bloggers, but the sour after taste from bailing out the frauds who crashed our economy.

    The Obama Administration was undermined by their failure to stand up to the financial industry. It makes them look like they don’t care about the American people, during the worst downturn since the Depression.

    I am very happy health care is being reformed.

    But they lost trust, and deservedly so, with the only audience that matters. Not bloggers. Voters.

    1. sgt_doom

      Not meaning to offend anyone, but do you actually believe health care is being reformed? You might wish to read every single line in the finalized legislation before making such a farfetched remark.

      I’ve spent many hours perusing various legislation over the years, from the Depository Institutions and Monetary Control Act (which overturned those anti-usury laws, plus much more) back in the ’80s, to the Gramm-Leach-Bliley Act (Financial Services Modernization Act of 1999) and the Commodity Futures Modernization Act of 2000, and have yet to hear a newsy report which ever honestly reflected these pieces of legislation!

      1. ndk

        Health care “reform” as the Obama administration and congress have structured it is little more than a handout to the private insurance industry. I’m particularly sickened by the weaseling of Lieberman.

        I’m a little surprised that Yves would bother to meet with the ideologues, but I’m glad she did. Little of the summary strikes me as surprising, and neither does the meeting itself. If at first you lose control of the message, try, try, to capture again.

        1. Yves Smith Post author

          Funny you should say that, I was not keen about going, but my buddies who know the ways of DC said I should while simultaneously warning me to watch for the Kool-Aid.

          1. john bougearel

            It is always interesting to watch smart and savvy folks defend and rationalize their positions when the message that we hear is nothing more than a pitch to buy their pigs-in-a-poke. The startling thing is that there is a line up to which they “get it”, and then they almost imperceptibly cross over to a line of thinking that is total bunk, and you see they totally buy their own party line.

  2. Jim in MN

    What about the Japan policy? The central pillar of New Era macro policy is the Treasury/Fed commitment to no bond haircuts to protect the insurance and pension dominoes. Thus no bankruptcy and no nationalization is possible within the capital markets as either would cause mark to reality which cannot be allowed. Hence stasis is inevitable at the market structure level of policy. CIT and a few other exceptions noted.

    Did anyone talk about bond haircuts or the lack thereof?

    Maybe they were probing YOU to see how much the ‘blogistat’ understands at this stage…maybe it’s good y’all didn’t get too penetrating on some topics. Naah, couldn’t be.

    1. Yves Smith Post author

      I’m highly confident they had no interest in assessing our understanding, they made it clear that most of the attendees did not read our blogs (they were nice about it, and I would not expect them to,. I would assume that to the extent they keep on top of media, it’s MSM and pubs oriented to DC politics).

        1. mark

          It’s obvious they read your blogs. Why would they request Across the curve? He isn’t really side stream media. He is details wrapped in daily actions. They were trying to see who would bust out of their seat because they knew what is up behind the curtain.

          1. Yves Smith Post author

            Mark, no that ONLY means the staffer who put together the invitations looked at our blogs. That does not mean a single person in the meeting did, and there was no evidence they had any familiarity with any of our work (save perhaps Tyler Cowen, since he occasionally has op-edish article in the New York Times and I therefore assume elsewhere).

  3. Valissa

    Thanks for sharing your thoughts on this meeting… it all sounds very surreal and has me wondering how much in touch with reality the folks in charge are, as opposed to being caught up in fantasies of their power to create realities they desire. All these government shenanigans have encouraged me to reread Orwell and Huxley.

    As to anyone who thinks health care is being reformed… I’m surprised anyone who reads this blog would seriously say that given the focus on corruption and propaganda. I recommend reading David Swanson’s latest article over at Counterpunch…
    The Health Care Con – The Two Percent Robustness

    This so-called health care reform is so bad it needs to fail and start over.

    1. Yves Smith Post author

      Yes, the word I used afterwards for the meeting was “peculiar” but the flip side is none of us are DC types, so this form of Kabuki is probably perfectly normal there.

      1. Richard Smith

        “the meeting was to be background, which is a sort of journalistic “FYI but you can’t use it” but we were told at the meeting that we could discuss the meeting as long as remarks were not attributed to particular individuals.”

        Is that change of emphasis cold feet at the last minute, or the switch phase of a bait and switch, or just a rather patronizing casualness? Really the whole thing seems like a dutiful staffer organizing a bit of half-hearted outreach, with nobody much on either side having a clue what the objective was, beyond, as someone I couldn’t re-find just now remarked, making sure each of you had the right number of heads. If they’re not reading your blogs then all they’ve done is drag you in to tell you that they’ve never heard of you. So I second Jesse – was the food any good?

        Still, nil desperandum; presence or absence of follow-up in the coming weeks and months will tell you all you need to know. Maybe their world isn’t as closed as it sounds from the above writeup; rather hard to believe.

        McArdle no-show is a nice touch.

  4. Bruce Post

    Thank you for the info on your visit. I don’t know how high up in the chain of command you got. Suffice to say, if these were career (namely, Civil Service) people, you can never get much from them. It is generally very painful to sit through a presentation from a federal employee, even a senior one, because they are sooooooo constrained in what they can say. While things are said, there often seems to be very little meaning in what is conveyed. Perhaps you had a somewhat different experience than I have had in the past, but I get the sense you unfortunately did not.

  5. Peripheral Visionary

    Yves, as someone who lives and works in this world, what you have observed is fairly standard. Washington is very insulated from the rest of the country, and as such there is a strong tendency for Washington insiders–who as you noted are very bright–to define reality in their own terms.

    Coupled with that is the tendency to to silently differentiate between items that are on the table and items that are off the table; “everything is on the table” is something of a joke, it never means that. Case in point: one of the SEC directors made the assertion that “everything was on the table” when it came to overhauling the Commission, until asked a pointed question about dismissing incompetent staff, when it was conceded that, due to union contract restrictions, dismissing staff, at least, was not on the table. You will not know what problems, solutions, etc. are actually under consideration until you ask a pointed question, and even then you may not get a straight answer.

    All that is due to the power structures that underly Washington politics. Certain issues and solutions are not considered because of the ramifications for the entrenched interests; hence the alternate reality. The only real solution is to bring in knowledgable and uncompromised outsiders who can be honest about the real issues and who would be willing to consider the full range of solutions. This administration has not done that, and in a misguided effort to keep the peace with the establishment has brought in largely establishment players, and the result is what you observed.

    1. cougar_w

      Please consider the following image:

      This is called “gridlock”.

      Gridlock is a condition where in a system of interlocked components, the normal motion of any one of the components suddenly causes all other components to halt. Since motion is also the only solution to the halting, the system locks up on itself. Hard.

      Washinton DC policy makers are in a state of gridlock.

      This is not strictly a political problem. It is certainly a mental one and is very nearly a physical one. They cannot move, they cannot function, they cannot unwind their system, they cannot move the system forward as a whole or in any part.

      They are stuck fast.

      I do not believe they even recognize this. When one is stuck in traffic gridlock all you perceive is that the guy in front of you is not moving, the guy beside you is not moving, and you know the guy behind you isn’t going to move because you are not moving. You suspect something really bad has happened but you lack the vantage point to know how bad it is, nor do you care, because you aren’t going to fix it anyway. It will have to fix itself.

      Traffic gridlock solves itself. It is a self-limiting problem: once the traffic system fails, people go home.

      Our economic problem will prove self-limiting as well, and will fix itself. The policy wonks will have done nothing. What will be the “screw this I’m going home” moment for our economic outlook? Who is going to bail out, and what will they take with them when they go?


      1. sgt_doom

        Are you ever clueless bigtime!!!! Haven’t been reading Opensecrets have we? Haven’t been reading’s Sold_out document?

        Gridlock is the MainStreamMedia one-thousand-points-of-confusion talking points, dood! When almost everyone is on the same payroll (40,000 DC lobbyists at last count), then almost everyone is on the same page, and it ain’t gridlock, honeychile!

        It’s commonly referred to as 100 percent corruption! And that’s corruption by design!

        1. cougar_w

          I never said anything about why nobody is moving, or why nobody is going home.

          Everyone has a reason to stay right where they are even as the machine grinds to a halt. You are right, corruption is a big part of the reason. But there are other reasons to lock everything up — other brass rings to grasp, other pretty things to acquire — and as such greed is not the only perversion to move the human mind against the wheel of civilization.

          Greed is possibly not even in the top three, just as Hitler was not in it for the money.

          Thank you for playing. Do play again.


    2. Anal_yst

      As someone who works in Finance, I can tell you much of our organizations operate in a similar fashion, albeit far less publically. If any of my consultant (or anyone who’s taken Management 101, let alone Finance 101) walked into some of the offices I have, they’d have a coronary!

    3. john bougearel

      Thanks Peripheral,

      The alternate reality, the illusions to which you allude requires them to create make believe constructs like Level 3 assets or Too Big to Fail, or Systemic Risk, or without the banking system the real economy would surely be doomed.

      They climb the cliffs of insanity, and ask and expect us to take the blue pills they are passing out

    4. SidFinster

      If the entrenched interests in DC are good at nothing else, they are skilled in protecting and expanding their turf, that is, their mandates, authorities, and headcounts.

      When an outsider is sent in to reform those entrenched interests, the bureaucracies have a long and glorious history of stalling, subverting, derailing, co-opting, and capturing the ostensible reformers.

      In a nutshell, watch “Yes, Minister.”

    5. Naive_person


      I have been in DC for a couple of years and I am still puzzling over the mentality here. You seem more experienced. Is there possibly any book or article that in your view describes the mindset of people within the Beltway from an outsiders perspective? Thanks.

  6. Debtpocalypse

    The Treasury officials are employees of the US government and are paid and supported with OUR money. I don’t care if they said in fine DC-speak, “You know, this is off record, blah-blah-blah.” Are you a journalist? Why are you professionally subject to this standard? Who are they to demand it?

    You explain to me why you are beholden – why you are self-censoring – not to name names of who among OUR employees were there talking to you?

    If you all play by their ground rules – if you bask in your moment of egoistic self-importance – you and the others become little more than errand boys. There is nothing more desperately needed than greater transparency at Treasury & the Fed.

    Bring it.

    1. Rob

      While I don’t agree with the tone of this–coming at someone with a pitchfork is guaranteed to have them evade you–you do raise a good point concerning the question of “access” and its nefarious effects on reporting. If I remember correctly, Yves, you wrote a post concerning this problem in the MSM recently. How are the circumstances of your meeting different?

      1. cougar_w

        Nice catch. In her defense, she does say she was not open to being propagandized. And she does not blandly repeat the propaganda here. I find the account interesting and am glad she went and appreciate her honest appraisal.

        It’s a trip down the rabbit hole to view the court of playing cards. It’s hard to refuse the invitation, but you try to retain your mental and moral integrity on the way through. On the other side it’s hard to say how much was real, if anything. It is peculiar that governance proceeds this way. This is perhaps how things roll at the end of the game.


    2. Yves Smith Post author

      I suggest you take note of the comment that none of us thought anything new or surprising was said. In fact, the four of us who went out to drinks struggled a bit as to what was said that was even worth posting. And since the discussion was interactive (as in we were all looking for opportunities to interject and ask questions) none of us, certainly not yours truly, was taking close notes, nothing even remotely close enough to quote, and clearly none of us was recording the session.

      Thus, it is not proper to expect/demand me and other bloggers to quote particular officials when our notes aren’t good enough to allow for that. That has the potential to lead to distortion. Waldman’s comment was an exception only because it was short and stood out so much.

      1. sgt_doom

        Those of us with any financial or forensic economics’ understanding, and who regularly read your blogs, fully appreciate your sharing what you have of this meeting with us.


  7. Mr BB

    Great analysis as always. But it does not inspire confidence. I’m heading out to pick up some more gold.

    P.S- The times on the comments postings have not adjusted to daylight savings time.

  8. Tom Vanderwell


    Very interesting. What was said and what wasn’t said speak volumes.

    Can I repost the write up on Straight Talk? (either in it’s entirety or highlights – you pick?)


  9. Lavrenti Beria

    The why of this meeting strangely unclear, one is almost reminded, and somewhat eerily I might add, of the psychological terror Stalin inflicted on Nicolai Bukharin in the days preceding his show trial and subsequent execution by the NKVD. Instructive are two vignettes from a review of a book on the life of Stalin by Roy and Zhores Medvedev which describe the technique involved:

    “Here, the Medvedevs describe a scene in which Bukharin–one of the best-known socialist theorists, and a key figure in the revolution and the so-called New Economic Policy of the 20s–is visited in his Kremlin apartment by the housekeeping staff, which tells him he has been evicted. Thinking that this is the end–sure he is being taken away to execution by janitors–Bukharin is terrified when the phone rings and Stalin is on the line. ‘So, how are things with you, Nikolai?’ Stalin asks, as though nothing was wrong. Bukharin timidly replies that he is being evicted. Stalin’s bemused response: ‘Tell them to go to the devil!’ The housekeepers retreat, but Bukharin, understandably rattled by this cruel shot across his bow, is left to spend the rest of his days in terror, sure that the end is lurking behind every door.

    “In another scene, Bukharin, already in disgrace, goes to Red Square to attend a ceremony commemorating the 19th anniversary of the revolution. Stalin spots him waving in the crowd. Immediately, a guard pushes his way to Bukharin, who thinks he is done for. Instead, the guard says, ‘Comrade Stalin asked me to inform you that you are not in the right place and he requests that you come up to the platform.'”

    Sure they’re “talking past” you, Yves?

    1. cougar_w

      A case of psy-ops?

      That is an interesting theory. If I were to start from that point and speculate, it would be along the lines that bloggers have indeed replaced the MSM as the activist press, and this is happening just as the government has successfully (over 30 years) reduced the MSM to propaganda megaphones via the corrosive influences of access journalism. Nice hack, that one, but difficult and now being rapidly undone.

      There are only a few bloggers that one needs to neutralize. The blogosphere tends to eat its own at the best of times so the overall problem may simply sort itself out. What I would look for are signs that bloggers who play the event favorably will be invited back for “exclusives” while them as don’t, aren’t.

      I have little confidence this will work in the end, if that is what they have in mind. I think they have completely misunderstood the nature of decentralized media.

      And while I’m not ready to ascribe all this to deliberate psy-ops, I am quite ready to see this meeting as “business as usual with the media” now coming to include the blogosphere. After 30 years this is just how they roll now and nobody doing it this way knows of any other way.

      And that would be the really creepy part.


      1. Lavrenti Beria

        “What I would look for are signs that bloggers who play the event favorably will be invited back for “exclusives” while them as don’t, aren’t.”

        Yes, that’s it, certainly at one level. What’s presupposed here, of course, is that one ought give a hoot about being invited back. Bukharin cared because he feared for his life. And I wouldn’t put it past these filth perhaps not to kill but to injure someone materially if they didn’t start playing ball. What’s of concern in such instances is getting an invitation in the first place. Its the being regarded as influential that’s potentially dangerous. I don’t like the smell of it, frankly.

  10. Fiscalliberal

    Your mentioning higher policy people being present shows a lot. To take their time on their calander shows you are significant.

    I for one read your and other financial blogs and communicate oppinions to my senators and congressperson. I think it is a waste of time to write anyone but your representatives. It does not take much time and you get to make one notch on their survey’s. They never will have the opportunity to say – you did not tell me.

    I view the blogs like yourself is news aggregators and your education / experience profiles allow you to comment with relevant information. Treasury for certain will want to keep you in the loop, if you are a pain in the anatomy. I think the saying goes: Keep your friends close and your enemies closer.

    Now hammer them intelligently and they will invite you back. That is when you will be able to ask questions

  11. But What do I Know?

    This is interesting, Yves–I read pretty much everyone on your list of attendees, so I must be plugged in :>)

    It’s OK to talk to them, but just don’t expect them to listen–I think it’s more of a fishing trip to see who can be co-opted.

    @Debtpocalypse: If Yves agreed not to name names before the meeting then she shouldn’t. And what difference does it make who was there anyway? From Yves’ report it doesn’t sound as if any substantive ideas were (or will be) exchanged.

  12. craazyman

    Well, thanks for showing up there and making the effort anyway, and they deserve some credit for the invitation. But it appears they’re punch drunk on their own cool-aid — human nature.

    No, it will take another collapse to shake that mind cage. And a new crop of type-As on the Potomac to try where they will have failed.

    I love that Potomac, slow and still in its muted greys and browns, a quiet mirror of Time and the River of my Life, deep through those quiet canyons of Great Falls and under Chain Bridge with its Spanish fisherman on rocks with baited lines under the August sun. And that Virginia sun, pouring like the breath of an angel on its muddy banks and nearby woods in soft oranges and yellows and reds, the light of a Life beyond Life and inside of Life. That landscape is democracy and freedom. I trust in the Lord that a little will rub off, somehow, on their deliberations. Let us pray.

    If they don’t read these blogs, then they surely don’t read peanut gallery comments. And so I feel somewhat chagrined that my recent top ten definitions of TDTR was not “topic A” at their coffee machine. Bowahahahahahahaha.

  13. charlottemom

    Your write-up alternated between how independently, propaganda repellent you are and how Treasury then proceeded to set the terms, tone, and direction of the meeting.

    In fact, the whole last paragraph summed up how flattered you were to be tapped on the shoulder by Treasury and then how smart, sincere, etc. (you now think) they probably are.

    As for Treasury’s empty calorie meeting with bloggers, I say PR mission accomplished!

    1. cougar_w

      “We are a pretty unimportant audience (yes, they did bother making time for us, but let us not kid ourselves on how far down the food chain bloggers are)”

      You didn’t actually read it, did you?

      1. charlottemom

        I’m sorry but if your comment is directed to me, it bolsters my comment not contradicts it. Did you read my comment?

        1. Below the Middle

          I agree with you charlottemom.

          It pretty much reads to me as if Yves & gang were summoned to present themselves to court. They came to find out why they were ‘invited’ -asked no pointed questions, spoke no truth to power, discovered nothing of substance, got together later to hash out the surreality of it all and now to rehash here to what avail?

          It’s really not all that curious. It does however remind me of a piece of advice I once received about operating from a position of power rather than disempowerment.

          Offered for whatever it’s worth to you, Yves. I actually get an image in my mind of one curious man sizing you (and by extension the rest of us) all up for his own undisclosed purpose.

          1. Yves Smith Post author


            I regarded this meeting as a waste of my time BEFORE I went and was not keen about spending the time and money. I have had jobs in the past with large institutions, and I know who counts and who does not. I went ONLY because my buddies who know DC insisted, and since this is their bailiwick, not mine, I went.

            This “saying truth to power” assumes they will listen. It was patently obvious from the invite that they had no interest in our views. They do not even read our blogs, some staff weenie who was not there decided who to invite. At most a small extract might show up in a media summary distributed internally (most places do that daily). You cannot compel someone to listen. And contrary to your assumption, we did ask pointed questions, and they deflected them. They have practice the art of skillful evasion on people far more practiced than us.

            As I said earlier, too many readers are operating under courtroom drama fantasies, that if someone asks questions well, they can extract damaging confessions. In a courtroom, the witness HAS to answer questions under oath, if they lie they are subject to perjury. These guys can lie (or artfully misrepresent) and when we did try calling them out, they parried. They had no intention of engaging us in a serious way, and you assume we did not try. That is incorrect and frankly insulting.

    2. ndk

      Your write-up alternated between how independently, propaganda repellent you are and how Treasury then proceeded to set the terms, tone, and direction of the meeting.

      In fact, the whole last paragraph summed up how flattered you were to be tapped on the shoulder by Treasury and then how smart, sincere, etc. (you now think) they probably are.

      I don’t think this is an entirely unfair assessment, and it should be offered as friendly warning to Yves, rather than direct criticism.

      I believe it’s much harder to remain indifferent and unaffected by a meeting like this in practice than it may seem from a strict conceptualization of it. These people have made careers out of influence, and risen to the top for a reason. Often, they’re much more skilled in cajoling than in policy-setting. And it takes, frankly, much more than even a tinfoil hat to deal with that.

      I can’t do it that well. In my own meetings with strategic directors from major corporations whose actions I consider appallingly dangerous to my field and many freedoms we hold dear, I’ve always come away thinking, “these guys are rational and under control. I thought they were evil, but from their perspective, those actions make a certain amount of sense.” Then I have to slap myself and remember that their goals are to the detriment of the system as a whole. Made me wish I could talk to some of the old-school robber barons.

      Anyway, I guess I’d just ask Yves to do an extra-deep brain scrubbing with plenty of ammonia. It’s a lot harder to get this out of your head than you’d think. But having demonstrated no imagination or desire to fundamentally improve the situation, I think she’ll have no problem retaining her maverick.

      p.s. The dudes at NIH and NSF aren’t remotely as slick. :D

      1. Yves Smith Post author

        True, but remember, I did time in M&A and have seen a lot of garbage barges artfully tarted up. And recall that I left Goldman, and doing that was clearly an exercise in downward mobility. I must have spent the next 20 years, I kid you not, having to explain that choice (as in when anyone learned that I had been there and left thought the choice was deranged and immediately needed to know what was wrong with me, or assumed I had been ousted and wanted to figure out why).

        Long winded way of saying I am constitutionally pretty contrary. And I have seen a lot of smart people do things that they could justify that were quite damaging when you widen the frame of reference. The one practical consequence is I will probably read policy source docs more often, which I should be doing anyhow but tend to prefer covering the posting terrain more broadly rather than digging into particular topics more deeply.

        1. Doug Terpstra

          Leaving Golden Sacks a move of “downward mobility”? That your sanity was in question as a result is a clear measure of our culture’s deranged and degenerating values. The imperial glue is disintegrating. I declare your move an ascension.

  14. Hugh

    Random thoughts:

    “Cognitively captured” or as I like to say it they just aren’t up to it. This is why depression is inevitable. They either won’t react or won’t react effectively until it is too late.

    You are pointing out the Titanic is sinking. They are talking about doing some much needed maintenance, maybe involving paint.

    In such meetings, it is the tone and the general perception which is the message. They don’t know where they are. How can they have any idea where they are going or how to get there?

    I know there are many issues that could not be addressed or dealt with in depth but we have fraud, lack of accountability, capture, the growing mess with MERS, the bubbles, funny accounting practices, the foreclosure overhang (and MERS again), high debt, lack of credit, TBTF, joke reforms, and the stark failure to understand the gravity of the unemployment problem. The types you met aren’t paid to be well meaning and sincere. They are paid to get it and they clearly don’t.

    I think it is a safe bet that most of them don’t read this and other economic blogs. We have seen this elsewhere in the blogosphere for a long time. Our elite Establishment structure whether economic, governmental, media, or political still don’t know what to make of blogs or how to deal with them. Some dismiss, others ignore. Some like your group apparently felt some heat and so arranged one “meeting”, completely on their terms with a select few. This in itself shows they don’t understand the dynamics of blogging and the net where interactivity, openness, skepticism, and the ongoing nature of the relationship are all so important. They didn’t want a relationship with bloggers. They wanted a meeting, as in one. That meeting done they will pass on to other matters. It isn’t just the economy they don’t get. They don’t get us as well.

    1. Steerage passenger

      Oh, I like your Titanic metaphor; it fits the US economy commanded by unsinkable arrogance. A rhetorical question: after all the furniture has been dutifully arranged on deck, who do you suppose will end up in the lifeboats?

  15. asdffdsa

    I’ve gone from a obama supporter to a obama hater. Where’s the change? The financial crises might have been initiated by Bush, but it’s Obama’s problem squarely now, cause he has refused to take on all of those who got us into this mess, while at the same time stealing from the prudent and mainstreet to feed wall st. Scr*w him.

    1. Doug Terpstra

      Indeed, sadly Obama now owns the coming crash. He had a bright but narrow window and missed it by a mile.

      My waning hope is that he is yet well-intentioned but has been duped by ill-chosen, wormtongue advisors—Clinton-Bush malingerers. Crisis (or Gandalf) may yet break the evil spell, and he will then mount his noble steed and ride into battle against the wicked king of Mordor.

      Maybe that’s just a fantasy. We will have to come to our own rescue.

  16. DownSouth

    In 1963 James Baldwin met with Attorney General Robert Kennedy. Shortly after that meeting, Dr. Kenneth Clark interviewed Baldwin, and PBS has posted on its website a video of that interview.

    Here is an excerpt from Clark’s introduction:

    By all meaningful indices, the Negro is still, and unquestionably, the downtrodden, disparaged group, and for a long time was systematically deprived of his dignity as a human being. The major indictment of our democracy is that this is being done with the knowledge and at times with the connivance of responsible, moderate people who are not overtly bigots or segregationists.

    We have now come to the point where there are only two ways that America can avoid continued racial explosions. One would be total oppression. The other, total equality. There is no compromise. I believe, I hope, that we are on the threshold of a truly democratic America. It is not going to be easy to cross that threshold. But the achievement of the goals of justice, equality, and democracy for all American citizens involves the very destiny of our nation.

    And here are excerpts from the interview:

    Baldwin: I’m terrified at the moral apathy — the death of the heart which is happening in my country. These people have deluded themselves for so long, that they really don’t think I’m human. I base this on their conduct, not on what they say, and this means that they have become, in themselves, moral monsters. It’s a terrible indictment — I mean every word I say….

    Clark: What do you think can be done to change — to use your term — the moral fiber of America?

    Baldwin: I think that one has got to find some way of putting the present administration of this country on the spot. One has got to force, somehow, from Washington, a moral commitment, not to the Negro people, but to the life of this country….

    It was a great shock to me — I want to say this on the air — The attorney general did not know —

    Clark: You mean the attorney general of the United States?

    Baldwin: Mr. Robert Kennedy — didn’t know that I would have trouble convincing my nephew to go to Cuba, for example, to liberate the Cubans in defense of a government which now says it is doing everything it can do, which cannot liberate me…

    A boy last week, he was sixteen, in San Francisco, told me on television — thank God we got him to talk — maybe somebody thought to listen. He said, “I’ve got no country. I’ve got no flag.” Now, he’s only 16 years old, and I couldn’t say, “you do.” I don’t have any evidence to prove that he does….

    What those kids first of all proved — first of all, they proved that. They come from a long line of fighters and what they also prove (I want to get to your point, really) is not that the Negro has changed, but that the country has arrived at a place where he can no longer contain the revolt, he can no longer, as he could do once —

    Let’s say I was a Negro college president, and I needed a new chemistry lab, so I was a Negro leader, I was a Negro leader because the white man said I was, and I came to get a new chemistry lab, “please suh,” and the tacit price I paid for the chemistry lab was to control the people I represented. And now I can’t do that…

    Now, we all knew. I know you knew, and I knew too, that a moment was coming when we couldn’t guarantee, that no one can guarantee, that he won’t reach the breaking point, you know? You can only survive so many beatings, so much humiliation, so much despair, so many broken promises, before something gives…

    Clark: What do you see? Are you essentially optimistic or pessimistic, and I really don’t want to put words in your mouth, because what I really want to find out is what you really believe.

    Baldwin: I’m both glad and sorry you asked me that question, but I’ll do my best to answer it. I can’t be a pessimist because I’m alive. To be a pessimist means that you have agreed that human life is an academic matter, so I’m forced to be an optimist. I’m forced to believe that we can survive whatever we must survive. But the future of the Negro in this country is precisely as bright or as dark as the future of the country. It is entirely up to the American people and our representatives — it is entirely up to the American people whether or not they are going to face, and deal with, and embrace this stranger whom they maligned so long…

    Clark: As a Negro and as an American, I can only hope that America has the strength and the capacity —

    Baldwin: And the moral strength.

    Clark: — to ask and answer that question —

    Baldwin: Simply to face that question. Face that question.

    Clark: — in an affirmative and constructive way. Thank you very much.

  17. par4

    We’ve been handed a puny stimulus bill,a piece of crap health care bill,no financial regulation,I won’t bother bringing up Gitmo,AfPak or teh war on some drugs,trillions for the banksters,where’s EFCA?,cap and trade will be another joke shall I go on? I hope the transit strike in Philly is just the start of general strikes and other social unrest,otherwise we will remain well and truly FUCKED!

  18. chicago mike


    Were you debriefed by Lee Sachs?
    (It seems so.)

    Learn more about him here:

    “Around Treasury, Sachs was fond of comparing the decision to seize a large bank with the decision to invade Iraq. ‘There are hundreds of billions of dollars of value in these institutions,’ he’d say. ‘If you’re going to go and destroy that … you’d better know there are WMD there.'”
    —Noam Scheiber, The New Republic, August 17, 2009

    (I can add a little more about Mr. Sachs’ mentalité upon request.)

  19. out of control

    If you’re important enough to be invited to Treasury, you’re important enough for some unlawful NSA domestic surveillance (even just a little baby program with a GS-13 PM and a couple staff-years of junior BAH help.) When the real crisis hits you may need to be managed – last time Sheila Bair pointed out that you were out of control. Yves can’t hide, but everyone else better be using a proxy.

    1. cougar_w

      I know this sort of thing is intended to be helpful.

      I don’t see how it is.

      You can spend a lot of time, energy and expense trying to hide and maybe some whithered vestige of democratic principle will protect you. Maybe not.


      You can dare the m’fuckers to bring it. Just bring it, m’fuckers. Touch that and it blows up in your fat face, you traitors. You tools. You flaccid worms. Just touch that and we’ll bring the whole creaking, twisted pile of wreckage down on your pencil necks like a a hurricane full of knives.

      See? Like that. Jefferson did it. It started with “When in the Course of human events…” and don’t you think it didn’t mean that the m’fuckers could just bring it on.


      1. out of control

        When you reach the stage where you’re ready to do something effective, stealth is of use. Clearly no one cares if you just shout at your betters.

    2. winterwarlock

      the low level intelligence services, and the NSA operation go over these blogs with a fine tooth comb, write a memo with generalization points, along with specific, actionable outliers. That memo is sent up the chain, filtered, and flagged if relevant to particular agencies.

      Apparently, Treasury got a flag.

      1. Bill

        We can wait and see if Karl Denninger gets audited………then we’ll know how important bloggers are ;-)

  20. chicago mike


    Were you debriefed by Lee Sachs?
    (It seems so.)

    Learn more about him here:

    “Around Treasury, Sachs was fond of comparing the decision to seize a large bank with the decision to invade Iraq. ‘There are hundreds of billions of dollars of value in these institutions,’ he’d say. ‘If you’re going to go and destroy that … you’d better know there are WMD there.'”
    —Noam Scheiber, The New Republic, August 17, 2009

  21. Frank Ruscica

    Re: jobs creation

    Hello all,

    I have developed a business plan that has been praised by analysts at Microsoft, and top venture capital firm Draper Fisher Jurvetson.

    The plan presents a business case for a start-up provider of:

    * online markets that provide people with new and improved ways to customize education, and to showcase and earn money from expertise
    * media and software that complement said markets

    Canonical research findings (i.e., not mine) suggest that the best implementations of the plan will catalyze a lot of job creation.

    Toward raising awareness of this info re: job creation, I have adapted the plan at

    Any chance that you(r organization) can help to spread the word? If so, please contact me at your earliest convenience with any questions, comments, etc.

    Thanks kindly for your consideration.

    Best regards,

    Frank Ruscica

  22. Bill

    “The only audience that matters” – all 180 million or so voters in the country combined still carry less weight than a phone call from Jamie or Lloyd.

    Everyone at T and the Fed is really just a mid-level JPM/GS manager.

  23. Seal

    “Curiouser and curiouser!” Cried Alice (she was so much surprised, that for the moment she quite forgot how to speak good English). “Now I’m opening out like the largest telescope that ever was! Good-bye, feet!” (for when she looked down at her feet they seemed to be almost out of sight, they were getting so far off). “Oh, my poor little feet, I wonder who will put on your shoes and stockings for you now, dears? I’m sure I shan’t be able! I shall be a great deal too far off to trouble myself about you: you must manage the best way you can—but I must be kind to them,” thought Alice, “or perhaps they won’t walk the way I want to go! Let me see. I’ll give them a new pair of boots every Christmas.”

  24. apachecadillac

    I strongly suspect that the purpose of the session was not for you to see them but for them to see you.

    Assuming competent staff work, for the last year they have been reading memos and digests referencing blogs, posts and comments, some of which are insightful, some of which are inciting and many of which are merely colorful. If I were a policymaker or senior staffer, I’d like to meet a few denizens of the blogsphere–and not the usual suspects like Krugman, DeLong, etc., who are known quantities from other contexts.

    What it all comes down to is–does Yves Smith have two heads?

    1. Yves Smith Post author

      That theory sounds correct to me, that it was a combo plate of “yeah, we’ve been told to do alternative media outreach, so let’s tick that box to make the White House happy” and there might have been a bit of curiosity on the part of whoever does read blogs for briefing purposes.

      1. ndk

        That theory sounds correct to me, that it was a combo plate of “yeah, we’ve been told to do alternative media outreach, so let’s tick that box to make the White House happy”

        This is very, very plausible to me, Yves. This administration is very closely linked to social networking and Google in particular, and that others in the administration would feel it important for Treasury to engage the online ecosystems too sounds just about right.

    1. Yves Smith Post author

      I have no idea who was invited. I indicated others may have been invited that declined (for instance, Calculated Risk is on the West Coast, he would have been logical to invite and may have deemed the travel involved for a 2 hour meeting to be too much).

  25. i on the ball patriot

    You all missed a great opportunity to shun and shame the heart of the scum bag system. You could have pulled an Abdullah Abdullah and held a great press conference — “Bloggers Shun Crooked Treasury!”

    Certainly you did not expect any new and exciting developments and what you got was exactly the same old shit — they have no new vision for the future, you did not get your questions satisfactorily answered, and they were the same old non responsive government we have been complaining about for many, many, moons now.

    I believe that you were all propagandized just by attending. You validated them and gave them all ‘credibility of office’ and legitimized their scam system with your presence. You gave up your power to them. They can now say we are responsive, “We listen!”, to all segments of society.

    They are polished liars. They have lied in the past. They are lying now. And they will lie in the future. Let us not forget — they all serve in positions bought and paid for (in past generations and this generation), with; pac money, soft money, hard money, etc., all sweet little euphemisms for graft and corruption. They are self serving elite gangster scum that have capsized the global financial system for societal control and profit.

    Bloggers are high on the food chain or you would not have been invited.

    Bloggers should spend more time on consolidating media for a stronger collective voice and on organizing and promoting: Election boycotts! Rewriting the constitution! Electoral Reform! Etc. And … a new Amendment for the constitution that would provide for death by hanging for gross violations of the public trust by public officials. Screw these bastards.

    Deception is the strongest political force on the planet.

    1. Doug Terpstra

      Oh that’s good and worth repeating:

      “They are polished liars. They have lied in the past. They are lying now. And they will lie in the future. Let us not forget — they all serve in positions bought and paid for (in past generations and this generation), with; pac money, soft money, hard money, etc., all sweet little euphemisms for graft and corruption. They are self serving elite gangster scum that have capsized the global financial system for societal control and profit.”

  26. Matthew G. Saroff

    I think that you buried the lede, which is that, “My bottom line is that the people we met are very cognitively captured.”

    These people are incapable of seeing beyond big banks, because it is who they are.

  27. Ultimate Janitor

    So far, nothing the Congress or the Administration has offered up is anything near what needs to happen. That’s when it starts to smell bad.

    “They” have been fighting regulation and oversight of CDS’s for over 14 years. Now there are trillions of dollars of them out there that do not appear on any financial statements.

    They are supposed to be fully disclosed in the notes but lets face it, thats a joke.

    When the CDS’s were paying obscene returns: “we want our $100 million bonus”.

    When the bets go wrong and they punch a black hole in the balance sheet which CAN NEVER BE RECOVERED FROM: “we are too big too fail! Do you want total financial system collapse and marshal law??”

    These people need to be executed in public. Make it a pay per view event with proceeds going against TARP debt.

  28. Skippy

    Still waiting on the other attendees to post about their observations, which would reveal much more.

    Yves, now you know how the Native Americans must have felt having been graced by their new masters…eh

    You have now been tasted personally, given the opines from the horses mouth and they will be watching the effects of that (hi guys I see you {.1.}), not being Machiavellian either, just normal reconnaissance, PR, charm offensive, meet the natives kinda thing.

    Oh and the party list of any guest does say much about the shindig, sure would be fun to see the listing process.

    As others above have stated they got to where they are by studious examination and application of the physics used in their dimension and not by being the best at any one task set or free thinking. Lets not forget either that they are not the masters, but the actuators of their masters policy and just so everyone knows, I view the masters as a loose confederacy, not some grand organization, kinda like a wealth orgy, some times international and some times local, just depends on where the bottle points too.

    The kicker as I’m sure you know, would be a second contact in any shape or form, that would really get the monkey short hairs twitching.

    Skippy…Yves have you just entered and momentarily found passage through another circle in Dante’s Hell?

  29. ArmchairRevolutionary

    I think quite possibly it was more like a marketing focus group. When the TALF was brought about, they repackaged it no less than three times. They were all the same bad idea with three different marketing packages.

    Now, they are trying to sell so-called financial reform. They want to hear the items that make their most recent bad idea appear in the minds of the blogosphere to be a really bad idea. Then they will re-package their really bad idea in a manner that minimizes bad idea red flags.

    In conclusion, I do not think they had any intention of learning from you anything that would help them solve our economic problems. They hope to learn how to sell their bad ideas.

    1. ndk

      Now, they are trying to sell so-called financial reform. They want to hear the items that make their most recent bad idea appear in the minds of the blogosphere to be a really bad idea. Then they will re-package their really bad idea in a manner that minimizes bad idea red flags.

      Isn’t it amusing that we’ve been reduced to trying to guess the ulterior motives of our own Treasury Department, staffed by democratically elected officials or appointees that made it through our representatives in Congress?

      While I don’t think your theory is any less plausible than any of the others put forth, this is a sign of extreme sickness and detachment between the general public and the political class. We all feel so disenfranchised that all we can do is imagine how our own corporatocracy is trying to bend and screw us, or ruin our outlet for frustration, this blog. And we’ve in the past expressed our skepticism that these blogs are only permitted to exist because they’re idle vents for frustration, producing a lot of sound but little more.

      Where the hell has all the trust and sense of community gone?

      This is a spectacular demonstration of everything that goes wrong when you violate social contracts and a basic belief in the fairness of the system. And it will only get worse from here, because those policies and violations won’t change.

      1. ArmchairRevolutionary

        I could be wrong, but we have watched them re-brand bad legislation in the past. Look at what Mr. Bougearel says: ‘let us pray the derivatives bill does not pass precisely because of the “customized derivative exemption”’. It won’t pass on round one, but wait and see what comes in round two. Then, Yves being a fly on that wall may have a pretty good idea what it was about.

        As far as “Where the hell has all the trust and sense of community gone?” It is not as if things have really changed all that much; it is more that we are no longer blind. While seeing these activities may be disheartening at first glance, I think it is quite positive. It means corruption is finding fewer hiding places.

    2. Yves Smith Post author

      Armchair, that was my first reaction when I got the invite, and why I was resistant to the idea of going. They most certainly are not interested in what we have to say substantively, and even if they might hope to persuade us (or as they would like to think, educate us, the assumption is that those who are not on board don’t get it), there is no meaningful inducements to secure our cooperation (unlike journalists). And I think the guys who think this was meaningful are way off base. The folks who think this had some significance are vastly overestimating the importance of blogs in the overall scheme of things. Team Obama is into cultivating the web; this looks like a wee experiment on behalf of Treasury, which has been a late adopter.

  30. postmodernprimate

    “Rodgin Cohen, who was presenting and advocating the Administration plans…”

    Could someone please help me understand how Rodgin Cohen got this job? He’s spent his entire career as the ultimate industry advocate. I can live with him lobbying the White House as an advocate for the big banks, but this seems insane. Is there something I’m missing here?

  31. psychohistorian

    Played and relayed well Yves, thanks.

    A perspective I would like to add is that of the effects of the decline in dead tree publication readership, like in newspapers. This is driving organizations to explore the new information online aggregators like Yves.

    A optimist could say that they are looking for alternative viewpoints as their circle of options gets smaller. Gawd knows that they are in need of folks that can think out of the boxes they have confined our world to.

    All we can ask of you Yves (and thank you for) is that you continue to respond with the straightforwardness and opacity that many of the rest of folks that practice journalism lack.

    OT but, When is the next significant shift in this global kabuki dance going to occur? Living through this slow motion train wreck is certainly interesting but painful to watch.

  32. john bougearel


    Let me say, thank God you are not housebroken! :-)

    Secondly, let us pray the derivatives bill does not pass precisely because of the “customized derivative exemption”, but we are going to have to pray hard, because as Josh Rosner pointed out, the hearings this week are going to be mock-hearings, and worse, he expects that derivatives bill to pass with ease. And let’s not forget that Rob Johnson, who believes the most urgently needed financial reforms is precisely “the intersection between the TBTF institutions and OTC unregulated derivatives,” had been invited to present at last week’s derivatives hearings. Johnson had many things to say, but was cut short five minutes into his presentation by the financially captured Melissa Bean (who unfortunately went to my sister high school). Those that haven’t read Johnson’s transcript should, and can do so here

    Third, more prayers should go out opposing any special resolution authority to the US Treasury or executive branch to so-called “resolve” large institutions with a taxpayer-subsidized blank check. If Congress can’t push-back on that, we have to ask ourselves who they think they are representing, the American public or the banksters?

    Fourth, the $50 billion figure may be from the Reconstruction Finance Corp headed by Jesse Jones 1932-1945, as that was the amount the RFC spent on projects. As I recall from Jesse Jones autobiography on the subject, he was quite the czar, and any amount that he asked for was pretty much rubber stamped by congress and the administration. There was some push back early on, but Jesse Jones always got whatever size check he wanted with the utmost ease for many, many years.

    1. Ultimate Janitor

      The “customized derivatives exemption” would actually be hilarious if it wasnt the single biggest item that will ultimately bring down the banking and financial systems of the world. And that will only happen when the lies stop.

      I would venture a guess that 80% or more of the derivative contracts out there are “customized”. So what they are telling us good people is: “We know the taxpayers want this regulated, but we are not going to do it”

      Or in other words: “We (the Congress of the US) are an owned commodity and we do what our masters instruct us to do”

  33. DoctoRx

    As one who has been an “un-fan” of Team O since before Jan 20, I would dissent from some of the harsher comments. This sounds like a reasonable effort from somewhere in Treasury or the WH to reach out; and note that Hillary gave an interview to Fox News that aired last night.

    Re leaving GS, one of the saner people I know left as a VP in his 50s, 20 or so yrs ago, because he wouldn’t sacrifice more and more just to make partner.

    1. Hugh

      One off the record meeting does not a reasonable effort make. Curiously, it was Hillary Clinton’s lame attempts last year to cultivate the blogosphere that came to mind in reading Yves’ description of the meeting.

      There are telltale signs to such meets. Are the officials there for a frank exchange of ideas? Are they clued in to the blogosphere? Is there follow up?

      All Yves’ Teflon talk would suggest no on the above and no to the reasonable effort.

      1. Skippy

        The Clinton’s game plan has always been to suck you in with sweet southern hospitality, steal your idea, cut off your balls, stick ya on a slow boat going down river, and insert their people.

        SKippy…just ask the comic book guy.

  34. Siggy

    I’ve read your recap twice. I conclude: your were invited because you are a voice of dissent. The ground rules are there for a reason. There is fear within the institution that the public will want their heads in a basket. The most telling and disheartening thing you have reported is that there does not seem to be any sense of urgency toward the development of a reformed financial system. Notably unsaid is the concept of prosecuting the incredible fraud that has been perpetrated.

    As to leaving GS, it’s a choice, God Speed. I can understand the departure. The culture at GS is very inbred and the demands on time are enormous. 360 reviews are largely beauty contests and intelligent self sufficent individuals do not fair well in that enviroment. Yet, all in all it’s a choice made to do what you want to do. If you’re not doing something you want to do, you’re probably not doing it very well. As you have chosen, I say good choice and bon chance.

  35. jbmoore

    I couldn’t wade through all the comments, but a few people mentioned access to government officials as a device government uses to control MSM journalists. Perhaps the meeting was just a test of the nonMSM bloggers themselves. If so, then the meeting was an audition of the nonMSM bloggers. If the government is trying to control what nonMSM bloggers like Yves write, then it is possible that they are trying the same methods they use to control journalists. If so, then the meeting itself was a chance for the government to learn either a new form of spin control or decide who should be given access next time if there is a next time. If they learned that their usual techniques don’t work on nonMSM bloggers, then it is possible that that meeting was the first and last meeting Treasury will have with nonMSM bloggers. That the government officials said nothing of value doesn’t surprise me. It will be their subsequent actions towards these same people after this meeting that convey the real message and the government’s intention. The meeting was just a way for both sides to assess each other. The government officials gave nothing away, but they may have gained information they wanted or thought they needed.

    Another possibility is that they were plugging a leak. Someone in the government may be suspected of leaking information to one of the bloggers in question. How do you catch the leaker? You put the source and the reporter in the same room or area and see what transpires.

  36. MarketGuy

    I would have loved to hear how Goldman Sachs is allowed to be a “Bank holding company” and have access to the Feds funding window, yet conducts no appreciable “lending” or “banking”.

  37. Jesse

    I was a consultant to both the National Republican Congressional Committee and the Presidential Campaigns of a one Democrat back in the 80’s and 90’s when I was in the world. Although my area of expertise was technology, I became attuned to the world of Washington, and in particular formed some useful relationships with some of the chiefs of staff, primarily to be used to skin drinks and gossip when visiting DC each year for the State of the Union address. It often coincided with an annual technology conference in the area.

    The meeting you all had is fun, but there was no real content. There was none intended to be. Someone raised an issue on the political side, to address the bloggers, and an action was sent to the staffs of young Timdom, and they ‘did something’ by sending some staff to talk to some real live bloggers. Content free and sanitized. They cared about what you all had to say – not. Absolutely not.

    The Obama crowd will not react until they start worrying about getting their clocks cleaned in the 2010 midterms. They might get a little taste in the polls and today’s elections. But it will mostly be business as usual until they start worrying about what really concerns them, which is their continuing place at the public table.

  38. ComparedToWhat?

    This afternoon I finished reading Martin Mayer’s <a href="""The Fed" [2001], which I really enjoyed even though (like this worthy blog) much was way over my head.

    Mr. Mayer ends his book with this:

    “The tragedy for all of us would be if the Fed’s and the Treasury’s and the Congress’s reverence for people who make a lot of money left us unprotected against some sudden revelation of the truth that becomes obvious only in hindsight, that a lot of them don’t know what they’re doing.”

    Cheers to Treasury for the invite, cheers to those who accepted, cheers to those who made it, cheers to Yves for blogging it. Next time make it conditional on live webcast audio. (We no need no stinkin’ video.)

    1. Yves Smith Post author

      No, and if they had, in Cash for Clunkers style, we’d have had to pay taxes on it. You have to give your SSN to be cleared for a meeting in a government office in DC.

      1. IF

        You make it sound as if paying taxes is something to be avoided? But seriously, it is not quite clear to me why you guys/gals accepted the invitation. Ok, it was potentially entertaining. But what other upside did you expect from going there? This is the question I have been asking myself during the day. (While most commenters focus on the treasury, I don’t think there is much need to guess why they extended the invitation. They clearly are not interested in advise.)

        1. Yves Smith Post author

          Elsewhere I said I wasn’t keen about going, particularly since it involves time and expense. My buddies who know DC urged me to go.

        2. Richard Smith

          Well, you’d have to bet on the outcome being a fairly vapid occasion (as Yves evidently did too). It’s a lost day, lost sleep and lost travel costs. But if the insider tip is to go (burn no bridges, I suppose, that kind of idea), then surely you go anyway? Even the negative expectations are worth a reality check. Not my precious time, sleep and money, of course, but I’m glad Yves went.

  39. jbmoore

    Yeah, the government asks for your full name, SSN, and DOB, sent in the clear via email. How secure and smart is that? Only every FBI agent and NSA spook sniffing the Internet will have access to that data as will your ISP. So much for the wiretap laws.

  40. Richard Kline

    So Yves, I find this meeting interesting, but I wouldn’t want to make too much of it, much as you conclude. To me, this is more an exercise in shaping opinion than in propagating policy. The present Administration is very media savvy; perhaps moreso than you, Yves. Opinion is in a way like a largish volume of water beaded on a canted glass. Pushing it isn’t necessarily easy unless it’s concentrated, and even then one can as easily disperse it as focus it. The key is often something closer to working with surface tension or a siphoning process. If you form tension at one point, you can impel volume from it elsewhere. If you relieve tension at one point, you can draw volume into it. I’m not being terribly clear [‘twould take a text on this], but bloggers do have more influence than perhaps you credit exactly because they impact the surface tension at the margin in ways that either breaks opinion into an issue—think the Goldman’s brouhaha earlier this year—or shunt opinion away by consensing that a particular issue is in fact a non-issue, all before the lumbering MSM gets on the track or not.

    And the point is that presently the Bo Prez Admin is taking boocoup lumps for storking the sweet spot of the banks, and said Admin would like to get better press on that. Especially since policymakers in said Admin believe amongst themselves that, as you picked up, ‘they are doing a LOT’ and getting no credit for ‘taking on the banks.’ You may recall when Krugman and a number of other academic and policy economists not necessarily weighty with Dum Voters ‘R’ Uz but of considerable heft in their own circles were invited to bask in the charisma of Bo Prez with some personal face time. Your adventure was a down-market iteration of the same approach by a media savvy outfit. They are hoping to get a little favorable spin out of y’all. Not to convince you that they are right but to convince you that they are trying and you should back off and let them. Of course, they’re not really trying with their pitiful petty pushbacks since the gonads of their brains are in chains to the Big Spenders. I’m with Peripheral Visionary that this was a standard MO Beltway spin-play by folks who believe that you should believe in them. Not that they should change; not that they should explain what they’re doing; not that they should solicit input: that _you_ should believe in THEM because, y’know, they know so much more than you do and have so much power and have the right kind of government classification which you don’t. As you noticed, they didn’t appear to have any need to actually explain themselves, even to the point of not even having a clear program they bothered to hand out to you in attendance: the chrism of their presence was to be beneficence sufficient; at least it always is with ‘real reporters.’ Now in India, it is understood that they only way to have any real discourse with folks like those with whom you met is to set fire to their automobiles, with or without them inside. But in the US, that’s considered ‘violent demonstration,’ and can get you double digit years on an ecoterrorism rap, so I’m not advocating that on the hurry up [Big Brother’s streaming live and all].

    1. Skippy

      Hay RK isn’t the term “president” just an American colloquialism for chair warmer, golf buddie, microphone mannequin, PR shield for the monied interests now days.

      Skippy…hope your lookin out for your self in these strange days.

  41. Skippy

    Yves you lovely minx, you didn’t say you absorbed the heavenly glow of Timmy in the person (did he anoint thee..lay hands upon on thee) or did their slick slimy self import give ya the huzzz.

    Any-who the juxtaposition is delicious see: Financial Armageddon blog


    Overall, Yves did a good job summing up what transpired at the gathering. That said, I thought I’d throw in a few thoughts of my own:

    •In response to the question about what would happen if, as Reinhart and Rogoff had concluded about past financial crises, the current episode also proves to be a “protracted affair,” it wasn’t clear that there was a “plan B” in place if things do not recover in 2010 as many mainstream analysts expect. In fact, the suggestion from one official was that the tenure of the current crisis would likely be nearer the shorter end of expectations.

    •There was also a bit of a disconnect between the remarks various Treasury officials have made in public forums and what was said at the meeting. Last Thursday, for example, Bloomberg reported that Treasury Secretary Geithner spoke to the Economic Club of Chicago and said:
    “You can say now with confidence that the financial system is stable, the economy is stabilized….You can see the first signs of growth here and around the world.”
    Yesterday, however, a number of those present clearly acknowledged that things could (still) go wrong and said such fears kept them awake at night. While that is not unusual in and of itself, at the very least it adds to doubts I and others have expressed about the true state of the financial system and the economy.

    •Finally, the meeting seemed to confirm the strong grip that Wall Street has on the levers of legislative power. In response to a throwaway remark by one of the bloggers present that discussions about the overly large size of the financial sector relative to the real economy were “not politically correct,” one official suggested the reality was just the opposite, and that a substantial majority of the public agreed with that assessment.

    If you take that together with the assertion that the Treasury Department — and, by extension, the Obama administration — is fully committed to financial sector reform, as well as the fact that the Democrats dominate Congress, the implication is that other forces — namely, the moneyed interests and their lobbyists — are standing in the way of necessary change. Nothing new there, I guess.

    1. Skippy

      Followed by Accrued Interest blogs (Waring NC condom may be required) see:


      Yesterday myself and several other financial bloggers got the chance to meet with several senior Treasury officials, including the Secretary himself. It was a fascinating experience and I have to admit, it was just plain cool to be within the bowels of power like that.

      I am also on record as saying that Geithner was a good choice for Treasury secretary. We needed continuity as the bailout process was on-going. Geithner knew exactly where the bodies were buried in a way that other choices, such as Summers or Goolsbee wouldn’t have. I have since come to view Geithner as a pragmatist, which I appreciate in anyone elected from the other party. And truth be told, a lot of the Treasury department’s plans are working. I can’t deny that. I panned the stress tests when they happened, but I can’t deny that it worked. It created confidence where there was none. Say what you want about whether or not banks are still in trouble, I’m not terribly confident, but we’re sure a lot better off today than January 19.

      I’m a free market guy. I’d like to see any business be allowed to take whatever risks they can get funded. I don’t want to tell what risks banks can take any more than I want to tell Macy’s how many stores it should open or what flavor ice cream Coldstone should be selling.

      Yes, I know. Coldstone isn’t J.P. Morgan. But why not? Only because J.P. Morgan’s failure has major consequences for other banks. But in a perfect world, we’d let J.P. take whatever risks it thought would make them money. That is, whatever risks the market would fund by buying J.P.’s debt and equity instruments. And if J.P. failed, then those investors would get burned.


      Make your own call between the two

      Skippy…were doomed on way or another, these jackasses in the WH and WS have a death grip on us and will not let go until till salt is poured on the sucker filled tentacles they have attached to us, and their whispers of its for the good of the country REALLY!

  42. DaveInDenver

    Hmmmm…this pow-pow between Geithner’s staff morons and bloggers, some who are value-added and some who are completely mental midgets, sounds to me like nothing more than a Larry Summers’ motivated Orwellian love-in held in Geithner’s masturbation room.

  43. DavosSherman

    What is this: “Unfortunately, some of us are not housebroken”.

    Truth of the matter is that Paulson and his Treasury took a stinking un-housebroken cr@p in every American’s living room. It smell so bad that it will be there for our grand kids to clean up.

    And you are condemning someone for telling them the way it is? Frankly Yves, I think they have it right, once again you seem to put yourself above everyone else.

  44. Dave Lewis

    Mr. Smith,

    You captured, in my view, the essential problem: But my feeling, and it seemed to be shared, was that we bloggers and the government officials kept talking past each other….

    Bankers have their view, Officials have theirs, Commentators have theirs and the people have their own as well. People are talking past each other. Until some event engenders a change in sentiment such that people to TO each other, that new ideas are worthy of being entertained (a la Aristotle), change will be marginal.

    Nice post, thanks for sharing.

  45. Amit Chokshi

    I think Mark Twain summarizes things best re Yves’s meeting:

    “Sometimes I wonder whether the world is being run by smart people who are putting us on or by imbeciles who really mean it.”

  46. David Chessik

    Did you notice the elephant in the room? Or did you manage to ignore it while it was giving you all the business? Lending credibility to the Treasury and FED served their purpose, not yours. Showing up for descret meetings served their purpose, not yours. Agreeing to not identify government officials truthfully regarding their positions and comments served their purpose but not yours. Thank you for setting us all on our guard, now we know you are pandering to get into the ‘in group.’ Did you agree to moderate the comments on you blog too?

    1. Yves Smith Post author


      I have said this before, and I will say this more pointedly: did you not read the thread? I did not want to go, this was money (a day trip on my nickel when I make it a practice not to spend money in my business on travel unless reimbursed) and a full day of time. I resented the request since it is bloody clear that they do not give a damn about what I think, they and I know that any complaint I have has already been made by people more prominent than me and ignored by them.

      I went ONLY because people I know who know DC AND are keen opponents of what the banksters and Administration are up to insisted I go. This was based on their expert advice. With all due respect, you are not an expert in this area.

      As for not attribute names, I am asked to respect agreements in my day job. Maybe you believe it is OK to say you will do something and not, but I don’t. This is part of my personal and professional ethics. I agreed to go ON ADVICE not because I was keen or even wanted to go, and I agreed to respect their ground rules.

      And you are further assuming that there would be some bizarre value added in knowing who said what. They were all on the same page! We were getting the house BS! So what does it matter if a particularly colorful turn of phrase came out of one person’s mouth versus another? We were not getting individual opinion here.

      I am not impressed by power, I’ve had jobs where I would often meet CEOs and Wall Street heavyweights, in particular, the M&A department at the age of 29 when Japan was the place to be. I have also met senior regulators before, both here and in Japan. I was, for instance, the only person there who had been at Treasury before. I met a lot of very powerful people with big titles back then, and still do upon occasion now (I’ve had several billionaire clients, for instance).

      1. David Chessik


        I understand attending out of curiosity, but I don’t understand agreeing to their control over your speech in any manner. Any attempt on their part to control your speech is a veiled threat at best. Your agreement to subject your speech to their requests/demands is puzzling. They already knew what you think because of your blog. You already knew what they think because of their conduct. Did you request/demand that they supress their communication in any manner?

        I know you’re proud of your experience. My experience is different; alaska commercial fisherman, built my own fly fishing lodge in the wilderness, put myself through law school and built my own firm. We certainly have different values. I can’t agree that men of corruption are “powerful”, dangerous yes, but not powerful. Perhaps you are a little attracted to the trappings and glitz.

        Funny though, when Jesus wanted men to spread the truth, he chose four fishermen, and not one banker. The take home message I want you to understand from me is that when your dealing with men of appetite, greed and corruption, you don’t surrender an inch of your freedom, especially your freedom to speak. Pitiable.

        1. Yves Smith Post author


          I go to meeting all the time in my day job where I am asked to respect confidentiality in varying degrees as a condition of meeting. I am not about to agree to something and welch on it.

          More important, the only thing they wanted “confidential” is that particular remarks not be attributed to particular people. None of us were taking notes carefully enough to allow for exact quotes, so their request was not germane anyhow. They all stuck to the same script, so there was no diversity of views. As indicated in a link in the post, this seems to be a Team Obama neurosis, they seem to want it across the board, whether or not it is relevant.

          I didn’t give the names of the officials because quite a few wandered in and out and I did not get about 40% of them.

  47. Tell it like it is

    The rationale is wholly clear from where I sit.

    They are trying to use the access paradigm to divide and conquer those who have garnered some measure of influence in the blogosphere. Those like Yves, who have cultivated notably sized followings with their insight and eloquence in the context of the financial misdoings at the seats of power, must be redirected one way or another. The best defense is a good offense after all.

    Some will be expected to fall prey to the gradual intoxication of being included amongst the all-powerful officials and bankers in the beltway. Their future blog content and delivery can then consequently be expected to be diluted, at worst, and perhaps in the best cases even transmuted into some measure of support for the thieves and their enablers in D.C. Some will indeed likely fall for the compelling intoxication of power, whether real or perceived, after being sown with the seeds of access. Those who drink the Kool-aid will no longer be amongst the blogger thorns stuck naggingly to the underside of the beast. Indeed, some may prove as useful future mouthpieces once their perceptions are turned through the fanciful treatment directed at stroking their respective individual egos.

    Others will be tougher nuts to crack and can be expected to stand by their positions and their ethics, even in the face of the risk to access they will quickly be confronted with if they’re too controversial during these ‘discussions’. Those who don’t either equivocate or come aboard the wheelhouse with the captain and his henchmen will soon be jettisoned and their access retracted, perhaps as quickly as it arrived.

    Some will further be called out by their followers/readers, as has occurred here in this thread, as being capitulators who refuse to hold the powerbrokers’ feet to the proverbial fire. This, of course, even as they have so little control over how the ‘discussion’ forums are conducted. So, for those who straddle the line between drinking the Kool-aid and the risk of losing access there will additional risk of losing credibility amongst their followers when they don’t use the access to corner the insidious machine with pointed questions.

    Either way, the significant voices of the web which have served to expose so many misdeeds at the seats of power will have been largely reduced. And subsequently, so will the magnification effect of outrage be reduced among their readers.

    The ‘officials’ don’t care about the views of outsiders in the slightest. There is no interest in the poignancy of a position that questions the thieving status quo. They are only interested in marginalizing the voices that are slowly and increasingly spreading the word about how screwed up things are.

    If they can bring some of the effective dissenting voices aboard and discredit others amongst their followers then they’ve executed the gameplan they are really interested in.

    The other gameplan – the one that relates to reigning in the money profiteers who have systematically sacked the citizens of the country – is nothing more than a tactic for obfuscation. That gameplan is set, and it will not be changing any time soon…

    Some of the financial bloggers who have proven insightful, credible, and in many cases downright prescient were excluded from the get go. Why, you ask? Simple – because it was well known to the ‘officials’ that they would not conform, even at the outset, to the expectation of being well behaved in the presence of the mighty power-brokers. Ultimately, and sooner rather than later, they would need to have their access cut. Those, however, would run the risk of causing more grief to the high and mighty in the context of access than their inclusion would be likely to yield benefit…

    This is why Karl Denninger and Zero Hedge weren’t, and won’t be, invited.

    This isn’t to indict Yves or any of the other attendees. It is only to point out that the chosen attendees have surely been assessed prior to be of a character and/or writing style such that the ‘officials’ believe (whether accurate or not) that headway with them (and thus marginalization, one way or another) is more likely. None of these comments are intended as a jab at Yves or other attendees, by the way.

    Watch. Those who use the access to ask tough questions and who refuse to relent on those tough questions as they are ignored will have their access removed promptly (or perhaps gradually restricted, to see if they can be better behaved). In the interim, however, the writing of attendees will be far more docile when contrasted with their previous dissertations as they contemplate, consciously or not, their newly found access and ostensible pedestal. All attendees will be under a high level of ongoing scrutiny to determine how their positions are being influenced.

    Who was it that said something on the order of ‘… keep your enemies closer…’ ?

  48. fuguez


    I tend not to believe in organised well-planned conspiracies. This was a meeting to put names to faces. The Powers That Be had more to gain by showing their ‘human faces’.
    Yes, they will be seen for what they most likely are: sensible people. However we should all be careful not to mistake the messenger and message.
    Keep doing what you are doing as I am sure you will. Independent, intelligent and objective analysis will always be welcome.

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