One of the biggest criticisms I had of the Barack Obama administration was that it was completely in the pockets of the big financial sector institutions, such as the major banks on Wall Street. Especially guilty of this were Eric Holder and Lanny Breuer, who were the top two in the Justice Department and never prosecuted the executives of those firms. They both came into government from the law firm Covington and Burling that had those banks as clients, and they then returned to that same law firm after leaving government office, to reap the big rewards of their acts of obeisance to Wall Street. The other major figure in the sell-out to the banks was Treasury Secretary Timothy Geithner.
The excellent book Bailout by Neil Barofsky exposed all the shenanigans using pubic money to bail out the banks following the financial crisis. (See my 2013 review of the book.) Barofsky was the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) that was created by Congress to be an independent monitor to oversee the use of the $700 billion that they had rushed through in the wake of the financial crisis. He was in the unusual position of being nominated by the outgoing Republican administration and continuing under the Democratic one. As he wrote:
I had no idea that the US government had been captured by the banks and that those running the bailout program I’d be charged with overseeing would come from the very same institutions that had both helped cause the crisis and then become the beneficiaries of the generous terms of their bailout. (p. 19)
Helping the banks, not home owners, did in fact seem to be Treasury’s biggest concern (p. 156).
The hurried decisions, lack of transparency, and unquestioning deference to Wall Street that characterized the approach to the PPIP, HAMP, and CPP programs were hardly isolated incidents; it became clear to us that they were part of an emerging pattern that no secretary would want explored. (p. 174)
As I wrote in my review:
What I found most interesting about this book is the totally corrupt culture it reveals. This is of course not a surprise. What is a surprise is to have someone who was working at the highest levels be willing to dish the dirt on how things really go down so soon, instead of writing his memoirs decades later when the culprits have long since left the scene.
Like many others, I strongly suspected that Wall Street had long ago captured the government. But it is one thing to believe that and quite another to see it spelled out in such detail. If you want to know in detail who and what caused the financial crisis, written in an easy-to-understand and readable style by someone at the center of things, this is the book for you.
Barofsky was a truth teller and not shy of naming names about the people involved. He described Geithner as not only petty and small-minded but also as a complete stooge of the banks. So naturally Barofsky found it hard to get a job after he left that post.
With that background, it is not surprising that we learn that Geithner is now the head of a large financial institution that is making money off poor people, using predatory practices that are just more sophisticated versions of the old loan shark racket. The way it does that is by sending unsolicited checks to people who are struggling financially, hoping that they will cash the checks to meet some sudden and urgent need. Once people do that, they become the victims of predatory practices as interest and fees rapidly add to the cost of repayment. Instead of the traditional loan shark sending a thug to threaten to break your knees if you don’t pay up, Geithner’s people harass you on a daily basis and send legal goons to threaten you. As one analyst said, “It’s basically a way of monetizing poor people”. And on of the biggest players in this sleazy scheme is Mariner Finance.
Mariner Finance is owned and managed by a $11.2 billion private equity fund controlled by Warburg Pincus, a storied New York firm. The president of Warburg Pincus is Timothy F. Geithner, who, as treasury secretary in the Obama administration, condemned predatory lenders. The firm’s co-chief executives, Charles R. Kaye and Joseph P. Landy, are established figures in New York’s financial world. The minimum investment in the fund is $20 million.
Among its rivals, Mariner stands out for the frequent use of mass-mailed checks, which allows customers to accept a high-interest loan on an impulse — just sign the check. It has become a key marketing method.
The company’s other tactics include borrowing money for as little as 4 or 5 percent — thanks to the bond market — and lending at rates as high as 36 percent, a rate that some states consider usurious; making millions of dollars by charging borrowers for insurance policies of questionable value; operating an insurance company in the Turks and Caicos, where regulations are notably lax, to profit further from the insurance policies; and aggressive collection practices that include calling delinquent customers once a day and embarrassing them by calling their friends and relatives, customers said.
Finally, Mariner enforces its collections with a busy legal operation, funded in part by the customers themselves: The fine print in the loan contracts obliges customers to pay as much as an extra 20 percent of the amount owed to cover Mariner’s attorney fees, and this has helped fund legal proceedings that are both voluminous and swift. Last year, in Baltimore alone, Mariner filed nearly 300 lawsuits. In some cases, Mariner has sued customers within five months of the check being cashed.
Geithner and Holder and Breuer are Obama’s people, chosen by him, and utterly rotten to the core. What they were like was obvious before they were hired and yet he placed them in important public positions and now they are reaping the rewards of their actions in favor of the financial sector. So I am not at all surprised that Geithner is now a glorified loan shark. But this is what the top ranks of the Democratic party leadership consists of. I now hear that Holder is seriously considering running for the Democratic nomination for president in 2020.