Tim Geithner is the Tim Taylor of Wall Street: It’s All About MORE POWER!

Treasury Secretary Tim Geithner is starting to look like Tim Taylor: The only thing he cares about is more power.

Tim (Geithner, that is) asked Congress for new authority to seize non-bank financial firms:

"As we seen with AIG, distress at large, interconnected, non-depository financial institutions can pose systemic risks just as distress at banks can," Geithner said in prepared testimony submitted to the committee. "The administration proposes legislation to give the U.S. government the same basic set of tools for addressing financial distress at non-banks as it has in the bank context."

He said this authority would allow the government to make loans to an institution, purchase its obligations or assets, assume or guarantee its liabilities and purchase an equity interest. As a conservator or receiver, he said, the government "would have additional powers to sell or transfer the assets or liabilities of the institution in question, renegotiate or repudiate the institution's contracts (including with its employees), and prevent certain financial contracts with the institution from being terminated on account of conservatorship or receivership."

I find this development to be potentially disastrous. The government has enough trouble running the existing Federal Reserve, Treasury Department, and all the various regulatory agencies. Now they want to take on decisions regarding the fate of trillions of dollars in financial assets and liabilities.

Its decisions would suffer from political motivations – decisions could easily be affected by public perception/outrage and personal connections rather than what would happen between two independent parties in a free market.

We can draw a parallel with Defense contracts. You know, when a high-ranking military official hands a sweetheart contract to a defense company. And then that company hires that official at a 7-figure salary after he retires from the armed forces. Just substitute ‘military official’ for ‘Government crony’ and ‘defense company’ for ‘savvy hedge fund’.

You don’t think the public will get screwed for billions there?

There are other questions to be asked here. For example, Geithner wants investment funds to come in and buy up toxic assets with financing that would generate outsized returns.

Will the public be offered the same deal? I mean, they sound more attractive than savings bonds. Thankfully, BlackRock (BLK) Chairman Laurence Fink is considering creating mutual funds for individual investor participation. Now that’s a super idea, because it will allow the regular guy to get in on opportunities the government is gift-wrapping for big money managers like the Carlyle Group

And will the government hit those hedge fund managers with 90% tax rates on the profits they make on these deals? These guys are smart enough to pull the wool over the eyes of government officials and they’re going to make out like bandits.

The US government has been raining money down on banks to manipulate them back into shape. Now it wants to serve as one big fat lender, prime broker, investment banker, trader, and analyst to the financial world. Talk about a power grab!

Supposedly smart people failed at running companies like AIG (AIG), Lehman Brothers, and Citigroup (C). And now the government, which failed to properly regulate financial services companies, wants to be in charge of it all? All we would get is a massive concentration of power within the Treasury that would bully the market and private institutions as it sees fit.

What do you guys think?