Geithner, Bernanke reject new global currency idea

U.S. Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke on Tuesday dismissed suggestions by leading emerging economies that the global economy move away from using the dollar as the main reserve currency.

In a congressional hearing on Capitol Hill, U.S. Rep. Michele Bachmann, a Minnesota Republican, asked Geithner: "Would you categorically renounce the United States moving away from the dollar and going to a global currency as suggested this morning by China and also by Russia, Mr Secretary?"

Geithner replied, "I would, yes."

She posed the same question to Bernanke, who said: "I would also."

Chinese central bank chief Zhou Xiaochuan on Monday urged an overhaul of the global monetary system to allow for wider use of Special Drawing Rights (SDRs) created by the International Monetary Fund as an international reserve asset in 1965.

Zhou's comments followed remarks by Russia last week which said it would put forward a proposal at a meeting of the Group of 20 in London on April 2 for the creation of a new global reserve currency.

Australia's Prime Minister Kevin Rudd also knocked down the idea of dislodging the dollar as the world's main reserve currency, telling an audience in Washington on Monday: "The dollar's position ... remains unchallenged."

Goldman Sachs Said to Be in Talks to Repay TARP Funds

Goldman Sachs Group Inc., once the most profitable firm on Wall Street, is talking with U.S. regulators about repaying the $10 billion it received from the government by mid-April, a person familiar with the matter said.

Goldman Sachs hasn’t formally applied to give back the money, which the New York-based company received as part of the first round of the Troubled Asset Relief Program, the person said, declining to be identified because the talks are private.

Bank executives are chafing under increased scrutiny that accompanied the bailout money, as public outrage over bonuses and executive perks intensifies. The government may be reluctant to let any banks pay back the TARP money now, because it could pressure other companies that still need the cash to return it, according to Peter Sorrentino, who helps manage $13.3 billion at Huntington Asset Advisors in Cincinnati.

“The regulators do want to keep all these guys on the same page,” Sorrentino said in an interview. “It’s like a chain gang, you’ve got them all in handcuffs. If you let some of them out, then you’ve got a couple off the reservation.”

Goldman Sachs doesn’t expect to be allowed to repay the TARP money until the Treasury finishes so-called stress tests of major banks’ financial stability, the person said. Regulators said last month they expected to complete the review in April.

“We’ve indicated our desire to repay TARP capital sooner rather than later, but obviously won’t do anything without the approval of our regulators,” Goldman Sachs spokesman Lucas Van Praag said.

Bonuses Lost

The New York Times reported earlier today that Goldman Sachs was negotiating to return the money. Treasury spokesman Isaac Baker declined to comment.

David Viniar, Goldman Sachs’s chief financial officer, said Feb. 4 that running the company without government money “would be an easier thing to do.” The firm, which set a Wall Street record for pay in 2007, said in November that Chief Executive Officer Lloyd Blankfein, 54, and six deputies would forgo their year-end bonuses.

“We wouldn’t do anything that would potentially weaken the firm in an attempt to address a narrow issue,” Van Praag said on the issue of compensation.

Goldman Sachs is also mulling a potential sale of part of its 4.9 percent stake in Industrial & Commercial Bank of China Ltd. to raise more than $1 billion, the Wall Street Journal reported yesterday.

Predictable Earnings

Investors would likely welcome the sale as a means to raise capital and create a more predictable earnings stream, said William Fitzpatrick, an equity analyst at Optique Capital Management in Racine, Wisconsin, which holds Goldman Sachs shares among its $900 million in assets.

As part of the stimulus package, firms are allowed to repay TARP money without replacing the funds at the discretion of regulators.

JPMorgan Chase & Co. CEO Jamie Dimon said Feb. 23 the New York-based bank was planning to pay back TARP “as soon as it is prudent” in consultation with regulators. Richard Kovacevich, chairman of San Francisco-based Wells Fargo & Co., criticized the government’s retroactive curbs on bonuses last month and called the plan for bank stress tests “asinine.”

Goldman Sachs “can legitimately make the argument that it’s getting in the way of doing business since they keep changing the rules,” Sorrentino at Huntington said. “Politically I don’t know how you stop them from giving the money back.”

Bernanke: I Wanted to Sue AIG to Halt Bonus Payments

Federal Reserve Chairman Ben Bernanke told Congress Tuesday that he tried to prevent American International Group from paying out lavish bonuses, and even asked that the company be sued to halt the payments, but was advised against it.

Bernanke told lawmakers at a tense House Financial Services Committee hearing that he found it "highly inappropriate" for the bailed-out insurer to pay $165 million in bonuses to the very division that was "the primary source of AIG's collapse."

He said he was told the payments could not be stopped because of contractual obligations -- but he was also warned that legal action, which he wanted to pursue, could end up awarding the same employees more money in punitive damages.

"I then asked that suit be filed to prevent the payments," Bernanke said. "Legal staff counseled against this action on the grounds that Connecticut law provides for substantial punitive damages if the suit would fail. Legal action does have the perverse effect of doubling or tripling the financial benefits to the (employees)."

Treasury Secretary Timothy Geithner, appearing with Bernanke, also asked Congress for broad new powers Tuesday to regulate nonbank financial companies like the troubled insurer, whose collapse could jeopardize the economy.

"AIG highlights broad failures of our financial system," Geithner said. "We must ensure that our country never faces this situation again."

Geithner acknowledged that the current climate of anger, including the furor over those retention bonuses, will complicate any effort by the Obama administration to get more bailout money from Congress. "We recognize it will be extraordinarily difficult," he said.

AIG has become a symbol of reckless risk-taking on Wall Street. The House last week voted overwhelmingly to slap 90 percent taxes on the largest bonuses and similar, although not as punitive, legislation is before the Senate.The bonuses came even as AIG reported a stunning $62 billion loss, the biggest in U.S. corporate history.

The government has bailed out AIG four times, to the tune of more than $180 billion altogether.
New York Attorney General Andrew Cuomo said Monday that 15 employees who received some of the largest bonuses from AIG have agreed to return them in full, totaling about $50 million.