With a Little Help From Their Friends

Shocked, shocked I tell you, to hear that market-rigging is going on here:

During the Fed's August 16, 2007, conference call, Geithner said that banks had started to ask about borrowing from the Fed earlier in the month after the central bank had released a statement saying it stood ready to provide liquidity to credit markets.

Geithner said banks "obviously don't have any idea that we're contemplating a change in policy"---a statement that Lacker then questioned.

"Did you say that they are unaware of what we're considering or what we might be doing with the discount rate?" Lacker asked, according to the transcript.

Geithner said yes, and Lacker followed up: "I spoke with Ken Lewis, president and CEO of Bank of America, this afternoon, and he said that he appreciated what Tim Geithner was arranging by way of changes in the discount facility. So my information is different from that."

Geithner responded, "I cannot speak for Ken Lewis, but I think they have sought to see whether they could understand a little more clearly the scope of their rights and our current policy with respect to the (discount lending) window."

"The only thing I've done is to try to help them understand ... what the scope of that is," he said.

Don't really know which is worse if this is true: That he was leaking insider information that could have given them a competitive edge over other banks that weren't tipped off, or the way he talks about them is if they're a business partner of the central bank. Okay, in a way they are business partners, but the whole idea is not to selectively leak useful info that can be monetized to them because it will move the financial markets in a way that is, well, rigged.

---Baron V