Did Geithner justsay that?

http://www.reuters.com/article/2013/01/19/us-usa-fed-geithner-idUSBRE90I04220130119

Jeffrey Lacker, the head of the Richmond Fed, originally raised the allegation during a Fed conference call in August 2007, and he stuck to his 5-year-old claim against the current U.S. treasury secretary in a statement provided to Reuters on Friday.

"From conversations I had prior to the video conference call on August 16, 2007, I was aware of discussions among a few large banks about borrowing from their discount windows to support the asset backed commercial paper market," Lacker said in the statement. "My understanding was that (New York Fed) President Geithner had discussed a reduction in the discount rate with these banks in connection with these initiatives."

According to transcripts of the call released by the Fed on Friday, Geithner at the time denied that banks knew the Fed was considering cutting the discount rate. The Fed regularly releases transcripts of its policy meetings with a five-year lag.

"We don't have any comment beyond the transcript," said Treasury spokesman Anthony Coley. The Treasury declined to make Geithner available to comment.

Information about any planned interest rate move by the Fed is among the most sensitive as it can have a huge impact on a range of financial markets worldwide. That was particularly the case in the summer of 2007 when there were growing concerns about financial stability as a crisis that would reach fever pitch just more than a year later began to build.

Private disclosure of confidential, market-sensitive information by the central bank would be highly unusual, but it was not immediately clear if it would be illegal. It also was not clear if strict Fed internal rules governing confidential information would have been breached, or whether any internal or external investigation was mounted. Lacker made no suggestion of wrongdoing by the banks as a result of getting hold of any information.

The central bank delivered a surprise cut in the discount rate, which governs direct loans it makes to banks, the day after the call. The action spurred a big stock market rally, with the Standard & Poor's 500 Index enjoying its best gain in 4-1/2 years.

The unusually large half-point cut in the discount rate to 5.75 percent that the Fed delivered on August 17 was the first in a long series and came just days after French bank BNP Paribas froze three investment funds that were facing heavy redemptions. A month later, the Fed would also cut the overnight federal funds rate, its primary lever to influence the economy.

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."

http://www.zerohedge.com/news/2013-01-19/presenting-50-point-sp-500-move-courtesy-illegal-geithner-leak

Those who happened to have the misfortune of trading stocks on August 16, 2007, and especially those who were short the stock market just because they saw the writing on the wall - writing that would crush the S&P to 666 in one and a half short years and lead to the failure or consolidation of half of America's banking system - remember that day very well. What happened on August 15, and continued through the 16th was an aggressive bout of selling, that took the S&P from 1390 to 1360 at the close of the prior day trading day, and subsequently sent it lower by another 30 points to 1330 at just about 2 pm Eastern. What happened next would have otherwise remained a mystery, if not for yesterday's declassification of the Fed's 2007 transcripts. Because suddenly, out of nowhere, an unprecedented bout of buying started with no news to serve as a catalyst. The buying sent the S&P soaring by some 50 points (!) in the span of an hour.

Once again - there was no market-moving news to explain this move. At least no publicly disclosed market-moving news.

Now we know whose job it was to unleash the buying spree at precisely 2:00 pm on that Thursday. His name: Timothy Franz Geithner.

And we know this because Jeffrey Lacker knows this. From the August 16 transcript:

MR. LACKER. Vice Chairman Geithner, did you say that [the banks] are unaware of what we’re considering or what we might be doing with the discount rate?

VICE CHAIRMAN GEITHNER. Yes.

MR. LACKER. Vice Chairman Geithner, 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.

This exchange took place some time after 6:00 pm on Thursday, and some time after the 50 points ES ramp had taken place "out of nowhere." In other words, not only did the leak that many FOMC members (including, humorously, Tim Geithner) were concerned about take place, but it was none other than the Geithner Leak to at least Ken Lewis, and who knows how many other bank CEOs, which we also now know made the rounds among those bank trading desks who were privy to its confidential and illegal market moving content at just after 2:00 pm on that day.

For those who need a visual reminder of just what happened on August 16 2007, here it is:

Many shorts ended up being carted out of the front door that day, unsure what has just happened. Sure enough, the next day at 8:00 am the Fed did what it had decided the previously it would do, and announce the 50 bps cut to the discount rate to fed funds rate spread. The market response was just as blistering as the rest of the market piggy backed:

To summarize what happened for all those who were too stunned from the day's rapid events, the S&P futures moved from a low of 1320 (and 1330 at the 2:00 pm moment that the market saw a mysterious "invisible hand" pushing it higher), all the way to well over 1410 the next day: an unprecedented 90 ES point move in a few hours! The reason: the Fed's market moving announcement, as well as the Geithner Leak at just around lunch time on August 16th.

Thx RS..

Was Geithner talking about New York residential real estate? Is that why Riverside posted this full text in three consecutive parts here on StreetEasy?