Randomly Noted

The U.S. Treasury Secretary got his tense wrong.

“It is very important to keep politics out of monetary policy,” said Treasury Secretary Timothy Geithner on Friday, in a Bloomberg television interview.

Really, he should have said it would have been nice to have kept politics out of monetary policy. They are in, big time. Politics and the Federal Reserve may have traditionallly enjoyed an arms’-length relationship, but they were never completely separate. Now they are in a bear hug.

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In a world where forecasters of all sorts are typically not held to account, give some credit to the predictive powers of Rep. Barney Frank, D-MA, who chairs the U.S. House Financial Services Committee.

Sure, as the committee chairman and leader of the House conferees who helped hammer out a final financial services regulatory overhaul bill, Frank had some special insight into and influence upon the plight of the sweeping legislation.

Still, politics is a fickle business, so it is worth noting that back at the end of January, Frank predicted publicly that President Barack Obama would sign a “pretty good” financial regulation bill in the Spring. Frank spoke then at the annual World Economic Forum in Davos, Switzerland.

Well, Frank missed by a season, but just barely. The bill will be signed soon and a broad new era of financial regulation, no doubt filled with unexpected and unforeseen consequences for the banking and securities industries, will be ushered in.

The headline of the press release could have read, “Don’t Mess With Barney,” instead of the more sedate “Statement of Financial Services Committee Chairman Barney Frank.”

What got the power ful committee chairman riled up, as explained in an article by Sarah Lynch of Dow Jones Newswires, was the faster-than-usual ‘revolving door’ move of one of the committee’s staffers.

Peter Roberson, the staffer, “played a key role in drafting the derivatives part of the financial (regulatory reform) bill, which would move some products onto clearing and trading platforms, including those operated” by IntercontinentalExchange Inc., or ICE, Lynch reported. The House has passed its version of the bill, and we now await Senate action.

In January, Roberson told Frank he was talking to ICE about a job there. He was hired by ICE in February as vice president of government relations.

“When Mr. Roberson was hired, it never occurred to me that he would jump so quickly from the committee staff to an industry that was being affected by the committee’s legislation,” Frank said in a statement.

It is a tough situation. One would prefer the lure of the private sector didn’t follow so closely on the heels of crafting an important law with big consequences for companies in that sector.

Rep. Frank is doing what he can to show his displeasure. Roberson was relieved of his duties once he announced the ICE talks. As an ICE employee presumably tasked with dealing with official Washington, Roberson’s inability to interact with the Financial Services Committee staff will extend beyond the typical one-year ban.

Frank wrote he intends “to prohibit any contact between him and members of the staff for as long as I have any control over the matter.”

Now that a bipartisan commission has been named to find way to reduce the massive U.S. federal budget deficit sometime in medium term, it will be interesting if any of the usual untouchable spending areas will now be considered touchable.

It all likely depends on how much lawmakers really consider the budget deficit a crisis in the making. Few would advocate deep spending cuts now, with the fragile economy still in need of external support, but many think sometime reasonably soon the deficit issue has to be tackled.

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Neal Lipschutz is attending the World Economic Forum in Davos, Switzerland.

A statue in the City of London depicting the authors of the 2002 Sarbanes-Oxley U.S. regulatory legislation?

Such a monument is worthy of consideration, joked Lord Levene, chairman of Lloyd’s, at a World Economic Forum panel discussion here.

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It’s not yet officially proposed, but holes are apparent in the plan being hammered out by the Treasury Department and key Congressman Barney Frank, D-Mass., to better handle systemically important financial institutions on the brink of failure.

The key proposal: financial companies that have more than $10 billion in assets would have to pay the government back for breaking up one of their too-big-to-fail brethren.

That according to the reporting of Damian Paletta of  The Wall Street Journal.

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Goldman Sachs hasn’t had an easy time of it of late in the U.S. press. There was a tough story in the magazine Rolling Stone. There are the contrasts drawn between Goldman’s renewed success and the struggle of the American economy. There are all the former Goldman people who march through important U.S. government posts.

One example, a July 16 column in The New York Times  by Paul Krugman, who said of Goldman’s record profits: “First, it tells us that Goldman is very good at what it does. Unfortunately, what it does is bad for America.”

Now, some actual kind words about Goldman Sachs. They come from Rep. Barney Frank, D-Mass., who chairs the House Financial Services Committee, and Rep. Carolyn Maloney, D-NY, who chairs the Joint Economic Committee. The reason for the praise: Goldman paid full price, $1.1 billion, to buy back warrants held by the U.S. government in return for aid granted Goldman.

“I appreciate that Goldman Sachs did the right thing today, and we urge all the others to follow this example,” said Frank in a press release. “I hope that this will lead to greater cooperation by other firms that have outstanding warrants owed to the American taxpayer.”