Jeff Gerth writes about papers Timothy Geithner, Obama’s first secretary of the treasury, wrote which has cropped up as part of an ongoing legal case concerning AIG and the bailout.  With the SEC focused on insider trading, which Geithner descibes as disgusting but not the cause of the financial crisis, and poor supervision of the various institutions that bundled subprime mortgages, the aftermath of the crisis has still not be dealt with.

Weak remarks from Wiliaim Dudley, head of the New York Fed which Geithner ran before he went to the White House, illustrate how ineffective supervision of Wall Street was and is.  Specific criticisms are summaried in Geithner’s notes.  Timothy Geithner Talks About the Financial Meltdown, Somewhat Frankly

Geithner’s points: Illegal stuff was hard to prove, supervision was weak. Government relief programs were tepid and corporate wrongdoers have not been punished.

Can the New York Federal Reserve supervise Wall Street?

The financial crisis could never have happened without the passivity of federal bank regulators. And no agency’s failure was more pivotal than that of the Fed, which had the authority to crack down on the abusive lending that drove the financial system and the economy over the cliff, but repeatedly failed to exercise it

The New York Fed is a key part of the Federal Reserve, acting as the on-the-ground supervisor of the major Wall Street banks. According to an internal New York Fed report, written in 2009 but revealed recently, bank supervisors in the pre-crisis years ”saw issues but did not respond,“ were not ”willing to stand up to banks and demand both information and action,“ and were excessively deferential to the banks they regulated.

Five years later, a whistleblower’s tape recordings reveal a disturbingly similar pattern of inappropriate deference to regulated banks. A still more recent official report adds fuel to the fire by criticizing the New York Fed for sloppy oversight of the JPMorgan Chase office responsible for the $6.2 billion “London Whale” disaster.

Deutsche Bank, Germany’s largest, reported a net loss of 92 million euros, or about $117 million, compared with a profit of €51 million in the third quarter of 2013. Profit in the quarter had been expected to suffer after Deutsche Bank said last week that it had set aside an additional €894 million to cover legal costs.

The loss provides another reminder that Deutsche Bank and other large investment banks are still preoccupied with addressing the excesses associated with the financial crisis, as well as with increasing demands from regulators intent on curbing risk-taking by banks.

“It’s very clear that litigation legacy, coping with all of that, has proven to be more challenging for us and the industry than we would have thought,” Mr. Jain said on a conference call with analysts on Wednesday.

The bank is facing investigations over its role in the potential manipulation of global benchmark interest rates and inquiries into foreign exchange trading.

It is also facing lawsuits over mortgage-based securities sold in the US before the financial crisis.   Along with money set aside in previous quarters, Deutsche Bank has stockpiled a total of about €3 billion to cover potential litigation costs.

Mr. Fitschen and several former bank leaders are also facing criminal charges of colluding to give false testimony in a long-running lawsuit over the collapse of a bank client’s media empire.  In addition to legal issues, the chief executives said, headwinds include a slowing European economy and geopolitical risks, a reference to tension with Russia and fighting in the Middle East.

Deutsche Bank and its peers face increased scrutiny from regulators who are seeking to prevent future financial crises. The ECB  has already demanded more information than in the past, prompting many banks to invest in better information technology.

Deutsche Bank easily passed stress tests carried out by the ECB.  They have also actively increased equity.   But Deutsche Bank continues to face criticism that it is overly dependent on borrowed money.

The Jeffrey M. Lacker of the Federal Reserve of Richmond reports;  Here are the highlights of my speach at the National Conference of Bankruptcy Judges Annual Meeting at Chicago, Ill.

• The bankruptcy process is an effective tool for reconciling the incentives of creditors and debtors. Yet the government has a long history of handling large complex financial institutions outside the Bankruptcy Code.
• This has created two mutually reinforcing conditions: Investors feel protected by an implicit commitment of government support, and policymakers feel compelled to provide that support to avoid a disruptive adjustment of expectations.   Jeffrey Lacker’s Speech