OVERNIGHT MONEY: Geithner's tenure ends

FRIDAY'S BIG STORY: 

Fare thee well, Timothy Geithner: No one said it would be easy. 

Treasury Secretary Timothy Geithner ends his tenure on Friday feeling confident that efforts to water down the Dodd-Frank financial reform law are waning. 

The outgoing Obama adviser said in a recent interview with The New Republic that continuing Republican efforts to chip away at the implementation of Dodd-Frank have lost most of their steam. 

"That effort does not have much political force now," he said.

He is likely to pass the torch to Jack Lew, the nominee to take his place and the current White House chief of staff, who has been making the rounds on Capitol Hill this week. 

Senate Democrats have announced their support for his confirmation but Republicans are reserving their backing, waiting for requested paperwork, such as tax returns, to come together before agreeing to a hearing. 

Geithner took over in the months following the 2008 financial crisis, when many of the nation's largest financial firms were propped up with billions in taxpayer dollars, unemployment was rising sharply and when household wealth plummeted nearly 40 percent from 2007 to 2010 because of the housing crash and rapidly falling prices. 

His friends and foes were outspoken during his tenure, praising him for providing the financial sector with stability and ushering through Dodd-Frank and halting an economic meltdown while taking criticism for giving the same firms that caused the crisis an avenue back to prosperity and failing to be tough enough on them.

"My own view was that it was going to be very hard, if not impossible, to design a financial rescue that was going to be effective in protecting all the innocent victims hit by the crisis and still satisfy the completely understandable public desire for justice and accountability," he said. 

"Those things were in direct and tragic tension, never resolvable at that time."

Geithner said the hardest issue was designing a response that would work over time. 

"That was the most important thing, because nothing was possible without that," he said.  

"I knew with a fair degree of confidence by the summer of ’09 that the cumulative actions we took, on top of what Paulson and Bernanke did, was going to work. I was very confident about that by that time. Even though we still had a long, rough road ahead of us."

The most frustrating part of his job, he said, was effectively "relaxing the political constraints that exist on policy."

"It has been very hard since then to get out of the American political system more room for maneuver both on near-term support for the economy, as well as reforms that would lock in a sustainable fiscal path," he said.

"That is the most frustrating thing, to get the political system to embrace better policies for the country."

LOOSE CHANGE

Tri-trillion: A trillion here, a trillion there, and soon you're about real money. The Federal Reserve crossed a milestone Thursday, as its balance sheet topped $3 trillion for the first time in its history. As the central bank has kept up its monthly purchases of billions of dollars worth of bonds in its "quantitative easing," its balance sheet has gotten mighty plump. And with the Fed still buying up bonds until the unemployment rate dips significantly, expect it to just get larger going forward.

White knight: President Obama's pick of Mary Jo White as the next head of the Securities and Exchange Commission (SEC) so far seems to be raking in a lot of praise and virtually no criticism. Wall Street reform groups and Democrats have praised the pick of the former federal prosecutor, as have some Republicans. 

Now you can add a Wall Street titan to the mix. JPMorgan Chase CEO Jamie Dimon told Fox Business Network Thursday that White was "extremely capable, bright, tough and a perfect choice" to head the watchdog.

But it's not just Wall Street backing White's bid. AFL-CIO President Richard Trumka said her stint as a prosecutor left her "universally respected" and that her nomination was just another important step in "holding corporate wrongdoers accountable."

The president also tapped Richard Cordray to stay at the Consumer Financial Protection Bureau (CFPB). Cordray was installed as the agency's chief as a recess appointment, a move that angered many Republicans. 

Congressional Republicans and some financial groups have called for changes to the bureau, which include a board to run the agency instead of a one-person head. 

CFTC change-up: Just as President Obama named a few new picks to oversee Wall Street, he lost another. Jill Sommers, a Republican commissioner of the Commodity Futures Trading Commission (CFTC), announced Thursday that she was resigning from the regulator after serving for five years. 

CFTC Chairman Gary Gensler praised her "clear and consistent voice," saying it was an honor to work with her on a range of issues, including implementing the Dodd-Frank financial reform law.

House Agriculture Committee Chairman Frank Lucas (R-Okla.) called Sommers a "voice of reason" while at the CFTC, and can "say with certainty she will be missed."

Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) shared that sentiment. 

"Her hard work and contributions are greatly appreciated and will be missed."

Decisions on derivatives: Rep. Dave Camp (R-Mich.), the House’s top tax writer, on Thursday released a proposal to overhaul the tax treatment of financial products that played a role in the 2008 fiscal crisis, The Hill's Bernie Becker reports. 

Camp said his plan, part of a broader tax overhaul, would help modernize a tax code that has not kept track with Wall Street’s use of derivatives, swaps and other complex instruments.

"Updating these tax rules to reflect modern developments in financial products will make the code simpler, fairer and more transparent for taxpayers; and it will also help to minimize the potential for abuse that has occurred in the past,” Camp, the chairman of the House Ways and Means Committee, said in a statement.

Camp’s plan would revamp, among other things, how frequently derivatives are valued for tax purposes, how hedged risks are treated on the tax side and rules for how securities can be reacquired.

But the framework from the Ways and Means chairman does not examine certain key issues, such as the tax treatment of interest paid on debt, which generally can be deducted, and interest paid on equity, which cannot.

And the draft underscores that policymakers, who already face stark partisan differences on taxes, also must tackle dense technical challenges in their attempts to overhaul a code that stretches for 4 million words. Camp has vowed to pass a tax reform measure out of his committee this year. 

ECONOMIC INDICATORS 

New Home Sales: The Commerce Department releases its December report on new privately owned single-family houses sold and for sale. New home sales usually have a lagged reaction to changing mortgage rates, which are at historic lows. They also tend to be stronger early in the business cycle when pent-up demand is strong, and they fade later in the cycle as the demand for housing is sated. 

WHAT YOU MIGHT HAVE MISSED

— Business leaders, lawmakers press for trade promotion authority

— First-time jobless applications hit five-year low

— White House official: Corporate tax reform should boost green energy

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