Geithner Will Outlast AIG Outrage & Public Pounding:
Commentary by Albert R. Hunt
March 30 (Bloomberg) -- When Timothy Geithner was nominated as U.S. Treasury secretary in November, the stock market soared and he won bipartisan plaudits.
Departing Treasury chief Henry Paulson, a Republican, expressed “the highest regard for him.” House Financial Services Committee Chairman Barney Frank, a Democrat, called him “extremely able” and “very reassuring to the markets.” Nouriel Roubini, the New York University economist who forecast this fiscal calamity, praised Geithner as a “pragmatic, thoughtful and great leader for the Treasury.”
Four months later, Geithner, 47 and maybe a bit grayer, has the same qualities and qualifications. And the senseless speculation about whether he will step down, which would be devastating for the Obama administration, has rattled markets.
Much of it is either political posturing or a bank shot at his boss, the president.
Richard Shelby of Alabama, the ranking Republican on the Senate Banking Committee, recently predicted Geithner “won’t last long.” This is the same senator who last month questioned whether Barack Obama was a legitimate U.S. citizen.
The attacks from the left have been just as shrill, with bloggers and some politicians such as Senator Tom Harkin, an Iowa Democrat, saying Geithner is a shill for Wall Street.
The accusations against Geithner began after revelations that he had neglected to pay some taxes while he was at the International Monetary Fund. He was then roundly criticized over the first rollout of the financial-rescue plan on Feb. 10, which was conspicuously lacking in detail. White House aides complain he lacks television presence.
Unrealistic Expectations
These criticisms have some legitimacy, though not much. His tax problem was one of carelessness, not cheating; unrealistic expectations were raised over the initial rescue-plan outline, including the day before by Obama himself. And while Geithner isn’t a commanding presence on TV, neither was Robert Rubin when he became Treasury secretary.
The Treasury secretary was also nailed for not reacting swiftly enough on the bonuses American International Group Inc. paid to executives. Still, it was the White House that sent top economic advisers Larry Summers and Christina Romer on television the weekend the news broke, unprepared for the political onslaught.
Major Initiatives
Geithner had a few other matters on his agenda. In two months, he has unveiled sweeping initiatives -- a stress test for big banks, a small-business lending program, a housing plan, a public-private toxic-asset investment program, and a massive financial-reregulation proposal.
He meets with Summers daily and the president almost every day, talks to Federal Reserve Chairman Ben Bernanke multiple times a day, testifies before Congress on average about twice a week and has been the administration’s lead person on the Group of Seven and G-20 deliberations. All with a department where the White House has failed to fill top posts.
A more legitimate complaint against the administration’s economic-policy team is that it shares similar moderately progressive positions, selectively balancing a pro-market view with greater governmental supervision. This is the Rubin school, and Geithner and Summers are charter members.
A Wall Street chief executive officer like Jamie Dimon of JPMorgan Chase & Co. has a direct pipeline to the White House. (That doesn’t awe White House security guards, who made Dimon repeat his name twice before admitting him to a meeting with Obama on Friday). Yet skeptics like Nobel Prize-winning economist Joseph Stiglitz, a former top adviser in the Clinton administration, are shut out. Stiglitz says he’s only had a couple of e-mail exchanges with administration decision-makers since Obama’s Jan. 20 inauguration.
Volcker Kept Out
Even Paul Volcker, who espouses a tougher posture on regulation than Wall Street chieftains like, is kept out of major policy decisions, associates say. Volcker was named to head a White House economic advisory board, and then several of his choices for that board were vetoed by the White House.
Still, imagine Obama facing today’s crisis without a Geithner or Summers. Whatever mistakes were made, they bring unsurpassed credentials to deal with the worst financial meltdown since the Great Depression.
After the election, there was an internal debate over which post -- Treasury or National Economic Council -- to give Summers and Geithner. Summers was rejected for Treasury both because the political strategists (wrongly) worried that comments he once made about women would haunt his nomination, and Obama preferred a fresh face in that post.
Right Background
And no one was better trained than Geithner, then the head of the New York Fed and a former top Treasury official under Rubin and Summers. He’s versed in domestic and international economic issues, has a keen sense of markets, and an intellect and temperament suited for the most demanding job outside the White House.
He possesses an old-fashioned passion for public service, partly attributable to his Republican uncle, Jonathan Moore, a former adviser to Elliot Richardson, a cabinet member under Presidents Richard Nixon and Gerald Ford.
Even with the political pounding Geithner has taken, he commands loyalty from those around him, who praise his work habits, demeanor, personal grace and calming confidence.
Reports of friction with Summers are denied by aides close to both men and outsiders who talk to both regularly, all of whom say they have a close working relationship. Obama, aides say, extols Geithner as effusively in private as he does publicly.
Will It Work?
Ultimately, Geithner’s legacy will be shaped by whether his financial-rescue and regulatory plans work. Nobel Prize- winning economists disagree on the prospects. Some of the most prominent investors have been encouraging. Three of the most insightful people I know privately acknowledge they really aren’t sure, one tilting positive, another a tad negative and the third a firm agnostic.
Last summer, then-Congressman Rahm Emanuel, now White House chief of staff, speculated over an unhurried dinner that, if elected, Obama would pick the young head of the New York Fed as his Treasury chief, and what a smart selection that likely would be.
It still may be.
(Albert R. Hunt is the executive editor for Washington at Bloomberg News. The opinions expressed are his own.) |
