Time to Take the Steering Wheel out of Geithner's Hands
By Arianna Huffington
March 24, 2009 Huffington Post Posted on alternet.org on
March 24, 2009 http://www.alternet.org/story/133076/
On February 10th, the New York Times reported that there had
been a "spirited" battle within the Obama administration over
restrictions on executive pay and bonuses, and over attaching
stringent conditions to any bailout money given to banks.
The clash pitted Tim Geithner, who opposed the restrictions
and conditions, against David Axelrod, who favored them.
According to the Times, Geithner had "largely prevailed."
In light of what has happened since then, that outcome must
now be viewed as a tragic surrender to Geithner, Summers, and
the political/Wall Street class -- a "victory" that could
lead to the unraveling of the president's entire economic policy.
Maintaining the public trust is always important for a
leader, but especially so during hard times. There is a
fascinating chapter on Nelson Mandela in Stan Greenberg's new
book, Dispatches from the War Room, in which Greenberg writes
about how even the revered Mandela suffered a loss of public
confidence when change did not come fast enough after he took
office. "Don't assume the current euphoria, even with your
high approval rating will carry you through," Greenberg
counsels Obama, stressing the need to try to build up enough
trust so that the public will stay with the president until
they can actually experience change.
The Axelrod camp understood this and, according to the Times'
February story, argued that "rising joblessness, populist
outrage over Wall Street bonuses and expensive perks, and the
poor management of last year's bailouts could feed a potent
political reaction if the administration did not demand
enough sacrifices from the companies that receive federal money."
Axelrod was right. And his loss has already cost the young
Obama administration a lot.
No wonder the public is not convinced when Geithner, having
laid the groundwork that made the AIG bonuses possible, and
having gotten Chris Dodd to include a bonus loophole in the
stimulus bill, now acts shocked over the bonuses.
Geithner's feigned surprise at AIG has been a body blow to
public confidence in the president. According to Sunday's
Rassmussen poll, just 12 percent of those Rassmussen defines
as "Populists" have a favorable opinion of Geithner while
those Rassmussen identifies as "
have a 76 percent favorable opinion of him.
It was painful to watch Obama, just hours after Geithner had
admitted his role in the Dodd/bonus loophole affair, go on
Jay Leno and say that Geithner is doing an "outstanding job."
Even before Frank Rich's Sunday column was titled "Has a
'Katrina Moment' Arrived?," Obama's assessment had more than
a whiff of Bush telling Brownie he was "doing a heck of a job."
My dictionary defines outstanding as "excellent, exceptional,
superior to others in the same category." So how could Obama
say that and then, not a minute later, tell Leno that his
administration plans to "open up separate credit lines
outside of banks for small businesses" and "set up a
securitized market for student loans and auto loans outside
of the banking system" in order to "get credit flowing again"?
Back in January, after the Senate voted to release the second
$350 billion tranche of TARP money, Obama had told the nation
that he was "gratified" he'd been given the authority to
"maintain the flow of credit to families and businesses."
Now, here he was, just over two months later, basically
admitting that we have to find other ways to "maintain the
flow of credit to families and businesses" -- completely
contradicting a central tenet of the bank bailout, expressed
by Axelrod in January when he told George Stephanopoulos that
the president was "going to have a strong message for the
bankers. We want to see credit flowing again. We don't want
them to sit on any money that they get from taxpayers... And
we have to make sure that the money doesn't go to excessive
CEO pay and dividends when it should be going to lending."
Then Geithner happened. According to the Times, during the
internal debate the Treasury Secretary "resisted those who
wanted to dictate how banks would spend their rescue money."
And we see how well that turned out.
The AIG bonus backlash is the first serious threat to the
Obama administration. It has created an opening that allows
conservatives to storm the populist barricades, suddenly
acting like the second coming of Huey Long or Upton Sinclair.
Shameless opportunists like Mitch McConnell, Richard Shelby,
and Eric Cantor, who have all argued against limiting
executive pay and bonuses, are now positioning themselves in
front of the populist parade, railing against AIG and
pointing the finger at Obama for allowing this to happen on his watch.
Yes, the same free-market ideologues who were instrumental in
bringing
arming themselves with pitchforks and torches.
It would be laughable if it weren't so dangerous -- serving
to undercut the essential narrative of how we got into the
current crisis and, therefore, how we can get out of it.
On Leno, the president lauded Geithner as "a smart guy...a
calm and steady guy" who is dealing with a surfeit of crises
"with grace and good humor." And he's clearly very hard
working, reportedly arriving at the Treasury at 6:30 in the
morning and leaving at 9:30 at night. But no one disputes
Geithner's intelligence, steadiness, and work ethic.
And neither is the problem Geithner's lack of comfort in the
public arena. "When you run a Fed bank," a senior Democratic
operative told Chris Cillizza, "you live deep in a cave.
[Geithner] just needs to get used to the sunlight."
But the issue isn't Geithner's delivery, it's what he's
delivering: an approach to the crisis that is as toxic as the
assets that have hamstrung the economy. Geithner, brilliant
and hardworking though he is, is trapped within a Wall
Street-centric view of the world and seems incapable of escaping.
That's why every proposal he comes up with is deja vu all
over again -- a remixed variation on the same tried-and-
failed let-the-bankers-work-it-out approach championed by his
predecessor, Hank Paulson. For Paul Krugman, this "insistence
on offering the same plan over and over again, with only
cosmetic changes, is itself deeply disturbing. Does Treasury
not realize that all these proposals amount to the same
thing? Or does it realize that, but hope that the rest of us
won't notice? That is, are they stupid, or do they think we're stupid?"
I don't believe Geithner thinks we're stupid (although he
almost certainly doesn't think we're as smart as he is). He
just can't change who he is: a creature of Wall Street,
habitually sympathetic to the people at the top of the
financial system, who he clearly thinks were born to run the world.
Geithner's actions throughout his career are proof that the
toxic thinking that got us into this mess is part of his DNA.
While President of the
regulatory measures -- a quarterly risk report and a ban on
major acquisitions -- that may have prevented (or at least
lessened the impact of) the unraveling of Citigroup, which
his office was responsible for supervising. Then, together
with Hank Paulson, he was instrumental in the original
bailout of AIG and the creation of the TARP plan. And he was
a key player in the decision to let Lehman Brothers fail.
And now he surrounds himself with others who share his Wall
Street Weltenschauung, including his chief of staff Mark
Patterson, a former lobbyist for Goldman Sachs who had
lobbied against then-Senator Obama's 2007 bill to reform CEO pay.
Geithner's Masters of the Universe, the people he still
thinks are the ones we should turn to to save the day, are
the same people who brought us here. And that is why Geithner
either needs to go or keep his job but have his authority
stripped and transferred to someone who does not share his
Wall Street DNA. Call him or her the "Recovery Czar."
In other words, use any window dressing you want, just take
the steering wheel out of Geithner's hands.
It might seem extraordinary to be calling for the resignation
or demotion of President Obama's point man on our financial system.
But let me remind you of a few other things that are
extraordinary: the government has spent $2.2 trillion and
committed another $7.7 trillion to bolster
struggling financial system; $7 trillion of shareholders'
wealth was lost in the stock market in 2008; over 4.2 million
jobs have been lost in the last 14 months; 2.3 million houses
were foreclosed in 2008, with another 121,756 foreclosures last month alone.
Things that we never would have imagined are happening all
around us. So this is a time for doing things that might have
seemed unthinkable just a month ago.
A month ago... when Tim Geithner gambled the administration's
political capital, putting his money -- actually our money --
on the behavior of bankers and CEOs who continue to operate
as if it is business as usual.
A month ago... when Geithner crossed swords with Axelrod,
winning the battle and losing the war.
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