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Progressives, give Geithner a chance
There's been a chorus of pessimism from all fronts about Tim Geithner. It's being expressed by liberal columnists/bloggers, comedians, most pundits, and the ideological right. It's one of the few things these disparate groups are united on. On one hand, some of the criticism may be legit as the financial stability plan's expectations management by the Administration and Treasury was poor. On the other hand, I believe most of the criticism is unfair when you examine the context of the situation. Geithner's task is no less than saving the world. If the financial system and the economy collapse, the future we voted for that Obama wants to implement will be impossible. Around the world, nationalism and extremism will rise, and bad actors will be able to exploit fear and economic distress. It's scary to think about it, but in that world the only way to get out of economic depression is to start a massive war.
The Geithner/Obama economic to do list: 1) save the global banking and financial system 2) fix the housing market 3) help create and enact policies that create jobs and balance the tax code for average Americans 4) implement healthcare, energy, & education reform in a fiscally responsible way 5) re-tool the auto industry 6) get credit flowing (in reality banks are still lending, but finance companies have disappeared) 7) Hire a full staff for the treasury department 8) Completely overhaul the regulatory framework for the financial system 9) Navigate the extremely complex politics of tasks 1 - 8
Oh by the way, Secretary Geithner, do all this while dealing with an impatient mainstream media that doesn't understand economics and is driven by fear and bogus distractions. Do all this, while 'centrist' or 'free market' Senators care more about their own press releases rather than the right policy for the country. Do all this while citizens and some elected officials are legitimately concerned about protecting taxpayers and average people. Do all this, while most Americans and mainstream journalists don't understand basic economics, let alone the complexities and systemic risks of the modern cowboy financial markets. Do all this, while politicians and some of the media screams bloody murder because the Dow and 401k values are down, while simultaneously complaining about Wall Street greed. So far Americans still support Obama and believe that he is more in touch with their plight than the haters. I worry though, that the haters will spread more fear and make Americans more impatient and therefore erode Obama's political support.
Part of this is Geithner and the White House's own doing. The major mistake that Geithner has made, of which he admitted to last night on Charlie Rose, was expectations management. I blame the White House for this more than Geithner. It's one of the few mistakes they have made and I can understand why it happened that way. People wanted all the solutions mapped out when Geithner made his Financial Stability Plan announcement (less than 20 days after he was sworn in). Obama telegraphed that Geithner was going to lay out a detailed plan, when in reality he was always planning on laying out a broad strategy, with tactical details to be rolled out in the following weeks. The pundits were upset that they didn't have all the answers right away and Wall Street and its political and media enablers were mad that it wasn't a dump truck full of cash coming their way.
Maybe Geithner is technocratic and dull in front of the press or a congressional hearing, but I could care less, even though this for some reason offends pundits. I trust him because he's careful with his words, protective of the average American taxpayer, smart, seems to have strong backbone, is experienced with financial crises, has been known to tell Larry Summers 'No', and has the confidence of President Obama (<-- I still get amazed when I say or write that two-word phrase). Most importantly, I believe his policies and implementation strategies are going to fix the economy, as long as Obama maintains his political will and congress doesn't get in the way.
The point I'm making is not just a complaint about the haters. Instead, this is about the liberal economists and bloggers who are being tough on Geithner. I don't include them in the hater group. On the contrary, they are bringing up valid concerns and policy points. It's incumbent upon all of us progressives who voted for Obama to keep his Administration honest and hold them accountable. With that said, I believe the cynicism and negativity takes away from their points and makes it harder for the administration to do its job. Their criticism is sometimes more destructive and angry, rather than constructive and helpful. I understand these opinions and emotions, but they feed impatience and fear. Quite frankly, in my humble opinion, these posts can also cross the line from legit critique to unfair complaining.
This group, thinks receivership of the banks is the only answer. I also tend to think that this option is very possible and necessary for a few of the major banks. This is a satisfying solution on many fronts. It punishes bad actors and investors and it looks better on the surface for the taxpayers. What's being forgotten, is that whatever Geithner decides to do with the banks is going to be a political minefield and can trigger an economic panic and misinterpretation if implemented and communicated the wrong way. Because the financial system is interconnected in so many complex ways, the receivership option may trigger other consequences that we all have no idea about. This is a reality of the financial system and Geithner has to deal with the system as it is, not as we want it to be.
Obama has to carefully manage the politics of the bank fix. There's a small window that he has to crawl through perfectly and at the exact right time (think Luke Skywalker and the Death Star's achilles heal at the end of Star Wars) given the impatience and anger with the banks and the money already spent. He is going to have to spend a lot of political capital to convince congress that his plan is the right way to go. If the bank fix or receivership is executed poorly, it risks the passing of Obama's budget, which is filled with policies that we voted for. He and Geithner are waiting till they have all their ducks in a row, before they come out with details and a decisive plan of action that they'll be willing to defend and fight for. If the stress tests show that receivership of a few banks is necessary, then my guess is that news will break on a Friday night that a few banks were given capital infusions, a few were put in receivership, and all the ones that are still alive will participate in the public-private toxic asset fund program.
We voted for President Obama because he was a leader who always took the long-view. Every time there was concern about his approach in the short-term, he continually proved that he and his team were smarter than everyone else, strategically speaking. This is a heartening thing to have in a President, especially when he believes in policies that most of us are desperately hoping for. Let's be more patient and optimistic (cautiously) about his Treasury Secretary. Let's give him credit for a pretty good track record so far: 1) stimulus 2) good housing plan 3) a budget that screams change and 21st century. For the rest of his to-do list, I think he deserves the benefit of the doubt, at least for another couple/few months.
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Excellent. What I wanted to express, but much better.
President Obama has only been in office for less than two months.
I would ask those who continue to orate only about negatives and prophecies of doom/not good enough/too much-not enough, etc.,'what have they done to support and build up our country and society?'
Why are so many insistent upon spreading the manure that feeds crops of dissension and negativity? I'd rather work towards harvesting a
bounty that would benefit and enrich us in all ways.
Greatly appreciated and rec'd.
March 11, 2009 2:09 PM | Reply | Permalink
Hmmm,
I agree the expectations on Obama and team were huge- but that was their own success at managing the campaign, oh and the civil rights milestone most of us never expected to see. I also think that a lot of economists have been waiting for a huge crash for a long time and have gone estactic at finally being proven not crazy (I'm looking at you 1998 Paul Krugman).
However, I don't think that Giethner has done a good job on the simple things like staffing (its been nearly 4 months since he was nominated.) Or press management. Or think much of his prior work at the Fed (you know Lehman and AIG debacle, a full year after the first Bear sterns hedge funds failed). Maybe he just needs to hire a good PR firm, but count me as not confident.
I suppose my own hopes vacillate between he is being set up as a fall guy for an impossible situation, or the O team is playing a delay strategy in the interest of passing their priorities (health care, energy, education)-then they will fix the banks, with poor Giethner given the role of the public face of treasury with a bad hand to play while waiting. Or maybe the whole team is just out of their league, I certainly hope not.
March 11, 2009 2:18 PM | Reply | Permalink
I don't think staffing is a simple thing. He needs people who are knowledgeable about finance and Wall Street, but also not of Wall Street. Plus, the treasury can't have anymore unpaid tax embarrassments. The White House is responsible for the political appointments and they're being so careful, that two major appointees dropped out because of the vetting process.
Also, there are some qualified individuals who have made there opinions so well-known, that its disqualified them from being in the Treasury. For example, it'd be great if Roubini could be part of his staff, but hiring him would scare the market and cause panic and unintended consequences.
I also can't blame him for Lehman and AIG. Lehman was Paulson's fault. The scapegoat for AIG is that the policy and regulations (the lack of) allowed institutions to become too big to fail. If Wall St. is the heart of the economy, AIG is the heart of Wall St. As $hitty as it is, Geithner has no choice but to pump blood into AIG. At least we own 80% and the management was fired. $hitty consolation prize, but at least it's something.
I think the bank fix can work. The stress test is critical. The capital investment program is set up to take over ownership of the common equity, which is better for the taxpayer and the bank balance sheet (and simultaneously dilutes/punishes existing stockholders). The public-private partnership will stimulate the trading and higher valuation of the distressed (toxic is the wrong word) assets. Finally, the mortgage plan the TALF program will help consumers, home buyers, and small businesses, in a relatively simple and painless way.
What I like about Geithner's plan is that its synergistic and has good transparency guidelines. He also is trying to get private investors to step up and take some of this risk. Maybe the most telling thing, is that they've admitted they'll need more money, but know they'll only get it if they can prove effectiveness and taxpayer protection.
March 11, 2009 2:39 PM | Reply | Permalink
The imf and world bank (you know where the financially sophisticated and savvy Treasury secretary didn't how to pay his own taxes at) are filled with knowledge experts who know finance and are not of the wall street world. 4 months is a long time to captain a ship in a storm with no crew- unless your goal is secrecy and delay.
We should own 100% of AIG, Citi, BofA, and probably most of the others- the only thing keeping them afloat is our largess. John Thain, Dick Fuld, Ken Lewis, Goldman king Paulson, etc. should all be in court not counting their millions.
Maybe you are right about the banking stress tests, and maybe Geithner is laying the ground work for new regulations and incentives to force dangerous hedge funds to become real regulated institutions by merging with the banks. That seems like a brilliant and ballsy gambit. Like I said, I am hopeful that the stumbling is just an act.
But whatever his plan is, transparent it ain't.
March 11, 2009 3:04 PM | Reply | Permalink
I'm kind of with Saladin and his big birdbutt on this. Not at all convinced by Geithner, but still hopeful he isn't as lost as he looks. His private-public asset purchase plan is going nowhere unless he somehow forces the banks to unload them. And no sign of the stick he's going to be waving to do that.
He looks either out of his league or facing impossible political constraints. Neither is good.
March 11, 2009 7:19 PM | Reply | Permalink
You wrote “I believe the cynicism and negativity takes away from their points and makes it harder for the administration to do its job.
Oh they’re doing a job all right! A job on the least of these my brothers, my fellow citizens
What you call the cynicism and negativity is what I call reality.
All experts have repeatedly stated that our economy is tanking not just because of fundamentals being weak, but the lack of confidence.
Let me scream it louder for the mentally impaired LACK OF CONFIDENCE.
Lack of confidence due to the realities, the Geithner’s and the Obama team paid lip service to the homeowners; they gave lip service to the consumers.
All the while bailing out the well healed and the bankers, letting the commoner fail, letting the mortgage crisis continue it’s downward spiral, telling us; those at the bottom to have patience. Letting the banks credit card division prey on the less fortunate
Imagine all those at the top of the financial food chain, getting help from Uncle Sam, and then you the bottom feeders, the feeders of the droppings of trickle down economics, being told “SORRY we have nothing left for you, but OH! By the way, can you take care of this bill”?
Yet; because I don’t accept this patience BS or the delays and inaction as the bailout benefits the few who can now buy real estate at reduced prices at auctions and foreclosures.
Putting these new investors in a position to further enhance their economic future at the expense of those who have been kicked to the curb as expendable collateral damage.
This is the reality they wish to not address.
So while you get ripped off, bend over, and keep your mouth shut. You trouble maker.
March 11, 2009 4:46 PM | Reply | Permalink
'I would ask those who continue to orate only about negatives and prophecies of doom/not good enough/too much-not enough, etc.,'what have they done to support and build up our country and society?'
March 11, 2009 5:54 PM | Reply | Permalink
Is that all it takes? Confidence? Ok, I'm see if "confidence" in the flat earth theory cuts it! I'm gonna see if "confidence" in the sun going around the earth cuts it!
You try it too. Let me know how that works out!
March 11, 2009 6:07 PM | Reply | Permalink
Sam--just one fine read. A great media review. A great take on what the New Administration is attempting to do. Just finely written.
March 11, 2009 6:28 PM | Reply | Permalink
Agree, but he had his chance to clarify some of the goals of his department the day after Obama gave him a cheerleader's welcome.
But I would still argue that, if Congress can spend $700 billion on TARP, they can spend a few billion+ more on the American people. President Obama promised (amongst many) that he would be “honest” with the American people; how he wants himself and his administration to be held up to a higher standard of transparency and accountability. Funny he should have that kind of political audacity, when it was reported last week that Wall Street Wonder Boy, Timothy Geithner and his mentor, Lawrence Summers, (supposedlyl) held closed door meetings with Bank of America, being amenable to reducing the loan interest from the taxpayers' loan of $30 billion dollars down to maybe zero.
March 11, 2009 7:36 PM | Reply | Permalink
And you are presuming the worst why? Do you believe all that is 'reported'? And do you honestly think that all meetings should be public? The results should be made public if it's about our money, but that's sufficient.
Again, 'I would ask those who continue to orate only about negatives and prophecies of doom/not good enough/too much-not enough, etc.,'what have they done to support and build up our country and society?'
March 11, 2009 8:09 PM | Reply | Permalink
You keep asking the same question, 'what have they done to support and build up our country and society?'
Well for starters; we, as in a collective voice fought a war, we spent and sustained an economy that most experts stated was supported by consumer spending.
Consumers spending because there was no fear of the yoke or burden each individual would have to bear. For the choices or spending habits we were trying to sustain.
Once the fear set in and Confidence eroded, or the reality set in that WE as spenders had taken on to much risk.
What risk you might ask?
For me and others, the risk of losing our homes, with no help from Washington, with a suspicion that Washington knew and facillitated this crisis.
A Government For the People, has proven false. Instead it is a Government for the Well connected.
Government derives its power because the people place confidence in it. Once the Government breaks its promise to serve and protect, the people lose confidence in its authority.
Given the other examples of abuse from the prior or previous administration, our current crisis is a symptom of the disease that has infected the Nation.
A disease caused by a parasite that feeds off of the host, eventually killing it. The parasite now being deeply entrenched or well connected saps whatever life sustaining nutrients available.
With continuing evidence mounting of home foreclosures and diminishing values occurring because of a Government bailing out some and not others.
Home prices being driven down in value and purchased by a new group of parasites. Or maybe the same parasite has morphed, and has found another source to feed upon.
It shouldn’t come as a big surprise to who received the benefits and who would be sacrificed. A distinction defined by what class one belonged too. The parasite comes off victorious
So for you to ask what have I done to support WHICH society? High Society? A Country designed in whose image?
Some would suggest we adopt the attitude of the proverbial grasshopper, who; unlike his counterpart the ant, had no concerns about tomorrow and instead of acting prudently, decided to spend and spend and spend his time and money partying. Probably, scoffing at the ant or mocking his sense of urgency to prepare for the hard times that were surely coming.
Why would you ask what have WE done, when the question should be: WHAT, have they done?
What have they done to alleviate the fear?
They; supposedly being a Government of the People, have turned out to be supporters of a system that rewards the well connected. Writing and passing laws intended to support and sustain their own class.
Trying to convince the stupid grasshoppers “Don’t worry be happy”
You go right ahead, but remember Bullshit makes the grass grow. I for one don’t want to buried under it.
March 12, 2009 4:55 AM | Reply | Permalink
So what do you plan to do about it Resistance, leave the country? I'm not being snarky because I admit, during the early stages of the campaign I seriously considered doing just that.
I understand the cynicism, and anger but what exactly, could this administration do differently that would ease your frustration? I get the feeling whatever the President does you will find fault. I may be presumptuous and if so I apologize but I don't understand how negativity will get you the results you're looking for. Now that's me looking at it through a different lens and if it works for you, so be it. I'm only trying to understand.
March 12, 2009 5:33 AM | Reply | Permalink
Great post samaestro. You said many of the things I've been thinking but more eloquently. Other than being on the wrong team at the wrong time, I've never really understood how Geithner may have contributed to all of this but if he helped break it, he's obligated IMO, to help fix it. I get the sense he's sincere enough and scared enough to give 100% effort. Fear can often be a great motivator.
I agree with you as well Aunt Sam. It seems to me this transparency thing is overrated. The majority of you may be able to handle it all but can the majority of the American people?
The judging or forming opinions based on rumors, is that really fair or even wise? Isn't that what MSM does? The Republicans seem pretty adept at it as well.
March 12, 2009 5:13 AM | Reply | Permalink