Bailouts: Geithner vs Barofsky
David Leonhardt has managed to get a quite astonishing on-the-record quote from Tim Geithner:
“The central paradox of financial crises,” Timothy F. Geithner, the Treasury secretary, said before leaving for the Group of 20 meetings in Europe last week, “is that what feels just and fair is the opposite of what’s required for a just and fair outcome.”
This is textbook Geithner. For one thing, it’s pure Technocrat. Geithner, here, is the worldly policy wonk, explaining why it’s silly to simply do what feels right. In fact, you should do what feels wrong!
The quote is also extremely defensive — as it probably should be, coming from the one member of Obama’s economic team who played a central part in orchestrating the Bush bailouts.
And I can’t help but see the influence of Occupy Wall Street here, too. They’re demanding justice; and Geithner is, essentially, dismissing them as unsophisticated rubes. If only they understood what he understands — then they’d see that the bailouts were in their own best interest! Still, they’re setting the terms of the debate — to the point at which Geithner now considers such questions “central” to financial crises in general. (I don’t recall him talking that way when he was at the New York Fed.)
Meanwhile, Zachary Goldfarb gets an equal-and-opposite quote from Neil Barofsky:
“There’s a very popular conception out there that the bailout was done with a tremendous amount of firepower and focus on saving the largest Wall Street institutions but with very little regard for Main Street,” said Neil Barofsky, the former federal watchdog for the Troubled Assets Relief Program, or TARP, the $700 billion fund used to bail out banks. “That’s actually a very accurate description of what happened.”
Goldfarb goes into chapter and verse explaining what Barofsky is talking about — the way that too-big-to-fail banks have gotten ever bigger and more profitable, at the expense of the rest of us. And after reading his article, it’s extremely difficult to understand what Geithner might be talking about. Does he think that what we’ve seen on Wall Street in the past year or two is a “just and fair outcome”? If not, is he saying that he did “what feels just and fair” instead of what was the right thing to do?
What’s undeniable is that Barofsky is easy to understand, while Geithner is being cryptic and opaque. That might be because Leonhardt didn’t give him enough space to explain himself more fully, or it might be because Geithner simply isn’t a great communicator. But knowing the Treasury press office, I suspect that negotiations between Leonhardt and Treasury were required before Geithner’s quote became on-the-record. Which does make me wonder what they thought that they were saying here.