– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –
By James Pethokoukis
WASHINGTON, Jan 11 (Reuters Breakingviews) – U.S. cabinet members tend to lose their support the same way a person goes broke — slowly, then all at once. Timothy Geithner, the embattled U.S. Treasury secretary, still has President Obama’s confidence. Still, he has bled enough that this year could well be his last.
The rap against Geithner is that, as New York Federal Reserve president in 2008, he worked with former Treasury boss Henry Paulson and used AIG as a conduit to pass bailout money to struggling financial firms such as Goldman Sachs and Deutsche Bank. Critics also say that since joining Team Obama, Geithner has pushed an impotent financial reform package that fails to limit the size or complexity of U.S. financial institutions.
Emails from the New York Fed’s outside lawyers add to the impression that the bank tried to keep significant details of the AIG bailout from becoming public knowledge. But Geithner — already at the time looking ahead to the Treasury — wasn’t in the loop, according to the Obama administration and the New York Fed.
And even if that sounds like a cop-out, there’s an alternative Geithner narrative espoused by the White House. He helped fashion the plan that brought the U.S. financial system back from the edge of the abyss and laid the foundation for economic recovery. To insist on his departure now would eviscerate that message and probably unnerve markets. It would also set back Obama’s legislative agenda — and the search for a replacement would provide a forum for Republican attacks in the run-up to November’s midterm elections.