James Pethokoukis

Politics and policy from inside Washington

Why panicky Dems are bailing on Tim Geithner

Nov 23, 2009 20:38 UTC

One residual from Timothy Geithner’s rough confirmation back in January — “Turbo Tax Tim” and all that — is that his political position is probably a bit more precarious than that of the typical newbie treasury secretary.

Not only has Geithner been a frequent target of late-night comedy shows, he’s the public face of the unpopular bank and automaker bailouts. High unemployment rate isn’t helping either.

No surprisingly, a new Rasmussen poll finds that 42 percent of Americans think Geithner has done a “poor” job handling the economy versus 20 percent who rate him “good or excellent.” And the furor over his handling of the AIG bailout has yanked the competence issue back to the forefront.

So there is little political risk from calling for his resignation, as Representative Peter DeFazio, an Oregon Democrat, and several Republicans have done. But, my sources say, there seems to be little White House appetite at this moment for ousting Geithner, who certainly has no plans of his own for a fast exit.  Expect him to stick around until at least November 2010.

And why would Obama cut him loose when doing so would be tantamount to a vote of disapproval in his own economic policies?

No one has charged Geithner with going rogue, after all. So blame the model, not the man, if you must. Not to mention a quick hook would stink of panic. Top cabinet secretaries of first-term presidents rarely leave before the midterm elections.

Nor does Geithner have much to fear from a whisper campaign to put JPMorgan CEO Jamie Dimon in the job, according to insiders. Despite the rumors, Dimon doesn’t want the gig. What banker would, given the current populist political climate?

It seems unlikely that radioactive Wall Street will be supplying Geithner’s eventual successor. More likely candidates: Rahm Emanuel (he of the frequent phone calls to Geithner), White House chief of staff; Janet Yellen, president of the San Francisco Federal Reserve; Lawrence Summers, director of the National Economic Council; and Roger Ferguson, CEO of TIAA-CREF and former Fed vice chairman.

But the calls for Geithner’s resignation, as well as stunts like the Congressional Black Caucus blocking a key House committee vote on financial reform, indicate a degree of desperation among congressional Democrats. They see high unemployment and dissatisfaction with Obama’s scattered focus on the issue as driving the anti-incumbent mood.

Unlike in sports, in government it’s the players, not the coach, who gets fired. And that’s why some Dems think one way to save their jobs in 2010 is by suggesting that Geithner lose his today.

COMMENT

Blaming Geithner, or Paulson, for the great panic of 2008 is absolutely insane. Bears and Lehman were ruined when giant banks around the globe began reporting huge mortgage losses, securities where both Bears and Lehman were heavily invested. Then, behemoth banks, hege fund managers, and overnight financiers panicked and began yanking their financing from investment banks like, Bears and Lehman, who were heavily invested in these securities. It was nothing short of a good ol’ fashion panic; only this time it hit the unregulated, grossly leveraged investment houses. In unprecedented fashion, Geithner, Paulson, and Bernanke used the powers of the Fed to rescue the entire financials industry. Their alleged bailout of Bear Stearns did little more than protect Bears’ creditors and the global financial system. Bears shareholders and employees lost billions!! Look at what happened when Paulson couldn’t stomach being castigated again in the press and let Lehman fall: the down plunged over 500 points and the recession was on in earnest! Could you imagine what would have happened if Bears, Lehman, Merrill Lynch, AIG, and Fannie and Freddie were all allowed to go under? Lehman alone tanked the markets over 500 points!! If these institutions defaulted on ALL of their contractual obligations, commercial banks all over the world would have been ruined! You think 10% unemployement is bad, which we had in 1982 under Reagan, try the 30% and up we had in the great depression. That’s where we we’re headed but for the courage of these guys to take extraordinary steps to save us. If Greenspan had acted with similar aplomb, and taken the air he knew existed out of the housing bubble, it probably would never have come to this. The simple truth is that capitalism, like everything else, fails every now and then. And those who save us from its uncommon failures shouldn’t be pilloried by a bunch of brain dead politicians, many of whom thought that Enron and it’s real crooks were great guys!

Posted by Chad Swenson | Report as abusive

PAYGO and pretend fiscal responsibility

Nov 23, 2009 20:09 UTC

Ed Yardeni calls it on PAYGO:

Too bad that there are so many devils in the details. Obama’s proposal for fiscal discipline totally exempts “discretionary spending” for defense, education, environmental protection and many other programs. Normal increases in entitlement spending (more beneficiaries, higher health costs, etc.) also aren’t covered. In other words, the increase in Social Security and Medicare spending resulting from the impending retirement of baby boomers doesn’t count. Congress did operate under self-imposed PAYGO rules during FY1991-FY2002, and frequently skirted them. The statute was then allowed to expire. So here we are with Mr. Obama paying lip service to fiscal disciple with yet another campaign speech.

Is it any wonder that the price of gold is at a record $1165 this morning?

Might the Bush tax cuts be repealed before 2011?

Nov 23, 2009 20:02 UTC

I have to admit, this scenario does make a lot of sense:

In a word, yes. Back in August 1993, President Clinton passed the largest tax increase in history – the Omnibus Budget Reconciliation Act of 1993 (OBRA) – and made it retroactive to January of that year.

It was challenged in court, and the court held that retroactive tax increases were legal. This was not the first time this sort of chicanery had been pulled. (You can read more on the topic of retroactive taxes by clicking here.)

Why am I so confident this trap is being set? Nancy Pelosi herself tipped her hand on the retroactive tax plan when she said last January she wanted Congress to repeal Bush’s tax cuts well before their scheduled expiration date. An early repeal of the Bush tax cuts was also one of President Obama’s campaign promises.

The administration and its allies have since gone quiet on its intentions. But that’s only because they want to avoid triggering a stock selloff before the end of 2009. That all changes once the ball drops in Times Square this coming New Year’s Eve. At that point, it will be too late to escape.

Me: Perhaps this is how Team Obama means to help pay for the second stimulus, assuming they don’t intend just to borrow it all.

The politics of the bailout

Nov 23, 2009 19:33 UTC

From the Times:

Dominique Strauss-Kahn told the CBI annual conference of business leaders that another huge call on public finances by the financial services sector would not be tolerated by the “man in the street” and could even threaten democracy.

“Most advanced economies will not accept any more [bailouts]…The political reaction will be very strong, putting some democracies at risk,” he told delegates.

“I do believe that the financial sector needs to contribute both to the costs of the financial crisis and to reduce recourse to public funds in the future,” he said.

Me: In the US, TARP and bailouts are already transforming the political landscape, giving rise to the Tea Party movement and creating anti-Wall Street sentiment on the left and right.

Fight for the Fed: Ben Bernanke vs. Nancy Pelosi and Harry Reid

Nov 23, 2009 19:26 UTC

Ron “End the Fed” Paul:

If you want to be a strict constitutionalist, there’s a lot more defense of having Congress involved with defending the value of the currency than delivering this responsibility over to the Fed.

Me: Keep in mind that there are in folks in Congress, such as Barney Frank, who would like to depower the Fed bank presidents because they worry too much about inflation.  Mend it, don’t end it!

COMMENT

James,

How can you mend central planning? The Fed is socialist and needs to be abolished. Interest rates need to be set by the free market — people’s time preferences of money.

A restoration of Hendricks vs. Griswold and hard money is also needed to kill inflation and budget deficits once and for all.

Posted by Austrian School | Report as abusive

Geithner Resignation Watch: Jamie Dimon Edition

Nov 23, 2009 17:19 UTC

Here is what I know, or at least what I think I know after talking with slew of folks today (and an expanded take to come in a bit):

1) Geithner isn’t going anywhere before November 2010.

2) JPMorgan’s Jamie Dimon doesn’t want the job.

3) If Geithner did go, Rahmbo, Yellen, and Summers are all more likely that JD.

4) The Geithner resignation talk is a sign of panic on the part of congressional Dems. Expect the AIG ruckus to get more of a push on the Hill.

5) Geithner’s uneven TV skills aren’t helping, though.

COMMENT

JAMIE DIMON WILL BE TAGGED A CROOK IN A VERY SHORT PERIOD OF TIME. HE IS GREEDY AND WILL GET CAUGHT!!
HE USES THE BANKS POWER TO OVERPOWER PEOPLE AND WASTES MONEY, HE IS KEN LAY JR,, JAN 22ND ,, WE WILL ALL SEE WHAT KIND OF GUY HE HIS AND HIS FAMILY.

Posted by RICK | Report as abusive
  •