James Pethokoukis

Politics and policy from inside Washington

The future of Tim Geithner

Jan 13, 2010 19:19 UTC

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.

The Democrats are also fully in control for now, making it easy for Obama to quash calls for Geithner’s ouster. Besides, the list of candidates with ready-made reputations who might step into the breach is short. The nation’s populist mood seemingly rules out a Wall Streeter, not that JPMorgan’s Jamie Dimon currently desires the job. Whispered West Coast financial names like bond giant Pimco’s Bill Gross and Mohamed El-Erian seem a stretch. And the White House has scant interest in two easily confirmable choices, ex-Federal Reserve chairman Paul Volcker and bank regulator Sheila Bair.

So the “Geithner must go” crowd will need patience. That said, Geithner has a shallow reservoir of goodwill on Capitol Hill. Congress looks likely to investigate what he knew about AIG and when he knew it, and some highly damaging revelation could change the game. Otherwise, the Treasury secretary is probably safe until after Election Day. But if Democrats lose big then, booting Geithner will be an obvious way for Obama to show he’s rebooting his agenda.

COMMENT

Tim Geithner is a criminal just like Paulson, Bernanke, Bush, Pelosi and Frank. The current incumbent is going to lose in the next election.

I would vote for anyone over Obama (except a Bush or Clinton). Obama and Bush are economic slave masters. They have enslaved your savings, earnings and your children’s future.

At least the CEO of Goldman Sachs made over 430,000,000.00 for the last 3 years earnings. For what? He is just a seat warmer who contributed to the Obama and Bush campaigns. Bye, Bye democRAT slave masters.

Posted by Benny and the Talibanks | Report as abusive

Obama the (bank) Punisher

Jan 13, 2010 19:15 UTC

So says Larry Kudlow:

Think of this: The U.S. government bailed the banks out with TARP. Then the banks repaid TARP last year, including the stock warrants that provided a handsome taxpayer profit from the banks. And now the government wants to tax them? In other words, help the banks get healthy, and then punish them? I don’t understand it.

And here’s yet another ridiculous part of this story: The largest banks that de-TARPed, and are regaining their health, are now, with this tax, supposed to cover the government-owned failures like GM, GMAC, AIG, and Fannie and Freddie, which are running up huge deficits because they may be on the taxpayer dole in perpetuity. In other words, the healthy banks that made good decisions and paid down TARP are now getting taxed so that the government can finance the bad actors. This makes no sense at all.

Look, the big guys have de-TARPed. Now it’s time to get off their backs. As I wrote yesterday, bankers should not get bonuses for the period in which they were TARPed. But for the new year, since the bankers met their TARP obligations, Team Obama should leave them alone. Let the bankers help the economy grow, create wealth, and create jobs.

COMMENT

Words of wisdom from the master, AGAIN! You are the best, Mr. Kudlow.

Posted by gotthardbahn | Report as abusive

Is a healthcare deal close? Maybe not

Jan 13, 2010 19:12 UTC

This compilation of opinion from the great Igor Volsky at the Wonk Room

- Ways and Means Chairman Charlie Rangel (D-NY): “Normally you’re just dealing with the Senate and they talk about 60 votes and you listen to them and cave in, but this is entirely different,” he said. “I’m telling you that never has 218 been so important to me in the House.”

- Rep. Anthony Weiner (D-NY): “We keep hearing them squeal like pigs in the Senate that they had a tough time getting to 60,” Weiner said. “Well, it wasn’t particularly a picnic for us to get to 218. Generally speaking, the Senate kabuki dance has lost its magic on those of us in the House.”

- Rep. Pete Defazio (D-OR): “They only got two votes to spare in the House. I think this will be a tougher negotiation than they think.”

- Rep. Emmanuel Cleaver (D-MO): “In spite of the fact that the news media is proclaiming this bill approved, I’m not in a position, based on everybody I’ve spoken with to agree with them. …I think what comes out may be disapproved and then in 30 days, when they bring something else forth — because we’ve never been this close before — but it may take a ‘no’ vote in order to get people back on board.”

- Rep. Rosa DeLauro (D-CT): “This is no walk in the park. This is bare-knuckled policy and politics to get this done.”

A “senior House Democrat” told Roll Call that “no progress has been made this week on any of the key sticking points in the House and Senate bills, despite steady meetings with union leaders and the White House.” “There’s no agreement. No deal on anything. Nothing,” the lawmaker said.

COMMENT

smokescreen

Posted by proreason | Report as abusive

More on the Obama bank tax

Jan 13, 2010 19:07 UTC

My pal John Carney takes a crack at it:

1) Let’s start with the idea that we’re going to tax banks based on “riskiness.” How on earth do we expect the government to assess this? The government has an absolutely awful track record when it comes to assessing risk. Before the crisis, regulators put in place mandatory capital requirements that they believed were “risk weighted.” The result was the massive over-indulgence in risky mortgage backed securities that almost destroyed the financial system. A risk tax would just result in new pressure for banks to adopt the regulatory view of risk. No thanks.

2) The other idea floating around is that the tax would be levied on “bank profits.” That means the government would wind up in the same position as shareholders pushing for short-term gains

3) More importantly, there is no indication that the government has a way of evaluating the proper size of banks. This means that a tax on size will likely encourage banks to be too big or too small.

COMMENT

Until America gets over this silly populist fever, bad legislation will be forthcoming. Pray it doesn’t cause too much damage.

Posted by gotthardbahn | Report as abusive

Will Obama extends all Bush tax cuts?

Jan 13, 2010 15:26 UTC

That’s the DC buzz, that the WH will use bank tax to de facto pay for a 1-2 year extension of ALL the Bush tax cuts, including capital gains. The assumption was that the wealthier folks would be left out. But this would give Ds a tax cut to vote. With unemployment high and maybe going higher, Ds are scrambling for ideas.

COMMENT

A ploy too cynical for words. Bash the banks and tax ‘em to pay for Main Street’s (continuing) tax cuts. This is really getting out of hand.

Posted by gotthardbahn | Report as abusive
  •