April 30, 2009
Regular readers of this blog know that one of my favorite targets for criticism is Treasury Secretary “Turbo” Tim Geithner. My beef with him concerns his implementation and execution of programs designed to bail out banks at avoidable taxpayer risk and expense. Lately, we have seen a spate of wonderful articles vindicating my attitude about this man. One of my favorites was written by Gary Weiss for what was apparently the final issue of Conde Nast Portfolio. Mr. Weiss began the article discussing what people remember most about Geithner from the first time they saw him on television:
In his worst moments, when the camera lights are burning and the doubt, the contempt, in the Capitol Hill hearing rooms become palpable, Tim Geithner has a look in his eye — at once wary and alarmed, even as he speaks quickly, sometimes interrupting, sometimes repeating his talking points. It has become a look that he owns. It is his. It has made him famous in all the wrong ways. The Geithner Look.
A few paragraphs later, Weiss recalled Geithner’s disastrous February 10 speech, intended to describe what was then known as the Financial Stability Plan — now referred to as the Public-Private Investment Program (PPIP or pee-pip). Mr. Weiss recalled one of the reviews of that speech, wherein Geithner was described as having “the eyes of a shoplifter”. I later learned that it was MSNBC’s Mike Barnicle, who came up with that gem.
The most revealing story about Geithner appeared in the April 26 edition of The New York Times. This article, written by Jo Becker and Gretchen Morgenson, provided an understanding of Geithner’s background and how that has impacted his decisions and activities as Treasury Secretary. This piece has received plenty of attention from a variety of commentators, most notably for the in-depth investigation into Geithner’s “roots”. Becker and Morgenson summed-up their findings this way:
An examination of Mr. Geithner’s five years as president of the New York Fed, an era of unbridled and ultimately disastrous risk-taking by the financial industry, shows that he forged unusually close relationships with executives of Wall Street’s giant financial institutions.
His actions, as a regulator and later a bailout king, often aligned with the industry’s interests and desires, according to interviews with financiers, regulators and analysts and a review of Federal Reserve records.
After a thorough explanation of how Geithner’s social and professional ties have influenced his thinking, the motivation behind Turbo Tim’s creation of the PPIP became clear:
According to a recent report by the inspector general monitoring the bailout, Neil M. Barofsky, Mr. Geithner’s plan to underwrite investors willing to buy the risky mortgage-backed securities still weighing down banks’ books is a boon for private equity and hedge funds but exposes taxpayers to “potential unfairness” by shifting the burden to them.
Becker and Morgenson apparently went to great lengths to avoid characterizing Geithner as venal or corrupt. Nicholas von Hoffman said it best while discussing the Times article in The Nation:
The authors did not have to spell it out for readers to conclude that Geithner, while honest in the narrow sense of the word, has been extremely helpful to his billionaire mentors and protectors.
Mr. von Hoffman was not so restrained while discussing the behavior of the bailed-out banks in an earlier piece he wrote for The Nation. In attempting to figure out why those banks did not get back into the business of lending money after the government-provided capital infusions, von Hoffman pondered over some possible reasons. First, he wondered whether the banks still lacked enough capital to back-up new loans. I liked his second idea better:
Another possibility is that the banks may have found new ways to steal money, which is more profitable than lending it. The banks’ conduct has been so devious, so mendacious, so shifty and so dishonorable that you cannot rule out any kind of sharp practice. You just can’t trust the bastards.
In recent days, some banks have enhanced their reputations by announcing quarterly profits achieved not by business enterprise but by bookkeeping legerdemain.
Renowned journalist Robert Scheer saw fit to praise Becker and Morgenson’s article in a piece he wrote for the Truthdig website (where he serves as editor). His analysis focused on how Geithner’s views were shaped while working for his mentors in the Clinton administration: Robert Rubin and Larry Summers. Scheer reminded us that these are the people who created “the policies that Clinton put in place and George W. Bush accelerated”:
The seeds of the current economic chaos were planted in those years, in which Wall Street lobbyists were given everything they wanted in the way of radical deregulation, and hence was born the madcap world of credit swaps and other unregulated derivatives.
Scheer noted how Turbo Tim has kept alive, what President Obama has often described as “the failed policies of the past eight years”:
Geithner has since pushed the Obama administration to approach the banking crisis not in response to the needs of destitute homeowners but rather from the side of the bankers who are seizing their homes. Instead of keeping people in their homes with a freeze on foreclosures, he has rewarded the unscrupulous lenders who conned ordinary folks.
He still wants to give more money to Citigroup, which has just been found woefully short of cash by Treasury’s auditors, and has not stopped Fannie Mae, Freddie Mac and some other big banks ostensibly under government influence, and indeed sometimes ownership, from recently ending their temporary moratoriums on housing foreclosures. Geithner has been in the forefront of coddling the banks in the hopes that welfare for the rich will trickle down to suffering homeowners, but that has not happened.
Rather than just complaining about the problem, Mr. Scheer has suggested a solution:
What is involved here is an extreme case of government-condoned “moral hazard” offering outrageous compensation to the superrich for screwing up royally. Where is the socially conscious Obama we voted for? E-mail him and ask.