Treasury Secretary Tim Geithner’s “charm offensive”, began one year ago. At that time, a number of financial bloggers were invited to the Treasury Department for an “open discussion” forum led by individual senior Treasury officials (including Turbo Tim himself). Most of the invitees were not brainwashed to the desired extent. I reviewed a number of postings from those in attendance – most of whom demonstrated more than a little skepticism about the entire affair. Nevertheless, Secretary Geithner and his team held another conclave with financial bloggers on Monday, August 16, 2010. The second meeting worked more to Geithner’s advantage. The Treasury Secretary made a favorable impression on Alex Tabarrok, just as he had done last November with Tabarrok’s partner at Marginal Revolution, Tyler Cowen. Steve Waldman of Interfluidity provided a candid description of his own reaction to the August 16 event. Waldman’s commentary exposed how the desired effect was achieved:
First, let me confess right from the start, I had a great time. I pose as an outsider and a crank. But when summoned to the court, this jester puts on his bells. I am very, very angry at Treasury, and the administration it serves. But put me at a table with smart, articulate people who are willing to argue but who are otherwise pleasant towards me, and I will like them.
* * *
I like these people, and that renders me untrustworthy. Abstractly, I think some of them should be replaced and perhaps disgraced. But having chatted so cordially, I’m far less likely to take up pitchforks against them. Drawn to the Secretary’s conference room by curiosity, vanity, ambition, and conceit, I’ve been neutered a bit.
More recently, a good deal of attention has focused on a November 4 article from Bloomberg News, revealing that back on April 2, Turbo Tim paid a call on Jon Stewart. The disclosure by Ian Katz raised quite a few eyebrows:
Geithner and Stewart, host of Comedy Central’s “The Daily Show,” held an off-the-record meeting at Stewart’s office in New York on April 2, according to Geithner’s appointments calendar, updated through August on Treasury’s website.
Since that time, we have heard nothing from Jon Stewart about his meeting with Geithner. I expect that Stewart will continue his silence about that topic, focusing our attention, instead, on the controversy concerning a book, which should have been titled, Pedophilia For Dummies, while referring to Amazon.com as “NAMBLAzon.com”. If he uses that joke – remember that you saw it here, first.
The November 13 New York Times article by Yale economics professor, Robert Shiller, raises the question of whether Professor Shiller is the latest victim of the Geithner Kool-Aid. Shiller’s essay reeks of the Obama administration’s strategy of approaching the nation’s most pressing crises as public relations concerns — a panacea for avoiding the ugly task of actually solving those problems. The title of Shiller’s article, “Bailouts, Reframed as ‘Orderly Resolutions’” says it all: spin means everything. The following statement is a perfect example:
Our principal hope for dealing with the next big crisis is the Dodd-Frank Act, signed by President Obama in July. It calls for bailouts of a sort, but has reframed them so they may look better to taxpayers. Now they will be called “orderly resolutions.”
Yves Smith of the Naked Capitalism website had no trouble ripping this assertion (as well as Shiller’s entire essay) to shreds:
Huh? It’s widely acknowledged that Dodd Frank is too weak. In the Treasury meeting with bloggers last August, Geithner didn’t argue the point much, but instead contended that big enough capital levels, which were on the way with Basel III, were the real remedy.
It’s also widely recognized that the special resolution process in Dodd Frank is a non-starter as far as the institutions that pose the greatest systemic risk are concerned, the really big international dealer banks. A wind-up of these firms is subject to the bankruptcy proceedings of all the foreign jurisdictions in which it operates; the US can’t wave a magic wand in Dodd Frank and make this elephant in the room vanish.
In addition, no one has found a way to resolve a major trading firm without creating major disruption.
* * *
Shiller’s insistence that the public is so dumb as to confuse a windown with a bailout reveals his lack of connection with popular perceptions. The reason the public is so angry with the bailouts is no one, particularly among the top brass, lost his job, and worse, the firms were singularly ungrateful, thumbing their noses at taxpayers and paying themselves record bonuses in 2009.
Bill Maher’s Real Time program of November 12 is just the most recent example of how Bill Maher and most of his guests from the entire season are Geithner Kool-Aid drinkers. The show marked the ten-trillionth time Maher claimed that TARP was a “success” because the banks have “paid back” those government bailouts. Bill Maher needs to invite Yves Smith on his program so that she can debunk this myth, as she did in her June 23 piece. “Geithner Yet Again Misrepresents TARP ‘Performance’”. Ms. Smith is not the only commentator who repeatedly calls out the administration on this whopper. Marshall Auerback and almost everyone else at the Roosevelt Institute have said the same thing. Edward Harrison of Credit Writedowns wrote this piece for the Seeking Alpha website, in support of Aureback’s TARP critique. Will Wilkinson’s October 8 essay in The Economist’s Democracy in America blog presented the negative responses from a number of authorities in response to the claim that TARP was a great success. With all that has been written to dispute the glorification of TARP, one would think that the “TARP was a success” meme would fade away. Nevertheless, the Geithner Kool-Aid is a potent brew and its effects can, in some cases, be permanent.