Mayor Mike Bloomberg for Treasury Secretary
This morning on SquawkBox, my fishing pal Chris Whalen of Institutional Risk Analytics called for Paulson’s and Bernanke’s heads.
That is the perfect opening for Marion Maneker, who presents us with this guest essay. Marion is the Managing Partner at Colle, Hochberg and Grey, publishers of the Art Market Monitor. He is a former editor at New York Magazine and the Publisher at the HarperCollins business imprint. Marion has been observing the political and economic scene from a vantage point within the financial press for many years. His take is wry, sharp, and unique. I would not bet against his perspectives.
~~~
It isn’t easy being Secretary of Treasury these days. One minute you’re down on your knees begging the Congressional leadership not to blow up the world’s banking system; the next you’re fielding calls from the Chinese threatening god-knows-what if you don’t make them whole on the GSEs. Just look at the month Hank Paulson has had.
One of the effects of the market shock and bailout plan has been a renewed focus on the Secretary of the Treasury. Once a role for a worthy business figure whose job amounted to repeating the mantra “a strong dollar is in America’s interest”– usually as the dollar is sinking–the job has become something very different now and for the forseeable future. If Hank Paulson gets his way and Congress declares martial law over the financial community, the Treasury Secretary is going to be more Proconsul than cabinet functionary.
First, Paulson received nothing but praise for the way he handled the crisis; then he unveild his bailout plan. Suddenly it seemed like everyone turned against him — though Anatole Kaletsky had questioned his moves already. No matter what happens to the bailout, Paulson isn’t likely to be asked to stay on after the transition. So we have to start asking the question: who is going to be riding this tiger next?
This isn’t a question like, who would the new president appoint to the Supreme Court? Where the Treasury Secretary was once a high level consiglieri, the position is rapidly becoming a much more complex and intense job with no natural constituency . . . and little margin for error. Congress hates you; main street hates you; and pretty soon — with all that bickering as a distraction from its own misdeeds — Wall Street is going to start complaining again. As a cabinet position, it may soon overshadow the Secretary of State in political importance and be no more satisfying for the office holder than trying to make progress with the Israelis and Palestinians.
Having said that, the job is still a career capstone or a stepping stone to greatness. The speculation about the possible nominees under the next administration began a few weeks ago when the Wall Street Journal baldy asked if the Fed’s Timothy Geithner and FDIC’s Sheila Bair were leading candidates.
No disrespect to either Geithner nor Bair, both of whom look to have big careers ahead of them on either side of the public/private divide, but even a traditionalist’s view of the job would put it beyond their reach. The media focus requires some star-power, which Geithner still hasn’t got, and international experience. The GSE bailout revealed one half of the Treasury Secretary’s job: dealing with pressure from abroad. From news reports, we know that the holders of American debt–namely, government agencies for economic powerhouses like China who Daniel Gross points out currently hold mearly $1 trillion or 21.4% of the GSE debt–were on the phone with Paulson a few seeks ago demanding reassurances. Next thing we got was the Fannie/Freddie takeover.
Holding off our creditors abroad is going to take someone with real international stature and visibility. That’s why everyone is so relieved that Paulson is currently in the job. But being the former head of Goldman wasn’t always credential enough. Remember that Robert Rubin had to serve an apprenticeship in the White House while the grand old man of the Senate Finance committee, Lloyd Bentsen, kept the seat warm.
That’s one reason the Journal hedged their prediction with New
Jersey Governor John Corzine, a Rubin successor at Goldman (so why not
Treasury too?), and Jamie Dimon. Though one would be hard pressed to
understand why someone like Dimon, just entering the salad days of his
career, would want to deal with the US Treasury’s many headaches. Or to
put it another way, it’s a job with many of the same constituencies
Dimon has now but not the pay package.
Some enterprising reporter will have to ferret out the short-list as we move into the final phase of the campaign. The Times
didn’t get much this week. Out here in the cheap seats, we can still
follow the action because the jockeying and positioning for the job is
already going on in a very public way. Witness the recent op-eds in the FT and the NY Times by Evercore’s Roger Altman and opinion pieces from Steven Rattner in the Washington Post and the Wall Street Journal.
You might think of these as applications for the other half of the
Treasury job: banker-in-chief. That’s what Paulson has been doing,
playing banker to the biggest client of all. With the goverment’s clout
he can steer the financial world toward some safer combinations. Altman
and Rattner would be worthy successors in that respect.
Altman’s got unfinished business in Washington, having made a large fortune at Evercore and received a transplanted heart,
he must feel that now is the time to realize his life’s abiding
ambition, a big job in Washington. The disinterested tone of Altman’s
piece gives him the inside track on playing the self-less reformer
whose willingness to restructure power under the Fed for the good of
the economy and the nation just might allow him a victory lap in the
job he might have had instead of Rubin a decade and a half ago.
Backing the Clinton’s horse was Altman’s undoing, and it should
have put Steven Rattner out of the running as well. But Rattner’s skill with the media
goes beyond his celebrated friendship with Arthur Sulzberger. He’s been
blitzing CNBC and the dailies for two years now raising his profile
while his wife has done inside work as Democratic fundraiser. His GSE
op-ed showed the kind of war room Rattner must be operating with
speechwriters ready to pounce on any opportunity. A week later, Rattner
was on the opinion page at the Journal
giving his two cents on the failures of risk management that led to
Lehman’s fall and AIG’s rescue. That piece echoed the Washington Post
essay. Like the GSE op-ed, Rattner didn’t point a finger but focused on
future. The subtext of both efforts was the barely contained enthusiasm
of, " Give me the ball, coach!"
Unfortunately for Rattner’s ambition, he’s not really a banker in
Paulson’s mold. Rattner is more of an inside man, an advisor and
strategist. Cerebral, well-mannered and good with clients, his
personality doesn’t play so well on TV where the Chinese and Indian
billionaires are likely to need to see him much of the time.
That’s almost besides the point now. What we’re going to need is someone who can keep both Washington and Wall Street in line, someone with stature, political skills and the will to make a few omelettes. Lawrence Summers is the big dog of the Democratic camp is waiting in
the wings and he’s not been shy about positioning himself either (well,
not unless asked directly.) Using the Financial Times
as his platform to speak to the world’s economic community, Summers has kept himself current and increased his leverage. Here’s a
guy with record of building confidence — well, before he got to
Harvard — and the kind of international reputation that will keep our
creditors from picking up the phone at every tremor. After all, Summers
was on Time magazine’s “Committee to Save the World” cover with Rubin
and Greenspan. Even with the beating Alan’s reputation is taking,
that’s still good company to have been in.
He’s also adept at using his connections to build support among the elite. Here’s what he’s telling his fellow Harvard alums.
Nonetheless, this is still a political appointment. So just because
Summers is the most qualified for the job doesn’t mean he’s going to
get it.
There are plenty of wild cards waiting out there. Joseph Stiglitz has a Nobel prize that will turn heads but he’s an outlier. That hasn’t stopped him from sticking an oar in.
If things don’t go well for Morgan Stanley over the next few
months–and even if they do–John Mack might be looking for a
Paulson-like exit strategy. (Extra fun fact: the Secretary of the
Treasury gets to sell his holdings tax free when he takes the job.)
We’ve been looking at the Democrats, but we might have missed the
real contenders. If McCain wins he might want to keep Paulson on to
finish the job (what else is Paulson going to do with his career?) Then
there’s John Thain. He’s both redeemed himself with the sale of Merrill
and freed himself up for another position. Time
says he’s been close to McCain for a long time. They predict a future
for him in Washington if the Republican wins. Which would be great.
Thain could be CFO to the nation and figure out a way to spin off all
that unwanted to debt like he did at Merrill.
All of this talk of bankers and economists may be missing the real
point. If Treasury is going to guide the country through the next few
perilous years, we might prefer to have someone at the wheel who is
experienced in all aspects of the job. The perfect candidate would have
been a corporate leader and an elected official. He would have
experience with the markets–it wouldn’t hurt to have a name that’s
synonymous with financial sophistication–and a large enough fortune to
intimidate the Oligarchs and Emirs. It would help if he was a centrist
who could appeal to either political party.
Michael Bloomberg wanted to be president. But you can make the case
that being Secretary of Treasury could be the bigger job by 2009–and
he won’t have to spend his billions to get it.
September 26th, 2008 at 7:26 am
Bloomberg would be good… but somehow I feel that Buffet would be even better, if not the best man for the job.
September 26th, 2008 at 7:42 am
Thought Whalen’s comments were easy to make from a non real world political-less responsiblity less TV studio ..must do his own brain surgery too…to second guess these guys at this juncture is not helpful..they are the pilots we have..while the plane is crashing we shouldn’t be sending out resumes for pilots…
September 26th, 2008 at 7:43 am
admiral paulson gets a drubbin inna press today. cmon ovva ta my place an see THEY AINT NO PLAN..!
September 26th, 2008 at 7:53 am
PS ..He let Lehman go ..when he wanted to save it..and was second guessed..he made a tight advantageous for the taxpayer (and the world by the way) deal for AIG ..and expected these political knuckleheads to appreciate and understand this is an emergency…this is political nonsense ..imo ..This guy is James Bond and should be supported and Bernanke …the question is ..do we trust them..and has been answered..we don’t ..but I would say that these Senators can be trusted less…I ratehr we ruled by an intelligent king than and ignorant committee
September 26th, 2008 at 8:13 am
Chris Whalen made more sense than anyone I’ve heard commenting on the current situation.
He obviously understands the concept of free markets, and actually had Steve Liesman nodding in agreement when he was talking about how the govt messed up the Lehman deal.
September 26th, 2008 at 8:15 am
Assuming the good thing and not the bad thing happens on November 4, I would actually prefer retreading someone like Summers or Rubin on Treasury, and even recruiting old Volcker back to the Fed (ciao, Ben). And for the historically ignorant out there, yeah, there have been retreaded Cabinet members, even a few who served both political parties (e.g., Stimson).
September 26th, 2008 at 8:21 am
Shelby on Bloomberg just said Bush and Paulson will be gone in three months, and “who knows how long Bernanke will be around”.
September 26th, 2008 at 8:24 am
I caught part of Chris Whalen on Squawk Box this morning as I ran out the door. I was pretty impressed with what I saw and heard.
September 26th, 2008 at 8:28 am
of course they made sense and sounded good …because they are made with out complete knowledge…or the various pressures being applied…$IRX and LIBOR make sense too…
September 26th, 2008 at 8:30 am
Look at parliamentary systems the world over: treasurers are more important than ministers for foreign affairs.
This is – I would argue – in large part due to less globalism of policy, relative to the US. As this power/influence wanes, though, there’s no reason why the US shouldn’t see the same re-balancing.
September 26th, 2008 at 8:30 am
Hey Barry (or anyone else),
With this bailout plan, does it mean that the banks get to keep all that foreclosed property AND it gets reimbursed for the all mortgages that got defaulted on (the source of the ‘toxic debt). So in a way, its a double-up situation?
September 26th, 2008 at 8:39 am
« Hypocrite lecteur mon semblable mon frére »
Whom called for Mr Greenspan’s head on due time?
Whilst very tempting to see the aftermath of a no action on this financial demise togather with the guillotine being well greased. There are few pitfalls “Vox populi vox Dei”,the foreigners are owning 75 Pct of the assets in the USA, amnesia may prevail but only through time.
I have NOT read any thorough plan on an alternative, save through few “tricoteuses de la révolution” claiming for heads now when they were silent when the fraud and abuse were blatant.
September 26th, 2008 at 8:39 am
Lehman in the rear view mirror.
There is a danger that is perhaps not unique to this crisis, but is particularly relevant. Both the incredible speed and sheer magnitude of the degradation of credit conditions that has occurred has consequences for critiquing past courses of action. Decisions that were made just days prior, due to ensuing events, are very easily criticized, but were made in a very different context. Does anyone believe that, had the Fed/Treas had any idea (last weekend) of the events that unfolded at the end of last week, they wouldn’t have acted differently with Lehman? The Feds are in an impossible position. Until last Thursday morning, they really had to be one step behind events or else be roundly denounced as acting well beyond their charter. I found Whalen’s comments this morning enlightening as well, but, because of the rapidly changing context in which the Fed’s actions have been executed, it’s a bit too easy, for me, to pile on.
Jay
September 26th, 2008 at 8:42 am
CNBC SUCKS:
Amusing parlor game but I’d basically agree with you. With Summers/Rubin back at the treasury and most important you know who in the white house the show would get back on the road. All that said Paulson’s plan with Dem mods need to pass. I got up in the middle of the night to check what was happening in Asia and Europe which wasn’t as bad as I expected but I think Europe is waiting on the street. I also called a couple of UK contacts and their reaction is basically WTF is going on there. Has McCain come off his trolley. This needs to get done or we’re all done. etc etc.
September 26th, 2008 at 8:49 am
Friday morning, 8:39 a.m. — greatest CNBC moment EVER!
Steve Liesman and Rick Santelli (with Jack Baroudjian looking on in a third screen window) are locked in a FIERCE debate about the Paulson plan. Liesman is taking the adminstration line — we have to do it. Santelli claims that “Confidence is shattered because the Honorable Chris Cox, and others like him, are CHANGING THE RULES IN THE MIDDLE OF THE GAME. THAT’S why confidence is shattered!”
Liesman tries to engage him further on the issue. Obviously boiling over with frustration, Santelli starts repeating, with increasing volume and ferocity, “I’m done. We have to go. We have to go. WE HAVE TO GO!” Then he turns his back to the camera, and walks off to the CME floor. The gobsmacked looks on the faces of Liesman and Baroudjian, too stunned to say anything, are priceless.
The camera continues following Santelli’s back as he strides away. Finally he turns toward the camera again, and begins clapping mockingly.
Theater, I say! A cross between Shakespeare and World Wrestling Federation — greatest CNBC moment ever! I hope someone posts the video. Wish Barry had been there.
September 26th, 2008 at 8:50 am
Brasil
Make no mistake about it, we know that no matter what happens, we’re in for a world of hurt. Very serious economic strain – higher prices for everything we consume, shortages, etc.
But throwing money at this situation is not the long term solution. Take the pain now and let the markets work through the mess.
When you mess with the markets (disallowing short selling, you just prolong and exacerbate the problem.
September 26th, 2008 at 8:57 am
Todd ..all respect man..I could argue the whole story from the other side and probably with just as much weight of common sense…this ain’t good..think the short selling ban was a mistake..as we all know shorts support the market also..besides apply pressure..now a guys head that should roll..Chris Cox..but thats to late
September 26th, 2008 at 9:02 am
‘I have NOT read any thorough plan on an alternative, save through few “tricoteuses de la révolution” claiming for heads …’ — Philippe
LOL! I’d settle for a pulchritudinous jeune “tricoteuse de la révolution” claiming for head.
To the barricades, to the boudoirs, mes amis!
September 26th, 2008 at 9:06 am
Let’s just do it right and scrap the current two candidates and vote Bloomberg in as President. He can pick his VP from the two current candidates.
September 26th, 2008 at 9:15 am
Let’s see…
Barry and Chris hate Paulson. Buffett thinks whoever wins the election should beg Paulson to stay on because he’s doing such a terrific job.
Somebody is wrong? Barry or Warren? This is the second time Barry has publicly taken a completely opposite position with Warren. The first one was the $1 million gamble that the bailout is a money loser. Buffett and Gross disagree. Gross is just talking his position. But Buffett is placing current bets that the prices of the mortgages the U.S buys are going to be worth a lot more in the future.
Gotta hand it to you BR. You’ve got stones to go up against the Oracle twice in less than a week.
September 26th, 2008 at 9:16 am
Bloomberg has the 2nd best job in the country – If we want to share him with rest of the country maybe President.
Accountability in the new plan.
Do a deal like Buffett did with Goldman or a deal like AIG – the bankers who need this package – are just waiting for their dream – to get this money without strings.
Accountability!!! – Want our money – then put your ass in my pocket!
September 26th, 2008 at 9:24 am
what needs to be done right now? No bailout. Focus only on stopping a run on the bank. Unfortunately, every deposit needs to be backstopped for a two week period. Make not going to the bank to pull out your money a patriotic act. Force all networks to run It’s a Wonderful Life continuously.
September 26th, 2008 at 9:36 am
By demanding a Federal equity stake in these companies are we not nationalizing them. What are we Venezuela? Russia? We are nationalizing the banking industry. We should start filing for the exits people…orderly queue.
No equity stake. Berkshire can do things the gov’t can’t…don’t think that the government can get a Buffet like deal. It shouldn’t go that route.
They should lend at low interest and gently tax the gain when the housing market stabilizes and the toxic assets are broken apart and ultimately sold for a profit.
September 26th, 2008 at 9:52 am
Fenner – pick another Capra movie. Running the only movie that I know of which shows an actual run on the bank is not the way to prevent a run on the bank.
Come on, man.
September 26th, 2008 at 9:52 am
Jim Haygood, thank you for making my morning! can’t wait to see read a follow up from Santelli in Barron’s. Is he ever right?!
(BTW, posters’ adoration of Buffet makes me ill.)
September 26th, 2008 at 10:05 am
that’s it. i’m banning myself to poster oblivion. Santoli not Santelli.
and I meant, with emphasis, that he was very right.
September 26th, 2008 at 10:34 am
>…I ratehr we ruled by an intelligent king than and ignorant committee
It’s so sad you think that way.
Consider this: When you are not allowed to see the data, how do you tell in real-time (not in hindsight) who is intelligent and who is ignorant?
September 26th, 2008 at 11:03 am
Jim Haygood
“To the barricades, to the boudoirs, mes amis!”
Fine Jim go the boudoir but watch out at that time « rien n’était petit chez les rois » référence made to « la petite vérole »
September 26th, 2008 at 11:36 am
I would love to have a link for this:
“Friday morning, 8:39 a.m. — greatest CNBC moment EVER!
Steve Liesman and Rick Santelli (with Jack Baroudjian looking on in a third screen window) are locked in a FIERCE debate about the Paulson plan. Liesman is taking the adminstration line — we have to do it. Santelli claims that “Confidence is shattered because the Honorable Chris Cox, and others like him, are CHANGING THE RULES IN THE MIDDLE OF THE GAME. THAT’S why confidence is shattered!”
Liesman tries to engage him further on the issue. Obviously boiling over with frustration, Santelli starts repeating, with increasing volume and ferocity, “I’m done. We have to go. We have to go. WE HAVE TO GO!” Then he turns his back to the camera, and walks off to the CME floor. The gobsmacked looks on the faces of Liesman and Baroudjian, too stunned to say anything, are priceless.
The camera continues following Santelli’s back as he strides away. Finally he turns toward the camera again, and begins clapping mockingly.
Theater, I say! A cross between Shakespeare and World Wrestling Federation — greatest CNBC moment ever! I hope someone posts the video. Wish Barry had been there.
Posted by: Jim Haygood”
September 26th, 2008 at 11:40 am
And Bloomberg would be good because…? Smart guy to be sure, neither banker nor trader by trade, the market is not his forte. He is notoriously thin skinned, how will that play over the next few years? It is not as if he saw this coming, not as if he has any relivant experience, though few do. Given how so many of the “best and brightest” have failed I have very low expectations for the next Sec, given his inheritence, it’s likely the bar is set too high.
September 26th, 2008 at 12:21 pm
“Where the Treasury Secretary was once a high level consiglieri, the position is rapidly becoming a much more complex and intense job with no natural constituency . . . and little margin for error.”
You are looking in the rear view mirror. It’s about to get a whole lot less complex. The markets are bringing back the consiglieri.
September 26th, 2008 at 12:38 pm
I was just thinking the last couple days about where the US would be today if that guy from Columbia had been hired instead of Bernanke. Maybe you should offer him some space to give his opinion Barry.
On another point, it looks like this teachable moment is turning into a great big one for all of America. I’m actually giving it about a 25% chance that if done right the Fed could be GONE when people begin to grasp the truth. The crowd is so close to turning right now I can taste it. All they need is the right nudge. The great American electorate has been stirred from their 95 year slumber. If only their heads would clear just a bit more….
And who knows, Ron Paul for president could still happen even though that is a hail mary at this point. All that is needed is for the anger out there to touch a spark….
Stay tuned folks, the game is just getting going. Lots of innings to play still
September 26th, 2008 at 1:17 pm
Bloomberg would be a disaster. Doesn’t anyone remember his plutocrat Olympic boondoggle? Let’s make my buddies billions in West Side real estate profits under the cover of hosting a huge sports event. Good thing NYC’ers (and the State Legistlature) saw through that one.
Bloomberg is not as much smoke and mirrors as Guiliani, but he is almost as bad. Don’t let him anywhere near DC. Put him out to pasture. The only thin he should do after his term limit hits is play golf in the Bahamas or wherever his swanky estates are located.
September 26th, 2008 at 1:17 pm
Bloomberg would be a disaster. Doesn’t anyone remember his plutocrat Olympic boondoggle? Let’s make my buddies billions in West Side real estate profits under the cover of hosting a huge sports event. Good thing NYC’ers (and the State Legistlature) saw through that one.
Bloomberg is not as much smoke and mirrors as Guiliani, but he is almost as bad. Don’t let him anywhere near DC. Put him out to pasture. The only thin he should do after his term limit hits is play golf in the Bahamas or wherever his swanky estates are located.
September 26th, 2008 at 2:42 pm
As a former Republican, I become ever more amused at the contrasts between two wings of my former political party: the Ron Paul Constitutionalists, with a supreme intellectual grasp over every aspect of reality (economic, fiscal, geopolitical) except that of the American two-party system, and the neocons, who have exactly the reverse.
September 26th, 2008 at 3:14 pm
If McCain wins it won’t be a Bloomberg. Look at his economic advisor pick (Phil Gramm) and his VP pick (yuck). If there is enough money around to be stolen Phil might take the job. If not, McCain will stick his thumb in his ass again and pull out another maverick. Or maybe a high school teacher from the mid west somewhere.
Bill Gates once said, “always hire A’s. A’s will hire other A’s. B’s will hire C’s.” Don’t expect an A from McCain, in spite of the large pool of very capable republicans.
September 26th, 2008 at 3:37 pm
debreuil – John McCain finished #894 out of 899 in his Naval Academy class. Unless Annapolis had massive grade inflation in the 1960s, that would put McCain’s GPA at about a D, correct? So, if As will hire other As, Bs will hire Cs, what will a D hire?
What do you think is our probability of literally, physically surviving a McCain / Palin administration? I would like to see that on Intrade.
September 26th, 2008 at 5:05 pm
>what will a D hire?
Sarah Palin.
Anyways, why does this even have to be a “job for the Treasury Secretary”?? Y’know, why couldn’t, why shouldn’t, we create a federal body to handle this specific problem.
Because the daily decisions badly need input from all stakeholders. I have two guys in mind that I want right in the midst of this, neither are economists, traders, financiers, CEOs, or any of the tainted lot.
The first is, clearly and when the fuck is his name going to come up in all this: Eliot Spitzer. His wife may not trust him, but I sure as hell do. He was elbow deep into investigating this mess, wasn’t he?
The second, ugh… man the scars, the pain… I almost cannot type his name but his resume is undeniable for situations like this….
I’m trying to type it.. can’t stand it…. still trying, ugh, ugh, uhhhhh……
Ralph Nader
Oh that hurt. I used to hate him when I was a conservative, then I learned again to hate him when I became a liberal. Means he probably is a very special guy, which is just what we need.
September 26th, 2008 at 7:46 pm
The nice thing about this is that there may finally be a sense of consequence again. Its been all freedom to act, but no consequences of actions (not just in financials, also in voting). So given that, we hopefully won’t have to survive poor governing again (imagine McCain dies and a Palin/Gramm team, oach!).
Brave typing with Nadar, lol, you may be absolutely right, someone that everyone hates. I suspect it will end up someone who everyone hates by the end of the term anyway, but you get a sense that at least he wouldn’t go easy on anyone.