Today’s must read MSM piece is a fascinating front page WSJ article on Treasury Secretary Tim Geithner (Bailout Anger Undermines Geithner).

Ignore that misleading headline — the article itself is not so much about the anger over the bailouts, but instead details the policy decisions and political choices Geithner made as Treasury Secretary.

The litany is not pretty.

The headline misses the nuance of the story: That Geithner is very much a creature of the Banks he is supposed to regulate; that he continued the same ruinous bailout policies he was a part of when they began under Bush/Paulson; that he has stood as a speed bump preventing more aggressive regulation of the banks that caused the mess.

Perhaps the key sentence in the entire Journal article: “Interviews with dozens of government officials show that Mr. Geithner has acted as a brake on administration officials seeking punitive action against big financial firms.” No, we best not punish these banks, that would be terrible.

From the Journal article, here are a few of Geithner’s greatest faux pas:

• Resisted efforts to oust Citigroup Chief Executive Vikram Pandit as a condition for more government aid;

• Successfully argued against ripping up contracts that controversially allowed millions of dollars in bonuses to be paid to American International Group employees;

• Pushed for banks to repay government funds, thus freeing them from TARP regulation;

These factors are minor compared to the overall failure to enact any sort of comprehensive regulatory reform. That is what a stronger, less captured Treasury Secretary would have done. Only a year into his term, this failure to achieve any major reforms represents his biggest policy blunder.

Expect it to cost the Democrats dearly come November . . .


graph courtesy of WSJ


Bailout Anger Undermines Geithner
WSJ, FEBRUARY 21, 2010

Category: Bailouts, Politics, Regulation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

33 Responses to “Policy Errors Dog Treasury Secretary”

  1. rktbrkr says:

    “Break it and you own it” By continuing the Bush economic policies so completely O’B owns it. Only if O’B had kept Paulson as Teasury Secretary would the policy continuation been any clearer. O’B is well on his way to being America’s first one-term black president

  2. bsneath says:

    “stronger, less captured”

    A diplomatic way of putting it. Reminds me of a beer commercial.

  3. Robert M says:

    I am a big lurker here and in full accordance w/ you statements on Sec Geithner. Elsewhere I have blogged for him; I thought I was getting Joe Kennedy circa 1933. When it quickly became apparent his policies are as describe in the Journal article I came to the conclusion he was Fredo. The reality is that is wrong too. He is doing what the President wants.
    We can discuss if it’s because he doesn’t understand economics; I definitely believe the evidence is 80 20 that this is true. We can argue whether is a Clinton acolyte of triangulation to keep the Democrats in power. On and on and on. The reality is these policies are going to come back and bite his behind off. the trigger will be a sovereign nation default and one of the “rescued solvent financial institutions” having to pay off CDS w/ help from the government to keep the system “afloat”. I need not add that one of our other financial institutions is likely to be the big beneficiary.

  4. Chief Tomahawk says:

    “Expect it to cost the Democrats dearly come November . . .”

    That’s an endorsement for the same ‘gerbil wheel’ we’ve been on! The Republicans already had the chance to say no to bailouts and cow-towed to the emporers. Now the Democrats are doing the same. One has to assume the campaign contribution checks are still coming in from the financial sector and thereby have both parties extremely agreeable. Afterall, whatever isn’t spent on an election may be kept as income so long as taxes are paid, right? It will be interesting to see whther newly-elected Scott Brown will be anything different or just the latest turncoat.

  5. Its a function of perception, not policies. The Dems have allowed teabaggers and others to paint the bailout as their cration — same with deficits.

    They should have relentlessly painted the collapse and bailout as Bush era errors …

  6. torrie-amos says:

    nobody liked tarp, yet, there was no other real alternative, thus it was done

    nobody liked stimulus, yet, there was no other real alternative, thus it was done

    everyone assumed reorms would happened,, because there was no other alternative, it has not been done

    banks and lobbyists rule, it’s obvious to everyone, yet, what is the alternative, vote em out, because there is no other alternative

    they will lose not because of tea party or frank luntz propoganda, done well by repulbicans, they will lose due too choice, not only have they let the crooks off the hook, they have backed them and have given them more

    that is the real perception, and after a year of no reform it is cemented in concrete and steel, nothing will change it

  7. Moss says:

    Re: banks and lobbyists rule, it’s obvious to everyone, yet, what is the alternative, vote em out, because there is no other alternative

    This is exactly the outcome that is ‘baked’ in. Just like the 2006 mid-term when the Iraq War was the lighting rod and Rumsfeld became the sacrificial lamb. The 2010 mid-term will most likely result in Tim becoming the sacrificial lamb. Maybe also Ramm.

  8. And still…Obama will not fire this person who cost him his chance to be a great president.
    The Tim and Larry show doomed Barak. What a shame.

  9. cognos says:

    Everything that “WENT WRONG” was broken in 2004, 2005, 2006, 2007… its unforetunate that regulators did not make better decisions in the first half of 2008 when the situation was dire, and then we had the crisis.

    While making other decisions might have been marginally better, and this will likely be debated some in academic and policy circles over the next decade… RECOVERY is here. ZIRP + TARP + removal of FASB 157 + stimulus has solved downward spiral… banks have almost all paid back TARP… and the remaining banks (many failed) seem to be growing in profitability.

    Give it 1-yr, unemployment will be 8% and headed down fast, S&P500 will be 1300+, bank credit losses will be OVER and the rate of foreclosures will be 1/2. Why all the finger pointing? Why all the monday-morning quarterbacking?

  10. Marcus Aurelius says:

    If you think back to the campaign, neither party candidate had clue one regarding what was about to happen (the “debates” had very little discussion of recession, depression, banking collapse, or criminality in the banking/ratings/mortgage industries). Both parties were so caught-up in the faux issues of the day (gay marriage, for example) that they didn’t notice the freight train of financial disaster bearing down on them. As a result, any action taken was (and would have been, regardless of “options”) short-sighted and beneficial only to those not subject to the whims of the electorate (the banking class — our shadow government).

    The seeds of social rebellion have been planted, and the bumper crop will be harvested. Geithner, along with his cronies and enablers, will eventually be held accountable, but by then, it will be too late to make anything but ultra-radical changes in our system of government.

  11. TakBak04 says:

    Yves at Naked Capitalism has a post up about Geithner and Emmanuel this a.m. which has a link to a Treasury Press Release from Geithner where he “tours the Green Grocer Initiative” in PA. It does seem she has a point…if Geithner is now following Michelle around touring grocery stores as part of Treasury initiative…are his days numbered. ????

    From Yves Smith…Naked Capitalism
    Monday, February 22, 2010

    Administration Ratchets Up PR Campaign for Beleaguered Emanuel and Geithner

    The evidence just keeps mounting that Team Obama sees its flagging poll ratings and increasing criticism of key incumbents as a mere communications/imaging problem. Its response is just to slap more lipstick on those pigs.

    Link to Geithner’s PR:

    February 19, 2010

    Treasury Secretary Tim Geithner
    Remarks on the Healthy Food Financing Initiative
    As Prepared for Delivery
    Philadelphia, PA

    Governor Rendell, thank you for that introduction.

    You’re doing great work leading this state out of recession. And you’re a national champion of the power of infrastructure investments to get Americans back to work and our economy back on track.

    It’s always nice to get out of Washington DC. And it’s a real pleasure to be here with Secretary Vilsack and First Lady Michelle Obama.

    Almost a year ago, the First Lady broke ground on a White House Garden and – in doing so – started an important national conversation about healthy eating, especially for our kids.

    And last week she turned that conversation into a call to action, unveiling an ambitious campaign to tackle childhood obesity

    We’re here to make sure that all communities have a chance to shop at green grocers selling healthy food.

    And we’re going to do that through the Healthy Food Financing Initiative, a joint effort among the Departments of Treasury, Agriculture and Health and Human Services.

    For our part, Treasury is devoting $250 million towards New Markets Tax Credits which provide a powerful incentive for private investors to take a chance on projects – like a new healthier grocery store – in distressed communities that have potential.

    That incentive is a tax credit, valued at 39 percent of the investment’s total cost and claimed over a seven-year period. And through this innovative partnership with the private sector, local developers are able to create new jobs and services for residents in their community.

    In addition, we are providing $25 million in Treasury grants to certified community development financial institutions that have already been successful in increasing healthier food options in distressed areas and that, with our support, will be able to do even more.

    This morning, the First Lady, Secretary Vilsack and I toured the Fresh Grocer Supermarket.

    Thanks to New Markets Tax Credits and one of those Treasury grants made possible by the Recovery Act, Fresh Grocer was able to open a few months ago and now provides affordable, fresh food – including produce from local farmers – to the North Philadelphia community.

    Let me close by saying that as America emerges from this recession, we are committed to doing more than repairing the damage. We are committed to a recovery led by the middle class, to rebuilding our economic foundation, to return responsibility to Washington and, as every generation has done before, to leaving this country better than we found it.

    Today we take an important step in that direction.

    Thank you. Let me now turn it over to Secretary Vilsack.

    More details of Press Release (including money Treasury has given to Green Grocers Food Initiative) from Treasury at…….


  12. Marcus Aurelius says:


    You sound like one of the blind men describing an elephant. You ignore the very real, very unsolvable down side of what has happened. Out of sight, out of mind.

    Monday-morning quarterbacking? here’s a clue: The game is still in the 1st quarter, the score is 100-0 against the home team, and the rules have been rewritten to favor the visiting team. The crowd has been locked into the stadium, the food and beverage vendors have run out out of products to sell to the crowd, and the doors to the restrooms have been locked.

    Yup — that last play should have been a run up the middle — who passes on first down?

  13. Moss says:

    cognos Re; Why all the finger pointing? Why all the monday-morning quarterbacking?

    Even if your out come becomes true I guess what erks me and many others is the means to that end.
    Many believe that the choices taken to get to your end were all front loaded to benefit the financial predators and other parasites who continue to suck the blood out of the majority of the country.

  14. torrie-amos says:

    the economic wave came from, since the 1970′s, lower inventory levels and lower interest rates, along with steady energy costs, yet, there was always and extra shove

    a. 1970′s, cheap female labor entered work force

    b. 1980′s, tech started it’s efficiency run

    c. 1990′s, illegal immigration, cheap labor again

    d. 2000′s, financial engineering, a bust

    what’s up for the next decade Bloom Energy

    all debt has been dumped on and assumed by the gubment, they now own all the leverage, all around the world, all

    imho, we’ve reached maxiumum complexity and efficiency, re-adjustment is a biotch, and no one in power, ie, leaders have a clue

    oooops, i forgot, u can now get the internet on your phone anywhere, anytime, that makes people more efficeint, how, more profitable how, cause you know they could not do that before, right

  15. Robespierre says:

    Tim is and it has always been the fall guy to handle the “crisis”. Obama did not re-appointed him because he was good or not “capture? by the financial institutions. Obama re-appointed Tim to eventually be the sacrificial lamb (before mid-term maybe?). The truth of the matter is that the whole government has been “capture” (Democrats, Republicans and president and all regulatory agencies) by corporate America (and some foreign) and no change will come from the US.

  16. cognos says:

    Give it 1-yr… and Tim Geitner will be solidified as a strong part of the recovery. Although he may exit from exhaustion (and he probably doesnt deserve the “credit” as business cycle and ZIRP are bigger parts — but he doesnt deserve the “blame” either).

    Give it 1-yr and Obama will look pretty damn good. It is extreme wishful thinking to hope that Obama looks bad in 2012. The business cycle exists. Recession is followed by recovery. The business cycle should be in its strongest part right during Obama’s re-election. That will be unbeatable.

    (Not to mention Iraq is already 1/2 wound-down and will be completely wound down by summer, Afganistan is going v v well and will be over before you know it. What will that give him?)

  17. Cynic_FA says:

    Barry said “Its a function of perception, not policies”

    The answer is not for Obama to clearly lay blame for the problems on the Bush administration ( I agree
    Bush and Greenspan blew it) We are looking for actions not words from Obama and his next Treasury Secretary (Geitner needs to go). It is time to change many of the policies which the article claims Geitner has opposed.

    Your article yesterday “Securitization without risk transfer” pointed out the banks used securitization to avoid bank capital rules. The way to avoid the next financial crisis is to raise capital requirements and enforce rules against off balance sheet SIV’s and guarantees designed to avoid capital requirements.

    The problem is that higher capital requirements now would choke off the economy. Maybe a jump in capital reuirements can help the Fed deal with excess liquidity if the economy ramps up too quickly.

  18. FrancoisT says:

    I particularly enjoyed Yves Smith’s take on this fluff piece:

    The [WSJ) article has more seeming objective but actually slanted accounts, giving the logic of various Geithner positions, and the resistance they encountered, all told to create the impression that opponents are either rubes, unreasonable, or driven by the need to appease that lunatic, um, angry public.

    But it was pretty obvious that something was up last week when I got this Treasury press release: “Treasury Secretary Tim Geithner Remarks on the Healthy Food Financing Initiative”. And indeed, the Journal reveals this uncharacteristic move is part of a charm offensive (the Journal has a picture of Geithner “touring” a grocery store. “Touring”? Are normal domestic errands that alien to our Treasury Secretary? The stunt smacks more than a bit of desperation.

  19. tradeking13 says:

    You forget to mention that he went produce shopping with Michele Obama this weekend. That will surely sway public opinion in his favor.

  20. The Curmudgeon says:

    I’m surprised Timmy wasn’t photographed with Mrs. Obama helping her dig a victory garden. Of course, if they were both in shirt-sleeves, she’d make him look like that guy in the Burger King commercials that doesn’t want to get a whopper because it would make his small hands look smaller. Then again, he could just get Michelle to hold the hoe.

    But Cognos is right. The trajectory of Obama’s presidency means he’s apt to be annointed King in 2012.

  21. [...] Has Treasury Secretary Tim Geithner been “captured” by the big banks?  (Big Picture) [...]

  22. bsneath says:

    “The evidence just keeps mounting that Team Obama sees its flagging poll ratings and increasing criticism of key incumbents as a mere communications/imaging problem. Its response is just to slap more lipstick on those pigs.”

    The “lipstick” they are using is government money.

    What people want is a government that has integrity. In my view, what we appear to be getting is a continuation of back room deals to buy votes, be it $8 billion to nuclear for cap & trade, or $1.5 billion limited to Nevada and 3 other States to help out Harry Reid.

    Obama’s Administration would gain respect if they instead took on financial reform with the same degree of intensity. They have proposed reasonable regulations in the Volcker Rule and they needed to sincerely fight like hell to get it passed. If it fails, the blame will go to those who bring it down, not to those who did everything in their power to get it passed. It is called taking the high road.

  23. DeDude says:

    He was put there as Wall Streets little toy, to stop the panic among the bonus babies from dropping US into a depression. Not surprising that he has been on the wrong side every time and tried to stop any and all progression. Now the economy has stabilized, so give him back to them. Being on the wrong side of public anger will be very expensive at the next two elections, particularly if unemployment stays as high as predicted.

  24. carol7 says:

    “Resisted efforts to oust Citigroup Chief Executive Vikram Pandit as a condition for more government aid”

    Please contrast this with the overnight kick-off of Willumstad, then only half a year CEO at AIG.

    Paulson at Treasury and Geithner at NYFed put in his place ……a retiree with connections to ….GS.
    After the ‘successful’ transfer of taxpayer billions via AIG to GS, he went back into retirement again.
    Perhaps GS is not counterparty to Citygroup, hence no need for (temporarily) a Goldmanite at the helm.
    Or it’s all just a coincidence.

    Yes Geithner, being too captured by the banksters, should go. However, if Obama selects Jamie Dimon (a name sometimes rumored) we are all even worse off!

  25. [...] litany is not pretty,” FusionIQ CEO Barry Ritholtz says. But failure to pass any regulatory reform so far may be his biggest blunder. “Expect it to [...]

  26. bsneath says:

    carol7 Says: However, if Obama selects Jamie Dimon (a name sometimes rumored) we are all even worse off!

    I could not agree with you more.

  27. I’m still waiting for the FRN’s bearing ol’ TTT’s JH, those things need to Shorted/Traded at a Discount. –the 4th one.. –the 5th one..

  28. soloduff says:

    The WSJ title, ” Bailout Anger Undermines Geithner,” is not the only misleading title of the article cited. The title given by The Big Picture (Barry Ritholtz?), “Policy Errors Dog Treasury Secretary,” should read, “Policy Dogs Treasury Secretary.” –Mr. Geithner’s course of action was policy, not a policy error; i.e., quite intentional, and in keeping with the Wall Street interests that he represents.

  29. TakBak04 says:

    bsneath Says:
    February 22nd, 2010 at 4:26 pm

    carol7 Says: However, if Obama selects Jamie Dimon (a name sometimes rumored) we are all even worse off!

    I could not agree with you more.


    Shouldn’t we be beyond the point of “Fearing the Next Worst Appointment?” Isn’t that what’s wrong with our whole Political System?

    We are forced to choose between “Fear and Status Quo!” Example: “What’s WORSE than Geithner would be “X,Y,Z” Political Hacks from Clinton Administration?

    Where are the NEW BLOOD! THE REFORMERS? Isn’t it TIME?

  30. philipat says:

    Somewhere on Wall St sits a quietly accumulating bonus account obfuscated somewhere as a liabilty?

  31. bsneath says:

    Where are the NEW BLOOD! THE REFORMERS? Isn’t it TIME?

    I would even settle for some old blood with honest intentions – Volcker comes to mind.

  32. [...] is Timothy Geithner’s record as Treasury [...]