Though it may come as a surprise to many Americans, key aspects of the policies enacted by embattled Treasury Secretary Tim Geithner have actually been successful, according to new profiles of Geithner in the New Yorker and the Atlantic.
Geithner, who's been widely criticized for his handling of the Wall Street bailout -- and mercilessly ripped for his poor communication skills -- is portrayed in both pieces as a deft technocrat who isn't afraid to make unpopular decisions. Geithner's role in rescuing the financial sector and avoiding an outright nationalization of banks, according to a quote in the Atlantic from Rahm Emanuel, "saved the United States taxpayer a trillion dollars."
John Cassidy's piece in the New Yorker hinges on Geithner's reputation on the bank stress tests which, after being introduced in April of 2009, soon restored badly needed confidence into the financial markets. The Obama administration's main choice early last year, Cassidy suggests, was whether to nationalize struggling U.S. banks (likely resulting in management shake-ups and certain shareholders being wiped out) or to rely on private capital markets to boost the financial sector.
Geithner called for the latter, and used the stress test results to encourage investors to pour capital into the banks. Cassidy reports that the Obama administration reserved nationalizing banks as a weapon of last resort.
As a result of the stress tests, Cassidy notes, the market was able to determine which banks were struggling and which needed more capital. Geithner seems to already be patting himself on the back, according to Cassidy's piece. Banks have historically high levels of capital and, as Cassidy puts it, "a jobless recovery is nonetheless a recovery of sorts." (Jobless, in this case, means an unemployment rate hovering near 10 percent, millions of foreclosures projected and no true consensus about whether the economic recovery will be robust and lasting.)
Here's the New Yorker:
"My basic view is that we did a pretty successful job of putting out a severe financial crisis and avoiding a Great Depression or Great Deflation type of thing," [Geithner] said. "We saved the economy, but we kind of lost the public doing it."
Still, Cassidy notes that Geithner has sometimes suffered from an absence of support from the White House. In one of the piece's toughest quotes, former Commodity Futures Trading Commission official Michael Greenberger says: "There's been a total lack of Presidential leadership. If Obama had been running the war in Afghanistan like he's been dealing with the ﬁnancial crisis, the Taliban would control the streets of Kabul."
In The Atlantic, Joshua Green also credits Geithner with saving the economy, but is a bit more critical of Geithner's tenure. Green sees Geithner's legacy as one that will be inextricably linked not just to public outrage but to how Wall Street fits into Washington's core values:
"Any study of Geithner is unavoidably a study of how both political parties came to agree that the interests of the financial sector must predominate, of what went wrong when those interests did predominate, and of how someone whose glittering career is a product of that system wound up at the center of an effort to write new rules for it. At the center, really, of the whole Obama presidency."
Geithner may still in large part be a product of the pre-crisis consensus in Washington, implies Green in the Atlantic. Which, Green notes, isn't the same as saying Geithner is beholden to Wall Street or favors high-paid CEOs. Here's Green describing the intellectual framework that shaped Geithner and his colleagues:
A former Democratic Senate staffer explained the effect this way: "Before the 2008 crisis, [the Banking Committee] was seen as a place where you could go, serve a couple years, and end up going to lobby. Everyone thought that financial services was the perfect industry, where you had a harmonization of progressive values with money. It was a way to be a good Democrat and a good liberal while making lots of money. The mark-to-market accounting changes, the loosening of bank capital requirements, harmonizing international standards--all that stuff was seen as, like, 'Where's the harm in this?' If banks are making a little more money to keep up with their international competitors, what's the big deal?"