Don't Look for Geithner to Go

Chris Cillizza argues that proxies on the Sunday shows need to make the case for Tim Geithner this weekend, or else.

Treasury Secretary Timothy Geithner, under fire for his handling of the bonuses paid to AIG executives, faces a critical weekend as he fights to remain as the Obama administration's lead economic spokesman.

Although White House senior aides insist that Geithner is perfectly secure in his post, the fact that President Obama and White House press secretary Robert Gibbs both saw fit to express their "complete confidence" in him over the last 96 hour speaks to the level of concern in the administration about the situation.

In the very same post, though, Cillizza quickly surmises that Geithner's job is safe.

Given the Obama Administration's demonstrated skepticism about the shark tank that is politics in the nation's capital, it's hard to see them making what they would regard as a knee-jerk decision on Geithner. Barring any other future bombshells, the treasury secretary is likely to stay in his post for the foreseeable future.

Hmmm. I think the whole point of the post is to whet appetites for the Sunday shows, and not actually to speculate on Geithner's job security.

And while I think the Treasury secretary's image could use a little polish after a rough week, I certainly don't believe Geithner's job is on the hook, at least not this week. Obama can't afford to lose his Treasury chief right now. Firing Geithner (or caving to calls for resignation) would be the equivalent of throwing a stick through the spokes of the whole administration velocipede. Not to mention, losing the Treasury chief would panic the markets. That's one thing you can count on the administration not to do right now.

But chatter about canning the Treasury secretary amid a swirling banking crisis makes for high drama, right? And good ratings?

Cillizza perhaps has forgotten that this is the "no drama" president.

So where is Cillizza's rationale for throwing so much scrutiny on the secretary's job security?

[T]his weekend will play a role -- perhaps a major one -- in shaping public perception about Geithner. Can the administration prove the chattering class wrong again?

If I read that correctly, then Cillizza is priming the pump for Obama's talking warriors to go out and exonerate Geithner and endear the Treasury Secretary to the nation.

I look at this differently. Geithner is a key player, but this is the president's rescue. If proxies do their jobs we won't be talking too much about Geithner this weekend, we'll be talking convincingly about what comes next. Health care. Energy. Education reform.

Really, that's what's at stake. If the administration gets bogged down in the banking crisis and can't solve that problem, then the "failure" Republicans will show that politics as usual is still alive and strong in Washington. The administration won't be able to avoid all conversation about the AIG bonuses, and needs to spend some airtime taking those questions head on and answering bluntly: some stinky deals were made. But progressives who are tweaked at the Geithner/Summers duo for economic affairs also should not be rooting for Geithner's removal, even if Geithner's relationships with the banking industry appear too cozy at times. Losing Geithner is the one thing right now that's sure to jar the administration and stall the momentum on health care. Watch Treasury fail, and this congress will lose the stomach for comprehensive health care reform and the big spending that our schools and energy infrastructure will demand as well.

So I'm looking for the administration to gut this out. It's ugly, and it might take some bare knuckles, and the administration will probably get its nose bloodied, and progressives won't be happy and neither with the newly minted bloc of centrist Dems who are vulnerable already come election season, but don't look for Geithner to go anywhere.

Time: Treasury Knew About AIG Bonuses Prior to Geithner Claims

Yesterday I wrote about the uncomfortable position in which Chris Dodd finds himself over the language of the loophole that paved the way for the current AIG retention bonus scandal. And I intimated that Treasury Secretary Tim Geithner is quickly becoming the target of my ire.

Via TPM, Time magazine reported yesterday that Treasury staffers were informed about the AIG bonuses on February 28 in a memo from the New York Federal Reserve. Geithner spoke to congressional leaders this week and said he first knew about the bonus plan on March 10. Uh oh.

If Time's telling of the details is correct, then Geithner is on the hook for what his staff--insomuch as it exists--didn't communicate up the line. That's the best-case scenario. It's gonna look much worse if Geithner did get the message and misrepresented key chronology before congressional leaders.

To be fair to Mr. Geithner, he still does not enjoy the benefit of a full staff. And to make matters worse, he can't just go out and hire the most qualified people he knows, because those people either a) owe taxes on nannies or employed an illegal immigrant once or b) are connected to the key financial entities at the middle of this debacle. Should Treasury jump to make quick hires, the appearance of (further) tolerance for tax cheats or coziness with consultants to the recently-tarred banking industry would not work in the Administration's favor. Adding insult to injury, the handful of people who actually get named for posts at Treasury seem consistently to eliminate themselves from consideration.

So I get it that the flow of information at the Treasury might be rough. But that's not an excuse that'll fly before Congress.

What's more, the article points out that the memo from NY Federal Reserve to Treasury was sent three days before the Administration ponied up an additional $30 billion in bailout funds to AIG. That emergency arrangement may have been too far advanced to be stopped over a trifling $160 million in fine print, but taxpayers are looking to the Obama Administration to protect bailout funds before those funds can be scattered to the four winds.

And Obama?

Geithner received solid backing from President Barack Obama on the South Lawn on Wednesday before the President left for California. "I have complete confidence in Tim Geithner and my entire economic team," Obama said. "Nobody is working harder than this guy. He is making all the right moves in terms of playing a bad hand."

All right. My impression of the president is still more favorable than my impression of the secretary. But if Treasury's (mis)management of bailout negotiations continues to decompose before our eyes, then the White House is very much on the hook as well.

Saying No to the Bailout

Via TPM, Krugman doesn't like the bailout plan. Reading his brief post makes me wonder: where have all the fiscal conservatives of the Republican Party fled to in this time of trouble? Why can't the Treasury and Wall St. work out a plan that guarantees the funders, aka the taxpayers--who are under more financial duress now than at any time in recent memory--some security if the high-risk plan doesn't work?

If the trillion dollar bailout is designed to restore markets by encouraging consumer confidence, then why can't the Treasury come out with details of the plan? Why are Republican lawmakers taking meetings with lobbyists to ensure that the legislature doesn't tack any taxpayer protections to the bill? Not exactly confidence inspiring.

From the WSJ:

The plan offered to Congress also gives the Treasury legal immunity from any lawsuits. "Decisions by the secretary pursuant to the authority are non-reviewable … and may not be reviewed by any court of law or any administrative agency," the proposal says.

The proposal doesn't detail how Treasury would manage the assets, but does give Mr. Paulson the authority to hire private financial institutions to conduct the program, as well as to create other entities to purchase mortgage assets and issue debt.

"Treasury will have full discretion over the management of the assets as well as the exercise of any rights received in connection with the purchase of the assets," the Treasury fact sheet said.

Emphasis mine. Let me see if I get this right. We're supposed to trust the same government that has time and again funneled high-priced privatization projects to favored contractors without oversight, the same government that, as a result of incompetence and croneyism, failed to effectively root out the Taliban and Al Qaeda in Afhganistan, the same government that led the U.S. into a quagmire in Iraq, and the same government that failed to effectively respond when Katrina swallowed New Orleans, we're supposed to trust that government with $1 trillion, no questions asked? And the Treasury Secretary gets to appoint private firms to handle public funds without oversight?

On top of that, Krugman raises the excellent question of price. At what price will the government purchase (on behalf of the taxpayer) these troubled investments? At fair market value, which would obviously be low right now, or at premium or above premium prices in order, as I understand it, to send an infusion through national and world markets, a shot in the arm to restore confidence? The problem there is that falsely inflated premiums, paid to troubled institutions and made with theoretical money for which the taxpayer is on the hook, offer nothing more than another bubble, another illusion, another trick with numbers bound to fail and give way to the harsh realities of fiscal fact. And the fact is that fiscal irresponsibility cannot save us from the consequences of fiscal irresponsibility. We don't call that a rescue, we just call it "throwing good money after bad."

Obviously, to protect American (and global) financial interests, government must intervene. The U.S. government, despite hits it's taken in the past several years, is still the only entity big enough to assert effective might to leverage the markets, unless we'd like to ask China to help. And the taxpayer may have to foot the bill. But all this secrecy can't be the answer. No details, no guarantees, and no provisions to protect the taxpayer. Treasury is willing to gamble only if nobody will ever know what happens to the money, what decisions are made, and nobody, regardless of the outcome of all this, will ever be held accountable.

At this decisive moment we need Congress to step up. We need oversight written into any bill that passes. Yes, we need emergency funding and we need it quickly. But this plan reeks of a short-term fix that will make the next upheaval inevitable and all but impossible to address.

At every turn, at every crisis in the past 7 and 3/4 years, this government has failed the American people. At a glance I'd say it's setting up to do so again. Somebody please tell me why this is the best bailout plan we get.