Tuesday Reads: Tim Geithner in Control of Obama’s Economic Policy, and Other News

Good Morning!! The snow is slowly melting outside my house, and I’ve come down with Spring fever! No more snowstorms please, Mother Nature. Anyway, at least for this week, we are getting temperatures in the 40s and 50s. It is going to be chilly again tomorrow, but after that–springlike! After the frigid winter we’ve lived through, these temperatures feel amazing. Maybe this will make the bad news from DC a little more bearable. I hope so.

This morning I want to focus on an important article that comes via David Dayen at FDL. It’s a piece at The New Republic about Timothy Geithner, written by Noam Scheiber. First a little aside.

Back in November, I wrote a post about the axing of Obama’s economic team and noted that Geither was the last man standing.

In that post, I quoted Andrew Cockburn of Counterpunch:

If Barack Obama needed any help in guiding the Democratic Party over the cliff he certainly got it from Treasury Secretary Timothy Geithner. Voters have told pollsters that the state of the economy, their own in particular, was their principle concern. Though impelled by the specter of unemployment and homelessness, the image of Geithner, toady to the bankers, can only have encouraged them in their fury. A sensible president would therefore already be running out the plank prior to giving this disastrous financial overseer an encouraging shove between the shoulders. But in this case, we may not be that lucky. CounterPunch can reveal the crucial role played in these matters by a group close to the President but unknown to the outside world.

A knowledgeable insider told Cockburn that despite Larry Summers’ reputation as a corporate tool,

“Larry has some idea that there is more to the economy than just the welfare of large banks,” this official suggests. “He did push for a larger stimulus and more jobs programs, for example. Tim just cares about banks.”

I then went on to indulge in a little conspiracy theorizing based on Cockburn’s information. But that’s beside the point right now. The point is that after writing that post, I came to the conclusion that Geithner was running economic policy in the Obama administration.

Getting back to the article at TNR, Scheiber purports to explain how Geithner survived the massacre of the economists. One interesting tidbit in the lengthy article is about Geithner’s relationship with Larry Summers, who acted as Geithner’s mentor and patron early on.

In 1993, Geithner caught the attention of [a] prominent patron—Larry Summers—whom Bill Clinton had appointed as his treasury undersecretary. Summers took a personal interest in Geithner’s career and promoted him each time he rose through the Treasury ranks.

And then during the Obama administration, Geithner apparently stabbed his patron in the back, becoming President Obama’s primary economic adviser–even though Geithner isn’t an economist. (Neither is anyone else on Obama current “economic team,” as Dakinikat frequently points out.)

Geithner actually sounds a lot like Obama–he’s really good at sucking up and convincing people he’s on their side–until he slides in the knife. Regarding Geithner’s time at the IMF, Scheiber writes:

According to former co-workers, Geithner was deft at bringing skeptical colleagues on board. One technique involved homing in on possible dissidents and absorbing their suggestions into his proposals.

Sound familiar? A bit more:

Perhaps most important, Geithner was scrupulously attuned to the temperament of the boss. Like Obama, he evinced a strong aversion to blather. During meetings with the president, he would say little, and usually not until the end, when his opinion was solicited. “I thought [Geithner] got the president really well,” says a former administration official who interacted with him on nonfinancial matters. “When he was in trouble, I said to someone, ‘He just needs to hold on. He’ll be fine with Obama. Once they get to know each other, they’re like the same person.’”

Scheiber describes an epic struggle between Geithner and Summers over how to deal with the banks that had crashed the U.S. economy. Summers argued for some form of nationalization, while Geithner claimed the banks just needed more capital and they could recover.

If Geithner was right, the capital shortfall was much more manageable than Summers feared. The banks might be able to fill it with minimal government help, simply by selling shares to investors. But, if he was wrong, the banks would stumble along in a kind of vampire state, sucking credit from the economy and exacerbating the recession. In the worst case, fears of insolvency could trigger a modern-day version of Depression-era bank runs.

Hey, wait a minute. That sounds like what is happening to our economy right now. But, never mind, Geithner won the battle that counted–the battle for Obama’s favor.

Part of what Geithner convinced Obama of was “that it was ultimately better politics to risk a backlash with unemployment at 10 percent than to feed the backlash and watch the economy shrink further.” So it’s Geithner we have to thank for the new normal of high unemployment, poverty, and suffering among the middle, working, and lower classes.

Finally, what horrified David Dayen was Geithner’s out-front claim that–in Dayen’s words, “what’s good for Wall Street is good for America.” Geithner:

“I don’t have any enthusiasm for … trying to shrink the relative importance of the financial system in our economy as a test of reform, because we have to think about the fact that we operate in the broader world,” he said. “It’s the same thing for Microsoft or anything else. We want U.S. firms to benefit from that.” He continued: “Now financial firms are different because of the risk, but you can contain that through regulation.” This was the purpose of the recent financial reform, he said. In effect, Geithner was arguing that we should be as comfortable linking the fate of our economy to Wall Street as to automakers or Silicon Valley.

In response, Dayen writes:

I don’t even know what to say about this. We’re just a few years removed from the financial oligarchs destroying the global economy through their own greed and negligence. And the man put in charge of regulating them, who had a front-row seat to all this destruction and who has been given expanded powers under Dodd-Frank to see to it that never happens again, thinks that there’s a great “financial deepening” about to take place where the demand for sophisticated financial innovations will jump. Therefore, the financial sector will need to grow and become the most reliable spur of the US economy. That’s his feeling. And regulation can reduce the risk, even though the new regulations barely put a dent into Wall Street’s core business, and are being systematically defunded besides.

Financialization of the economy has led to practically nothing but pain for the average worker and risk for the taxpayer. It has turned the allocation of capital into the placing of bets at a casino, and the stock market into a particularly sophisticated video poker game. This territory was all covered before in the run-up to the Great Depression as well, and we know the precise causes and remedies involved. Geithner prefers not to address the plutocracy he’s really advancing here – where elites provide “financial deepening” services abroad and amass ridiculous profits that they wall off.

This incredibly amoral conman is partnering with our conman chief executive to sell out our country, our lives, and those of our children and grandchildren. There’s lots more of interest in the article, particularly the information about Geithner’s upbringing.

I’ll wrap this up with a few other stories, and then throw the floor open to your links and opinions. Did you hear that Stephen Baldwin is suing Kevin Costner over Costner’s oil-eating invention?

It seems Baldwin sold his shares in Costner’s company right before BP shelled out $50 million for the machines.

Jane Hamsher offers a flow-chart of the principle players in the scandal over US Chamber of Commerce’s attempts to discredit Wikileaks, Glenn Greenwald, Brad Friedman, David House, and others who have supported wikileaks and Bradley Manning. Joseph Cannon has also been covering this story.

Brad Friedman’s post especially is a must read. Get this, the Chamber paid 2 million dollars a month for dirt on Friedman, and got completely inaccurate information. And that inaccurate information came from corporations who are paid billions by our government “to target terrorists.” But Obama wants to cancel heating assistance for poor people to save money.

Mitt Romney is ahead in the latest NH poll, at 40%, for whatever that’s worth. Romney was always going to win NH. They always vote for New Englanders up there. The real test for Romney will be Iowa.

The Patriot Act extension has been passed by the House on the second try. I think the Egyptians will probably get rid of their emergency law before we get rid of ours.

There are “massive” protests in Iran, inspired by the dramatic events in Egypt. There have also been more protests in Yemen and in Bahrain. When will it happen here?

What are you reading and blogging about today?

22 Comments on “Tuesday Reads: Tim Geithner in Control of Obama’s Economic Policy, and Other News”

  1. zaladonis says:

    Another one!

    Geez, I’ll be half the day reading that New Republic piece. Excellent, bb.

    In case you missed it over the weekend, you might be interested in this NYT op-ed by Felix Salmon called Wall Street’s Dead End. Here’s just a taste, how it begins and ends:

    THE stock market has been big news in recent days. Last week’s report that Deutsche Börse, a giant German exchange, intends to buy the New York Stock Exchange, creating a company worth some $24 billion, arrived shortly after the Dow broke the 12,000-point barrier for the first time since before the financial crisis.

    These developments drew headlines because they seemed to exemplify significant trends in the American economy. But look at America’s stock exchanges more closely, and there’s less to them than meets the eye. In truth, the stock market is becoming increasingly irrelevant — a trend that threatens the core principles of American capitalism. …

    At risk, then, is the shareholder democracy that America forged, slowly, over the past 50 years. Civilians, rather than plutocrats, controlled corporate America, and that relationship improved standards of living and usually kept the worst of corporate abuses in check. With America Inc. owned by its citizens, the success of American business translated into large gains in the stock portfolios of anybody who put his savings in the market over most of the postwar period.

    Today, however, stock markets, once the bedrock of American capitalism, are slowly becoming a noisy sideshow that churns out increasingly meager returns. The show still gets lots of attention, but the real business of the global economy is inexorably leaving the stock market — and the vast majority of us — behind.

    • bostonboomer says:

      Oh, that doesn’t sound good. I’ll go read it, although I probably won’t understand it completely.

      After reading the TNR piece on Geithner, I’m even more suspicious that Timmy’s dad (along with Barack’s mom, who worked for Timmy’s dad) are/were CIA assets.

      • KC says:

        I’ve researched the Geithner/Dunham CIA connection as much as I could, and I find it to be very credible. It makes you view the current administration with new eyes.

      • bostonboomer says:

        I’d love to know more KC. Can you point me to any good sources of info?

      • Beata says:

        BB, be careful about voicing your opinions on this issue. I had a major`computer meltdown about a month ago after I wrote that I believed that Obama and his parents were CIA. Coincidence? I think not. 🙂

    • grayslady says:

      Thanks for the link, Zal. I missed that one, and what Salmon says is crucial. The world has changed, and too many people think that if they just bury their heads in the sand long enough, everything will go back to the way it was. Where are the new thinkers and new proposals?

    • bostonboomer says:

      Wow, Zal. That is a really depressing analysis by Salmon. Talk about a soft coup. We’ve been completely taken over by the bankers every bit as much as Egypt by the military. Bankers control our government and our economy.

  2. Pat Johnson says:

    It appears that Obama’s “hope and change” chant can be substituted with “bleakness and despair”.

    Unimaginable that after suffering through one of the largest economic failures to visit this nation, and a brutal winter that has left so many reeling with the aftereffects, that a Democratic president would even suggest making deeper cuts into programs that so many depend upon to survive.

    It is becoming even more difficult to imagine an average citizen, out of work and with few jobs available, making ends meet when faced with fewer “bootstrap” programs in place to assist with food, shelter, and home heating subsidies.

    It is also impossible to understand how not taxing the rich at a higher rate is good for the country while withholding and eliminating services to the majority is placed on the table as a cost saving measure.

    I would suggest that some of these lawmakers spend a night in a shelter, or live with a family whose fuel subsidies have been denied before they place the burden of “shared sacrifice” on the most vulnerable among us.

    But it must be easy to make these Draconian proposals from a perch of entitlement,a full stomach, and a warm house.

    It is a mystery to me why we are not all out on the streets demanding reform from this corporate minded congress and an indifferent president who simply does not give a damn.

    • bostonboomer says:

      “Bleakness and Despair we can believe in!” That should be Obama’s 2012 slogan.

      Good one, Pat.

    • Beata says:

      Watching the events unfold in Egypt made me wonder what it would take to bring the masses out in the streets here demanding real change. Cancelling the next Super Bowl?

  3. bostonboomer says:

    A great analysis of Obama’s “handling” of the situation in Egypt by Tom In Paine.


  4. madamab says:

    How fascinating that Summers was more reality-based than Geithner. That is something I never would have guessed.

    To hear the words “financial deepening” come out of Geithner’s mouth is terrifying.

    • dakinikat says:

      You and me both. I’ve actually come to feel somewhat sorry for Summers recently. Something I thought I would NEVER do. I thought it was just Romer that was marginalized, but evidently not. Obama runs a tighter circle of loyalists that feed his ego and head then Dubya did.

  5. mjames says:

    Great reporting – and utterly disheartening. Two soulless hacks, unversed in economics, calling the shots. And a good chance they’re both CIA. Splendid. Now I have to go puke.

  6. Pat Johnson says:

    Tom in Paine’s article is a must read.

    It still boggles my mind that there are still those in the MSM who refuse to address “truth to power” when it comes to Obama.

    But then again, after having a hand in the “creation” of this mythical character, it must be a bitter pill to swallow in agreeing that he is one huge sell out.

    They and he should be “lashed to the mast” for even attempting to justify cutting back fuel assistance at a time when those most in need of its benefits are suffering enough.

    • Pilgrim says:

      Andrew Sullivan is one who seems now to have turned on the one upon whom he formerly doted.

      • bostonboomer says:

        He should have to walk around wearing a signboard with blown-up pictures of the cover of Atlantic with his adoring story about Obama in it. I think that was back in 2007.

  7. paper doll says:

    Terrific post and analysis bb ! Just when I think it can’t get worse, it does.

    It seems we are determined to follow some end of empire temp plate to the bitter end…and way quicker than most

    If the press speaks truth to power, they won’t be invited to the “must” parties and would frankly lose their jobs….it’s all about privileges now, not rule of law. What right do they have to speak about what they see in front of them and suggest that is reality?

    What is called reality is a privilege of their paymaster bosses. That’s why the Western reporters in Egypt were at a loss to saying something early on . The script hadn’t been written ….and they might be fired for being off script….or their reality might be ” premature”….they haven’t the right to say what is real and happening. It’s above their pay grade.