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A Repairman, Not a Revolutionary

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Posted on Mar 23, 2009

By Eugene Robinson

    Treasury Secretary Timothy Geithner is a repairman, not a revolutionary. Contrary to the impression he sometimes gives, he does understand why the Sun King excesses of Wall Street’s pampered executives make people so angry. Essentially, though, he blames the players, not the game.

    “We still have a system that has been exceptionally good, better than any other, in getting capital to the guy who has an idea,” Geithner said Monday in an interview. Hours earlier, he had rolled out his long-awaited plan to get credit flowing through the economy again; after my last question, he dashed from his Treasury office to the White House next door for a meeting with President Obama and the rest of his economic team. They had good news to talk about, for a change: At least initially, the markets reacted favorably to Geithner’s proposal to enlist private capital in cleansing the system of paralyzing “toxic” assets.

    The grandees of Wall Street have every incentive to do anything they can to bolster Geithner’s position, since he’s the kindly sheriff who stands between them and the snarling mob at the gate.

    But Wall Street seems to have gone out of its way to make Geithner’s job more difficult. The “retention” bonuses at the insurance giant AIG—to which the government has made available an astounding $170 billion in aid—dominated the news cycle for a full week. On Thursday, we learned that Citigroup, recipient of $45 billion in bailout money, had decided to spend $10 million redecorating its executive offices. On Monday, ABC News revealed that JPMorgan Chase has plans to spend $138 million on two new corporate jets and improvements to its hangar at the Westchester, N.Y., airport; the company later said that it won’t proceed with the project until it has paid back its $25 billion in bailout money.

    Geithner noted that the use of government resources to rescue Wall Street from its own foolish bets and boneheaded decisions actually began in late 2007. “Even after that, you had people making stunningly awful judgments” about corporate compensation and perks, Geithner said. “It makes it much harder for us.”

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    From Obama on down, the administration is displaying little enthusiasm for attempts in Congress to recover the $165 million in AIG bonuses through narrowly written tax legislation. Wall Street executives have been sputtering at the thought of “retroactive” taxation and grumbling that if this is the way things are going to be, they might decide to steer clear of any new government programs. Geithner needs Wall Street’s participation for his financial rescue plan to work.

    But it seems to me that Wall Street should be the lesser of his worries. Geithner’s plan offers private investors the opportunity to reap relatively big gains by taking relatively small risks. Some of the risk is assumed by the taxpayers. Christina Romer, head of the Council of Economic Advisers, said over the weekend that these private firms will be doing the government a favor by participating in the program. But that’s wrong. Investors will participate because they think they can make money. The only entity that’s doing anyone a favor—make that doing everyone a favor—is the government of the United States.

    “We can’t solve the financial crisis without the government taking risks,” Geithner said. An alternative approach in which the government would take over all the “toxic” assets would saddle taxpayers with more risk rather than less, he argued. But it’s unrealistic to expect citizens, having already poured more than $1 trillion into the Wall Street sinkhole, to react well when money managers haughtily make demands and set conditions.

    Geithner has not been impressive as a performer. He talks so fast that it’s hard for listeners to keep up. Grand settings, such as his ornate office, seem to swallow him up.

    He does have a vision, though. He sees, eventually, a reformed financial system in which the “too big to fail” behemoths such as AIG or Citigroup are required to run their businesses in a more conservative fashion. He sees better regulation and more transparency, so that hedge funds are not so opaque and the derivatives markets are not left unsupervised to run amok.

    The goal that Geithner describes sounds like an improved system but not one that is fundamentally different from the system we have now. If populism is resurgent in the land, it doesn’t get past Geithner’s desk. Wall Street should be toasting the guy—but with beer, not champagne.
   
    Eugene Robinson’s e-mail address is eugenerobinson(at)washpost.com.   

    © 2009, Washington Post Writers Group


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By TAO Walker, March 26, 2009 at 3:21 pm Link to this comment

One of the “pillars” of the Obama election win, and so presumably his presidency, is said to be the many young people who supported him so enthusiastically.  Among them are some with whom this Old Man sometimes gets to “spend some quality time.”  Their disappointment with his so far hyper-establishmentarian administration is becoming increasingly apparent.

No small part of Barack Obama’s “appeal” to them was in the prospect of his calling them to some greater purpose than merely more-of-the-same debt-driven CONsumptuousness that’s been the “hallmark” of american half-life these four hundred-odd years….ramped-up to levels of insane profligacy, in the “post-war” period, that have the rank-in-file today getting crushed in the merciless jaws of a “credit-crunch” designed to doom their own ‘selfs’ (and at-least ten generations of their less-and-less-likely “progeny”) to even worse abject wage/debt slavery than they are “enjoying” right now.  If the “global financial meltdown” was, as some have suggested, the “economic equivalent of 9-11,” then it’s difficult to see any real difference between the Bushite call to “go shopping,” as the “patriotic” allamerican response, and the Obamanite push to get people to go even deeper in debt to buy “stuff” they might be much better-advised to start learning how to live without.

In both instances an opportunity to do some serious and sustained soul-searching, a need felt strongly and voiced by plenty of ordinaryamericans, gets cavalierly squandered in the interests of….well, further feathering the nests of “the vested,” and at more of the already unbearable expense of “....your huddled masses.”  Maybe the SecTreas is only a glorified money-mechanic, as suggested here by Eugene Robinson.  So all he can do is use the tools-of-his-trade to tinker-with the machinery he’s so familiar-with.  He isn’t the only one.

The real question perhaps becomes whether some other kind of “expertise” would be more beneficially applied to what looks (to us here in Indian Country) to be a much more fundamental ailment than can be remedied by just more cooking of ‘the books.’  The crippling CONdition afflicting our domesticated Sisters and Brothers manifests NOT in make-believe imbalances in their “budgets,” but in severe damage to their very Humanity.

More-and-more among them are sensing that facile little rearrangements of the ideological/institutional/electro-mechanical ‘furniture’ of their captivity, however eloquently presented and authoritatively recommended, will come nowhere near addressing the “problem”....are rather certain, in-fact, to worsen it.  The ‘up-side,’ of course, is that much sooner than later the “establishment” will expose itself as being utterly irrelevant to “the real lives of real people,” which will free them, finally, to return-to and “....strengthen the things that remain.”

Not a moment too soon, either.

HokaHey!

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By BCunningham, March 25, 2009 at 2:05 pm Link to this comment
(Unregistered commenter)

“a reformed financial system in which the too big to fail behemoths are required to be more conservative. He sees better regulation and transparency, so that hedge funds are not opaque and the derivatives markets are not left unsupervised”

This kind of patch does not address the structural roots of the crisis. Corporate-Lawmaker relationships need to be ended and Elections need to be Publicly Financed.  Otherwise it is just a matter of time until the next set of crooked corporations find and create the next set of loopholes to enable the next ponzi scheme. These guys are much smarter than the regulators, and unlike common criminals they are powerful enough to decriminalize their activities before engaging in them.

The golden opportunity being missed at this moment is not to respond to the “to big too fail” by using this disaster to break up these behemoths so we can go towards a system that rewards competency at producing a useful product rather than rewarding those that can manipulate the system most effectively.  The government should not be trying to polish a turd.  They need to go in there and get rid of the scumbags and distribute their business to the many competent companies that should be rewarded for their past behavior. Instead of bailing out these criminals our trillions should be used to restructure the system.

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By Ivan Hentschel, March 25, 2009 at 11:45 am Link to this comment
(Unregistered commenter)

Mr. Robinson, I thought were smarter than this. Maybe you have been taking money from NBC for too long. Geithner is a Harvard-Wall St.re-tread. Nothing new, nothing courageous,nothing innovative. If he gets his way, he will retire early, to the Caymans,with his banking buddies, while we eat grits.

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By Kaelieh, March 25, 2009 at 11:44 am Link to this comment
(Unregistered commenter)

Someone talks about expanding treasuries powers, and NOW Congress starts screaming, “Hey, that’s unconstitutional.”

What the fuck guys. Where have they been for the past eight years?

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By Purple Girl, March 25, 2009 at 6:40 am Link to this comment

Why Congress thinks their Three Ring Circus will deflect the Blame they deserve on to others is ridiculous.
That Idiot Bachman asks about Cosntitutionality of powers of the Treasury Department, When it is congress who has granted or revoked such powers through their legislation. When do We get a chance to Grill members of Congress- past & Present- who Let this economic Treason take place. Drag up Bill Clinton to explain why he signed the Modernization Act.Drag up Phil Gramm and John McCain to Explain why they proposed such a Well foreseen disasterous peice of economic legislation. Drag up every one of these SOB and make them answer for Everything crap piece of legislation they authored or supported over the last 40 yrs!! Hell Start with the Nixon Admin and Work your way forward. There are at least 3 ‘strings’ which have connected the Nixon Era through to W’s admin- I want their Asses on the Grill especially.
I’m not partial- it’s not just Repugs who are guilty of Complicity with the Corps , theres plenty of so Called Dems who have some ‘splainin’ to do- and some charges to face- a good number of them are members of the Red Coats covert operation program called the DLC. Our Goldwater girl Sec of State has some Questions to answer by Real Dems about her lil’ group of lap dogs who are continuing to undermine our Current Democratic President.Hillary is, and has always been, a Repug, and she made sure Bill acted like one while in office- pussy whipped SOB! I want answers and not from the Johnny come lately Geitner or Berneke- I want them from those who brought US and betrayed US with Trickle Dwon economics- The Updated Version of the same system Our ancestors fought a Revolutionary War to Free US of- a Feudalistic Cast System.The name alone is a confession to Treason!

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By wildflower, March 24, 2009 at 2:18 pm Link to this comment

Informative discussion on NYT’s Room for Debate site, “Will the Geither Plan Work?”  It includes pro and con comments from economists Brad Delong, Simon Johnson, Paul Krugman, and Mark Thoma. 

Simon Johnson made some excellent points:

“. . . This kind of complex market-based scheme makes scams easy. After less than 24 hours, the Internet already abounds with detailed and plausible proposals regarding how to take unreasonable advantage of the plan, either if you are an independent hedge fund buying toxic assets or the employee of a bank selling the same or – ideally – someone with connections to both.

Banks, hedge funds, insurance companies and the like are willing to stay involved only if this does not bring onerous additional government scrutiny. As scams become more apparent – and it only ever takes one or two prominent examples – controls will be tightened and private sector participation will fall off. . .

. . . We must learn the painful lessons of A.I.G. and create laws, put in place procedures, and hire people who can clean up massive financial messes. The magic of the market will likely not get us out of this morass; we need a new Resolution Trust Corporation-type structure and we need it fast.”

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By ocjim, March 24, 2009 at 9:48 am Link to this comment

Geithner and Obama are wasting time. Once again the risks are with taxpayers. No wonder that Wall Street likes Geithner’s plan. It once again rewards banks for bone-headed management and puts taxpayers’ money at risk not the banks or even the jobs of empty-suit leaders.

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By Thomas Mc, March 24, 2009 at 7:12 am Link to this comment

Geithner is just another Wall St. puppet. WE THE PEOPLE need someone on OUR side!

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By Gulam, March 24, 2009 at 3:17 am Link to this comment

Geithner was picked to take most of the heat, because he is the only gentile among Obama’s primary advisors, especially among those directing the meltdown and recasting of finance.

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By P. T., March 23, 2009 at 11:44 pm Link to this comment

Geithner’s scheme is likely to fail because housing prices will probably continue to drop.  They would need to fall another 20% to return to trend levels.  If Geithner’s plan does flop, the administration’s credibility is going to be shot.

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By Xntrk, March 23, 2009 at 11:36 pm Link to this comment
(Unregistered commenter)

Robinson once again writes a lazy commentary rather then doing a bit of digging. Actually, he would have been better off to focus on Christina Romer’s contribution to the Sunday talk fest.

Her view, and I assume that of others in the Administration, is the same as many of the observations made when the market first tanked: There is nothing wrong with the economy except that we little people have lost faith in it.

All that is needed is for the banks to loosen the lending valve, and allow consumers to once again borrow like there is no tomorrow, and there are no worries about bills and mortgages.

Somehow, Romer, Geithner, and Robinson all seem to have lost sight of the millions who have lost their jobs AND their homes. You’ll notice I left Obama out, but these are his people: He bought and paid for them [including Robinson, probably] with the funds he accepted from the financial community during his campaign.

We may be a “snarling mob at the gates.” But I sure as hell wish someone would take our point of view to heart. More consumer debt is NOT the soloution to this problem!

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By Kaelieh, March 23, 2009 at 11:02 pm Link to this comment
(Unregistered commenter)

Everyone has to read this Rolling Stone article http://www.rollingstone.com/politics/story/26793903/the_big_takeover

It unveils the web of corrupption that is intertwined at every tier. Geitherner isn’t a repairman, he’s the banks man. His job is to keep the status quo, not fix this shit.

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