Geithner’s Baa Humbug to Job’s and Labor
“Ebenezer: Since you ask me what I wish sir, that is my answer. I help to support the establishments I have named; those who are badly off must go there.”
Daniel Gross at Slate interviews Tim Geithner here: “We Will Be Judged on How We Dealt with the Things that were Broken” Some rather revealing statements by Tim Geithner to Daniel Gross’s questions:
GROSS: There’s a perception that you regard your portfolio narrowly, as primarily focused on the health of Wall Street, with Main Street a distant second.
GEITHNER: “My first and essential responsibility was to fix and reform the financial system. That was necessarily going to be the principal part of what people saw. About half my time from the beginning has been spent on the design of the broader economic strategy. The idea that we did not do much for the broader challenges facing the country is completely unjustified. The Recovery Act itself was not just a sweeping, essential force for growth but included a bunch of targeted investments in education, energy, environment, health care that will have huge long-term benefits.”
(Run here: Geithner misses the point or makes the point that finance is the number one concern over Main Street, even though Main Street is financing the rescue of W$. The constituency doesn’t want charity in targeted investments in education, energy, education, and environment when it can pay for those investments itself if they are working. Main Street wants jobs? Main street is still waiting for that tsunami of job creation which is one of the broader challenges of any administration and no administration has put into play any package to stimuli it or companies to do more. Jobs are left to free market influences which is content with investing profits elsewhere other than job creating infrastructure.)
GROSS: So you don’t think the bailouts were too friendly to Wall Street?
GEITHNER: “The idea that the strategy was unfair and has principally benefited a small number of institutions in New York is a mischaracterization of the design and result of the strategy. I thought people would have understood this after the failure of Lehman Bros. But when you do too little and you leave the system with real fear that everything is going to fall apart, like any financial crisis, it hurts the poorest most. A just and fair strategy, even if it is politically hardest to explain and justify, is to use well-designed but massive force to stabilize the system.“
(Run here: Over at Naked Capitalism, they are debating whether Goldman Sachs drove the collapse of AIG by calling for the mark down of CDO by companies holding too many of them thereby forcing AIG to raise collateral after it was downgraded and eventually paying off on CDO that never were expected to payoff. While AIG is at fault for seeing too many pie in the sky dollars in risk and having too little collateral to cover it, one has to wonder why Goldman Sachs should have received 100% on the dollar on its CDS for its risk with AIG and not knowing how over leveraged AIG was at the time. Goldman Sachs certainly benefited by Geithner’s negotiated settlement of AIG’s liabilities at 100% on the dollar.)
GROSS: The biggest downside surprise?
GEITHNER: “The [high] level of unemployment relative to what was happening in the economy as a whole. I’m not an economist, but almost all forecasters missed that. And that’s hugely consequential, because it’s the prism through which most people view basic economic health.”
(Run here:He is kidding right? During every economic downturn, it has consistently been Main Street that has been shown the street from their jobs or homes.)