Simon Johnson on Tim Geithner and Elizabeth Warren
Simon Johnson offers pointed criticism of the role Timothy Geithner has played to date in the Great Recession and bank regulation, in particular as an advisor and architect to the Obama economic team and how that policy is presented and pursued in Congress. Another worthwhile read.
From a political perspective perhaps one can make a case for something like this…
Upon assuming office this administration was faced with what looked like the imminent collapse of the banking system. Now, in hindsight and even in real time there were voices pointing out that there were probably better ways to deal with the situation. Ways that would have upheld the rule of law for one thing. But the situation seemed to call for drastic measures where the imperative was simply to keep the system from imploding.
Faith, perhaps a naive faith was put on inside operators like Summers and Geithner because it was felt that the bankers essentially had a loaded gun to the head of the system. And these guys could negotiate with them.
From a certain perspective despite the inevitable negative political fallout, this approach makes sense. Even given the obvious injustice of the arrangement of allowing the very people who created this situation to profit by it. At least the damn thing is stabilized at this point.
Fast forward to today. TARP is repaid. GM is a success story. Can we stop hearing all the whining about bailouts? The real effect of the crash, the popping of the real estate bubble, is now high unemployment and a decrease in housing prices and the resultant mortgage mess.
If the administration now manages to do a pivot and refocus on unemployment and the mortgage situation they can yet salvage their position. But I agree that the signs don’t look promising. It would require the recognition that going with Geithner and that crowd may have been necessary when it looked like the whole thing was circling the drain, but it is death right now. The task has shifted 180°. We will see how nimble Mr. Obama is.
A rerun of an old happeining: Brooksley Born II or what makes sense when in the company of thieves. No surprise that Geithner may attempt to torpedo Dr. Warren. Under Larry’s tutelage, he obvious has earned a thing or two.
Summers: “To question an independent agency’s concept of its jurisdiction and then to propose legislation that would temporarily curtail that agency’s ability to act is not something we do lightly. We concluded, however, that such legislation was necessary to avoid disruption and dislocation in the market while the underlying issues were being considered by Congress” and his famous last words:
“has cast the shadow of regulatory uncertainty over an otherwise thriving market–raising risks for the stability and competitiveness of American derivative trading.” http://motherjones.com/mojo/2008/11/obama-taps-larry-summers-recalling-summers-days-regulation-foe
Apples typically do not fall far from the tree upon which they grew.