Geithner's Treasury Can't Get Anything Done

The Treasury Department is a mess. That’s the inescapable conclusion from this morning’s big Washington Post feature on how things just aren’t getting done at the Treasury Department these days. David Cho describes a host of delays, backtracks and fumbles that, taken together, paint an ugly picture of one of the most economically important government department during the most devastating economic crisis in generations.

Some symptoms of the problem are better known than others. The AIG bonus fiasco got national attention but Treasury Department officials have been meeting several times a week to review executive compensation with little to show for it. GM CEO Rick Wagoner was thrown out but he remains on the payroll of GM because Treasury officials can’t decide what to do with his severence package. The public-private partnership program to buy up toxic assets from bank balance sheets was announced months ago but now won’t be ready until July, at the earliest.

So what’s the problem? The Post runs through several possible explanations.

  • There’s no one home. Vacancies in the department’s top ranks have left it unable to make decisions.
  • Making things up as they go along. Treasury’s ad-hoc management also gets the blame.
  • Kitchen cabinet cronyism.  Decision making at Treasury is said to be dominated by a small band of Geithner’s counselors who coordinate rescue initiatives but lack formal authority to make decisions.
  • Politicalization. “Heavy involvement by the White House in Treasury affairs has further muddied the picture of who is responsible for key issues,” unnamed officials tell the Post.
  • Geithner’s a weakling. Between the small band of counselors and White House interference, Treasury staff memebers aren’t sure who is running the show. But it doesn’t seem to be Geithner.

The article never really gets around to the underlying problem: this isn’t what the Treasury Department was meant to do. There simply doesn’t exist a group of people in the United States, much less a functioning organisation, who have the experience and knowledge to run as much of the economy as the Treasury is now trying to do. It’s only an amazing hubris that allows officials to imagine they know how to restart the market for securitized debt while setting a national compensation policy while running the automotive industry while restructuring the management of the nation’s largest banks while saving insurance companies in order to bail out the corporate debt market while…you get the point.

There used to be a process for figuring out how to do a lot of these things. It was called a market process. But that’s off the table for now. Until its back on, you can expect a lot more articles like this.

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