We still think President Obama quietly fired Treasury Secretary Tim Geithner two weeks ago, when he rushed to the microphone with Paul Volcker the day after the disastrous loss in Massachusetts and announced a new war on Wall Street.
The new plan Obama floated that day was called the “Volcker Rule.” And Volcker has stayed front and centre since then. Today, Volcker himself expounds on the plan in the New York Times.
Meanwhile, Treasury Secretary Tim Geithner, who has put Wall Street first all throughout the financial crisis, has basically disappeared (except when testifying about his decision to rush into AIG and bail out the firm’s counterparties at 100 cents on the dollar).
On background, the Treasury Department rejects the suggestion that its boss has been canned: Geithner was closely involved in the development of the Volcker Rule, they say, and supports it completely.
If the latter is true, it seems beside the point. By choosing someone else to sell the plan, the Obama administration is sending the message that someone else (Volcker) is responsible for it. This means the administration is doing one of two things:
- Using Paul Volcker to appear momentarily tough on Wall Street while knowing the plan will go down in flames–and thus protecting the Wall Street champion they want to survive, Tim Geithner
- Benching Tim Geithner and taking a new harder line against Wall Street…but waiting a bit to carry out the formal execution, so as to avoid embarrassing the President for supporting Geithner for so long.
The second possibility seems far more likely, if only because Tim Geithner is universally associated with the longstanding Wall Street-first policy, and Volcker’s plan is a good one and is likely to be well-received.
If the answer is the first possibility, meanwhile, the Obama Administration is pathetic. Tim Geithner’s Too Big To Fail policy has failed. Leaving aside the question of whether AIG’s counterparties should have been paid 100 cents on the dollar and the beneficiaries covered up, saving the banks hasn’t produced the return to lending the country was promised (on the contrary…). Meanwhile, banks that destroyed themselves and almost took the country down have returned to printing money for themselves and their shareholders at taxpayer expense (via subsidized rates).
Yes, the financial crisis was a crisis, and, yes, Tim Geithner was trying to do the best he could to save the world. But his policy has still failed. So it’s time to change the policy.
If, despite all the above, the Administration still wants to support Tim Geithner, then it should be having him announce and sell the new policy. If, meanwhile, they think Tim Geithner is incapable of selling it and thus need Volcker to do it, then Geithner is a lame duck and should be replaced. If they think the policy will just be shot down, meanwhile, then announcing it is just pure populism. And that’s pathetic.
At this point, we’re not ready to accept that the Obama administration is pathetic, so we’re still assuming Tim Geithner has been fired on the job. But time will tell…
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