I found an interesting article in Time Magazine this week. Ever since Tim Geithner has been appointed Treasury Secretary there seems to have been a concentrated effort to get him out.
From the Republican's in the Senate voting against him and painting him as a tax cheat when it has been pointed out he made a simple mistake that others have made, to big names on the left such as Arianna Huffington saying he is just too much a Wall Street person.
However, nothing has stuck so far. President Obama has come out time after time and said he is sticking with him and he is standing behind him. Very few people in the media have stood up and said he is the man for the job, or have even tried to defend him in any way.
Now finally here is someone who is trying to defend him and say he is the man for the job. But, first lets look at some of Tim's history. Since there seems to be some confusion.
We will go to
Wikipedia:
Geithner worked for Kissinger Associates in Washington for three years and then joined the International Affairs division of the U.S. Treasury Department in 1988. He went on to serve as an attaché at the Embassy of the United States in Tokyo. He was deputy assistant secretary for international monetary and financial policy (1995–1996), senior deputy assistant secretary for international affairs (1996-1997), assistant secretary for international affairs (1997–1998).
He was Under Secretary of the Treasury for International Affairs (1998–2001) under Treasury Secretaries Robert Rubin and Lawrence Summers. Summers was his mentor, but other sources call him a Rubin protégé
In 2002 he left the Treasury to join the Council on Foreign Relations as a Senior Fellow in the International Economics department. He was director of the Policy Development and Review Department (2001-2003) at the International Monetary Fund.
In October 2003 at age 42, he was named president of the Federal Reserve Bank of New York His salary in 2007 was $398,200 Once at the New York Fed, he became Vice Chairman of the Federal Open Market Committee component. In 2006, he also became a member of the Washington-based financial advisory body, the Group of Thirty. In May 2007 he worked to reduce the capital required to run a bank. In November he rejected Sanford Weill's offer to take over as Citigroup's chief executive.
In March 2008, he arranged the rescue and sale of Bear Stearns.; In the same year, he played a supporting role to Hank Paulson, former CEO of Goldman Sachs, in the decision to bail out AIG just two days after deciding not to rescue Lehman Brothers from bankruptcy. According to some observers, Geithner severely damaged the U.S. economy As a Treasury official, he helped manage multiple international crises of the 1990s. in Brazil, Mexico, Indonesia, South Korea, and Thailand.
On November 24, 2008, then-President-elect Barack Obama announced his intention to nominate Geithner to be Treasury Secretary.
Now to the article in Time Magazine. You can read the entire article by clicking on the link here:
Geithner Gets a Bad Rap in the AIG Scandal but here are some high points:
The first thing Fed bashers should remember about the AIG bailout is the chaotic circumstances. The Fed barely knew how to spell AIG before the panic of September 2008; it didn't regulate insurance companies, and its leaders had no idea that a division of this particular insurance company had turned itself into a giant and overleveraged hedge fund, much less that AIG was entangled with other giant and overleveraged institutions through exotic financial gambles ultimately backed by sketchy mortgages. According to accounts of the crisis like David Wessel's In Fed We Trust and Andrew Ross Sorkin's Too Big to Fail, Geithner first discovered that AIG posed a potentially catastrophic risk to the global economy just as he and the rest of the Fed were frantically trying to persuade Bank of America to take over Merrill Lynch while searching for a buyer for Lehman Brothers in order to prevent the largest bankruptcy in the history of the planet. It's not easy to improvise a bailout for a company you knew nothing about the day before while the world is going to hell.
Very true, we were told it was near to the end of the world by Paulson and Bernanke and Bush. Remember? As far as we knew the world was about to crash around our ears... and why not, we have been living under the rule of GOPers for almost 30 years, with Reaganomics holding sway over our economic situation. I am sure he did what he thought was best at the time. He had rules to follow and did what he could to keep the economy from crashing. We have to remember that.
Lehman collapsed on Sept. 15, triggering a freefall in the markets and a cascade of margin calls that required AIG to put up tens of billions of dollars it didn't have. Fed Chairman Ben Bernanke, Geithner and then Treasury Secretary Henry Paulson quickly realized that a default by AIG — which not only sold insurance to 30 million Americans and 100,000 companies but suddenly owed big bucks to many of the world's largest financial institutions — would trigger bank runs around the world. The failure of Lehman had shocked the system; the failure of a dozen more huge financial firms would have crippled it. So on Sept. 16, the AIG bailout began.
It wasn't pretty. The creditors for AIG's bad bets — including Goldman Sachs and several large foreign banks — were paid in full. Critics have blasted the government for failing to impose haircuts, essentially providing a backdoor bailout for those banks in the name of AIG, but nobody has explained how or with what authority anyone could have invalidated AIG's contracts with all those far-flung institutions on the fly, or why that wouldn't have worsened the panic. Perhaps the public officials should have devised some way to limit the future bonuses AIG would pay its executives, but it's understandable that they weren't thinking about a few million dollars in theoretical perks when trillions of actual dollars and the entire financial system were at stake.
Again, very valid points the author is making. It wasn't pretty, and with the entire country's not to mention the world's economy at stake no one, let alone, Tim Geithner was thinking about any bonuses, or anyone having the guts to pay them out in just a few short months.
The second and most important thing to remember about the AIG bailout and the rest of the extraordinary government interventions during the crisis is that they worked. For all the populist fury about taxpayer giveaways for Wall Street, they did quell the panic. And they did so at a price that seemed exorbitant at the time but now looks like relative peanuts. Research by the Cleveland Fed has documented that financial crises usually end up costing national governments at least 5% to 10% of their GDP in payouts; the tab to the Treasury for this panic will be well under 1% of GDP. In fact, the Fed is about to return a record $45 billion in profits to the Treasury because the vast majority of its emergency loans have been paid back with interest. Meanwhile, the wildly unpopular $700 billion Troubled Assets Relief Program (TARP) is on track to cost only about $100 billion, including the giveaways for automakers, and the Obama Administration has proposed a bank tax that would bring that figure to zero.
Once again, I think this is pretty obvious and why this should have to be pointed out. is beyond me. But for some reason people have to be shown the obvious. I posted about the tax Pres. Obama is wanting put on the bankers, and along with that is other bills pending to help regulate Wall Street even more. WE THE PEOPLE, need to bear some responsibility for this mess too, and we have a responsibility to make sure these bills pass and get enacted so that this doesn't happen again.
The outrage that has been blasted at the decision makers who made the best of a horrible situation ought to be directed at the compulsive gamblers who created that situation — and channeled into fixing the regulatory system that allowed it to develop. AIG was a financial behemoth and should have been subject to federal financial oversight, including strict limits on leverage and strong capital requirements. The shadowy derivatives market that AIG was using as its casino also desperately needs adult supervision. Many of AIG's complex securities were based on subprime mortgages issued by unregulated brokers who had no incentive to seek creditworthy borrowers, but ratings agencies with equally strong conflicts of interest deemed the securities completely safe. And once the government had to come to the rescue, it had no emergency mechanism to wind down failed firms in an orderly fashion and impose haircuts on bondholders and other counterparties without imperiling the entire system.
In fact, the House of Representatives — with strong support from Geithner and the Obama Administration — has passed a financial-reform bill designed to address all those problems. It aims to provide stronger consumer protection, ensure that all financial firms and complex financial instruments are subject to strict oversight, and create a "resolution authority" so that no firm will be too big to fail during a crisis. And it received a grand total of zero votes from the House Republicans who are trying to fan the flames of the latest Geithner pseudo scandal. The Senate is trying to hash out a bipartisan bill, but for now the system in place is the system that failed. If that sounds outrageous to you, don't blame the firefighters who put out the last fire. Demand some real fireproofing.
So, again it is time we step up and demand that Congress do their job and enact these regulations and pass the reforms needed to regulate Wall Street and keep this from happening again. In the mean time, can we cut Geithner some slack? At least he is trying to put the fire out and it looks like he has done a pretty good job. At least we aren't falling off the cliff any more.
