06 December, 2008

Note to Obama: Geithner Needs a Spanking

Occasionally, people whom you choose to do important things for you based on the fact that they've done well in the past gang aft agley when they get your nod. That's when you either must smack some sense into them, or give them the old heave ho.

Tim Geithner is earning hisself a long walk off a short plank:
You've probably already read about this, but if not, here's the new article saying that Obama's choice for treasury, Tim Geithner, is trying to oust Republican regulator, FDIC chief Sheila Bair. When you see it put like that, it sounds good right? But actually, it's downright politically bizarre. First, Geithner is saying she should be ousted because she isn't a team player. Except that the media (and even unnamed members of the Obama team) have made a fetish out of the idea of having a "team of rivals" who will hash out ideas from all sides. "Team player" has almost become an insult in the last few weeks --- after all in politics it's often it's another word for .... (gulp) partisan. Now, Bair is a Republican, which according to the conventional wisdom would make her a most coveted member of the post-partisan Obama administration, but which might explain why she isn't considered a good team player. Except the complaint isn't that she's a loyal Bushie. It's that she is overly concerned with main street and homeowners and demanding too much accountability from the financial sector. In other words, she's behaving too much like you might wishfully expect a Democrat to behave. I don't know the details of the "problems" obviously and perhaps there's more to it than meets the eye. But the whole thing doesn't scan politically any way you look at it.

No, it really doesn't. I have to admit that the appellation "Republican" these days inspires an instinctive revulsion, but after I get done wincing, I take a closer look. And so far, I haven't seen anything wrong with Bair aside from that pesky little R by her name. In fact, she's doing what many Democrats have said we should do when it comes to the bailout.

Allow me to sum up a complicated post so I can get to Ian Welsh's delightful analysis: Citigroup wanted to buy out Wachovia for $2.2 billion and needed FDIC aid. Wells Fargo offered $15 billion and didn't need any help. Financial genius is not needed to understand which makes more sense to taxpayers. Citigroup stumbled badly, needed rescuing, and Bair was ready with the rope - on certain conditions:

Again, Bair held out for concessions as the Fed and Treasury sought to shield Citigroup from losses in its holdings of toxic assets. Bair insisted on getting preferred shares for the FDIC in the New York-based bank. She also demanded that Citigroup agree to implement mortgage modifications according to a model developed by her agency.

We'll allow Ian to take over the commentary:

It's hard to comment on this, because the cupidity and stupidity quotient is so high it's turning into a black hole that sucks all reason out of the room.

First: This proves that Citi was not a good bank to buy Wachovia. You want strong banks to take over weak ones. Citi taking over a bank with impaired assets of its own would have been the lame helping the crippled and it would have still wound up needing a rescue.

Second: Bair held up the Citi deal (250 billion dollars of bailout) in an attempt to make sure that taxpayers got at least some collateral and to demand Citi helped ordinary people. That indicates Bair was doing her job, which is to protect ordinary people, not to give free money to corporations for nothing in return. The people not doing their jobs were Paulson and Geithner, who wanted to give money to a failed corporation without any meaningful protection for the taxpayer.

Geithner and Paulson: "Our job is to give banks as much money as they need to succeed, while leaving the same people in charge, and not asking for enough collateral so that taxpayers could ever recover their money".

Bair "my job is to help banks, but at the same time to protect taxpayers and try and help ordinary Americans"

What this proves to me is that Geithner's personal judgment is awful. He was on the wrong side of all of these arguments, the side that said "just throw money at the problem and don't demand any meaningful change, any meaningful taxpayer protection or any meaningful help for homeowners".

He was, simply, wrong. He wanted to do the wrong things.

Bair wanted to do the right things. Granted, she didn't go as far as I'd like, but given she was in negotiation with "give away everything Hank and Tim", I don't think she can be blamed for that.

Bair's judgment, in every case listed, was better than Geithners. EVERY SINGLE TIME.

If there is more to this story, and a damned good reason why Geithner should prevail, now would be the time to clue us in. Because from where I'm sitting, it looks like little Timmy is throwing a hysterical fit because he didn't get his way, and we've had more than enough of that already.

I just want to point out a little something to Obama here, because I know he has an army of folks keeping up on what the blogs say, and it's just possible they got this far:

When you have people at Firedoglake defending a Republican and calling for the Democrat to be thrown out on his ear, attention should be paid. Just sayin'.

I await further developments with interest.

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