Geithner's Stock Plummeting
by Jeff Madrick
Daily Beast
Tim Geithner hotly defended his job Thursday in front of angry Republican congressmen who asked him to step down. "What I can't take responsibility is for the legacy of crises you've bequeathed this country," he shot back.
It is not easy being the secretary of the Treasury in the midst of so much economic turmoil. But even under current conditions, Tim Geithner’s credit is running exceptionally low. He is already in serious danger of being ranked with the most ineffectual Treasury secretaries in recent history—along with David Kennedy under Nixon, Michael Blumenthal under Carter, Don Regan under Reagan and Paul O’Neill under George W. Bush. This time, however, the stakes are much higher; a president in crisis will and should run out of patience with a floundering Treasury secretary. So far, Geithner shows few signs of recovering as unemployment continues to rise, ongoing defaults may still hamper the credit of the U.S., Wall Street pays itself huge bonuses, and China refuses to budge on its undervalued currency.
This week, Geithner was dealt a major personal blow when the special inspector general who was auditing the bank bailout plan known as TARP (Troubled Asset Relief Plan) announced that he “caved in,” to use The Wall Street Journal’s phrase, to demands from the financial community. Geithner was president of the New York Federal Reserve Bank when it saved AIG last fall; by all accounts, he was the principal decision maker. The huge insurance company wrote trillions of dollars worth of complex derivatives—credit default swaps—that were about to put it out of business without government aid. Geithner feared its counterparties—those it owed money on these trades—would also go down with it. But he could have forced these creditors to take significantly less and did not. The government acquiesced to their demands and paid them off in full. These creditors included, most notably, Goldman Sachs, who also took government funds and recently paid them back, only to announce enormous bonuses for its traders.
(More here.)
Daily Beast
Tim Geithner hotly defended his job Thursday in front of angry Republican congressmen who asked him to step down. "What I can't take responsibility is for the legacy of crises you've bequeathed this country," he shot back.
It is not easy being the secretary of the Treasury in the midst of so much economic turmoil. But even under current conditions, Tim Geithner’s credit is running exceptionally low. He is already in serious danger of being ranked with the most ineffectual Treasury secretaries in recent history—along with David Kennedy under Nixon, Michael Blumenthal under Carter, Don Regan under Reagan and Paul O’Neill under George W. Bush. This time, however, the stakes are much higher; a president in crisis will and should run out of patience with a floundering Treasury secretary. So far, Geithner shows few signs of recovering as unemployment continues to rise, ongoing defaults may still hamper the credit of the U.S., Wall Street pays itself huge bonuses, and China refuses to budge on its undervalued currency.
This week, Geithner was dealt a major personal blow when the special inspector general who was auditing the bank bailout plan known as TARP (Troubled Asset Relief Plan) announced that he “caved in,” to use The Wall Street Journal’s phrase, to demands from the financial community. Geithner was president of the New York Federal Reserve Bank when it saved AIG last fall; by all accounts, he was the principal decision maker. The huge insurance company wrote trillions of dollars worth of complex derivatives—credit default swaps—that were about to put it out of business without government aid. Geithner feared its counterparties—those it owed money on these trades—would also go down with it. But he could have forced these creditors to take significantly less and did not. The government acquiesced to their demands and paid them off in full. These creditors included, most notably, Goldman Sachs, who also took government funds and recently paid them back, only to announce enormous bonuses for its traders.
(More here.)
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