Treasury Secretary Geithner faces harsh criticism from legislators over bailouts
Wednesday, January 27, 2010
When Timothy F. Geithner emerged as the leading candidate for Treasury secretary in late 2008, he privately urged Barack Obama to think twice about whether to hire him. Geithner had been a key architect of the government's bailout of Wall Street and would carry that history into the new job, he reminded the incoming president.
The warning proved prescient. Nearly a year after Geithner was confirmed, his actions to rescue the financial system -- first as president of the Federal Reserve Bank of New York and then as Obama's initial Treasury secretary -- have made him a lightning rod for discontent with the Obama administration.
Geithner will come under fire again Wednesday when he faces questions at a hearing on Capitol Hill about his role in bailing out the insurer American International Group while he was New York Fed president. The grilling comes as lawmakers from both parties are becoming more aggressive in challenging Obama over federal rescue efforts, which have helped bring huge profits to Wall Street but have failed to significantly trim the ranks of the jobless.
With populist fervor putting Democrats in electoral jeopardy, lawmakers took aim in recent days at Federal Reserve Chairman Ben S. Bernanke, another key figure behind the bailout, threatening his confirmation for a second term. The White House and Senate Democratic leaders seem to have succeeded in shoring up support for Bernanke ahead of a Senate vote expected this week.
Now the Obama team is closing ranks behind its embattled Treasury secretary, saying that his actions likely averted a global financial meltdown. President Obama called him a "terrific" adviser in a television interview this week.
"Whoever is in these key economic positions becomes a bit of a lightning rod, especially after the extraordinary year we've been through, but the truth is [Geithner] has been a very steady hand in that crisis and he's been the author of many of the reforms that the president has championed," said David Axelrod, Obama's senior adviser. "Tim's been a great advocate for the economy and for the public interest."
Speculation about Geithner's job security spiked last week in blogs and on cable television after Obama broke with his Treasury secretary's long-standing advice on how to address risky behavior at the biggest banks. The president announced a tougher approach that would limit the size and activities of financial firms.
No other member of Obama's Cabinet has taken as much heat as Geithner. His first months in the job were rocky as he dealt with questions about his failure to pay some personal taxes and confronted doubts on financial markets about his plans for reviving the economy. But by summer, he appeared to be hitting his stride.
Geithner's team rebuilt confidence in the nation's financial system by orchestrating a "stress test" of the largest financial firms, which affirmed their health and allowed them to raise private capital and repay their bailouts. The stock market soared. The worst of the financial crisis seemed to be over.
But as banks began to report startlingly high profits -- and pay enormous bonuses to their executives -- Geithner was back in the political crosshairs. As the public face of Obama' economic team, he took the brunt of the blame for the dichotomy between Wall Street's prosperity and the struggles of many ordinary Americans. His critics tried to tar him as a friend of the banks.
Geithner said in an interview he is not surprised by the anger.
"I don't think there's anything exceptional in this. It's perfectly understandable. It's the price of holding this office," he said. "I am here to help the president make good judgments about what policy makes sense, what's fair and what's going to work to make things better."