DeFazio, the hard-nosed veteran Democrat from Springfield, offered up his view that Geithner should be fired during an interview Thursday with the Wall Street Journal. His reasoning: “All the gambling on Wall Street is doing nothing to put people back to work in America and rebuild our economy.” This made immediate news because a lot of people, myself included, are fed up with hearing about how well the economy is recovering while the nation — and Oregon — continue to lose jobs.
But let’s pause for a minute and consider what Geithner inherited, and where we stand today. I don’t know about you, but I had a strong case of economic doom one year ago. Between the headlines oozing out from the Lehman collapse and the AIG “rescue,” and the impending potential collapse of Fannie Mae, Freddie Mac, Bank of America and Citigroup, I was losing faith in the financial system. I don’t have that feeling today. The markets are coming back and Oregon’s unemployment rate is finally easing back down, albeit painfully slowly.
DeFazio’s central argument that Geithner’s actions have focused too much on Wall Street and not enough on regular people is understandable. I can see how it would be an easy postion to take, as a liberal from Oregon. It is certainly frustrating, for example, to listen to Oregon’s top economists (many of whom insisted early on that the recession would largely bypass Oregon) tell us today that the recession has passed – never mind the continued job losses.
But think about the root of the problem: Wall Street. If the goal is to fix or at least improve a financial system prone to inflating with greed and exploding with busts, wouldn’t you want someone in charge of fixing the problem who understands this stuff deeply? Geithner was in the room when the government pulled the plug on Lehman, and he fought like hell to prevent that because he understood the consequences. He also helped arrange the shotgun marriage between JP Morgan and Bear Stearns. And he has been the principal architect of an elaborate recovery plan that, for all of its myriad failures, is ultimately succeeding.
Has the Administration been too soft on Wall Street? It’s an understandable first impression, but once mighty (now or soon to be unemployed) banking barons such as Richard Fuld, Jimmy Cayne and Kenneth Lewis might see it differently. As for the idea that the Treasury Secretary is some kind of a patsy, here is how a quote from a highly recommended New Yorker article by Ryan Lizz, describing how Geithner rose through the ranks of the Clinton Administration:
The way Tim came up through Treasury is that he was the only one who would tell (Lawrence) Summers he was full of shit or that an idea was stupid.
Anyone remotely familiar with the intellectual capacity of Lawrence Summers will recognize the significance of that statement.
The day after Geithner gave his first major speech as Treasury Secretary, the Dow crashed 382 points. How did Geithner recover from his position as the “first human sacrifice” of the Obama Administration? He worked his butt off. He came up with the idea of forcing the banks to undergo stress tests, and he stood up to Summers (who had doubts about the ability of regulators to conduct those tests) and Paul Krugman and other leading economists who were calling for nationalizing banks. It was a tough position to take, but in the end it worked. Most banks have recovered (sort of) by raising private money instead of siphoning even more public money. Are there any taxpayers out there who really wish the federal government owned Bank of America and Citigroup right now? If so, I’d like to hear your reasoning.
I guess in the end my position on Geithner is similar to my position on Portland Mayor Sam Adams. Yes, he’s flawed, but he earned the job, he's smart as hell, he means well and he is working with a sense of purpose to make things better. Running him out of office would be a mistake and a major distraction from the important work that remains undone.
At least that's what I think I think. What do you think?
Ben Jacklet is managing editor of Oregon Business.