I wrote up some notes about Larry Summers' Brookings speech over at the Business Channel, but I wanted to highlight his comments about Timothy Geithner. He was asked the first question by Martin Neil Baily, who pursued two concerns: Shouldn't solving the problems in finance sector be the administration's top priority? And is there some hesitation about coming up with a plan for action? Summers first responded by noting that it's possible to work on more than one problem at the same time. But then he went on to say the following about Geithner (continued after the jump):
I think Secretary Geithner has handled this in a difficult and courageous way. The easy thing to do would be -- and anybody who's worked in Washington knows how to do it -- would be to lay out a nine-point plan with the illusion of specificity and a sense of certainty about what the future would bring. We actually saw this -- it's so easy that we actually saw half a dozen of them -- from the previous administration. It's just that they were different each month.
The right approcach, and the approach the Secretary Geithner has taken, is an approach that is based on deeds and not words. It is an approach that lays out a framework, that unlike so much of the commetnary actually recognizes the enormous complexity of the problem and the balances that need to be struck. We need to address, on the one hand, the capital markets, and on the other ahnd, the banks, and not to do what so many do -- which is to say we got a plan for this and we got a plan for that, and to fail to recognize the profound interlinkages, that the whole question of the toxic assets in the banks has to do with the health of the capital markets, and in what way those asets can be sold.
It would be tempting to rush to action to meet a chorus of questions, like yours. But I don't see how anyone -- I don't see how anyone -- could observe what happened in calendar year 2007 and 2008, and judge or design or implement policies that bore on the major financial institutions, without feeling a need to stress test them or evaluate in any comprehensive way their current situation. And that's exactly what these stress tests are. So my suggestion is that we let the stress testing continue, we allow the proces of supportng and reactivating the capital markets to be carried out, and we evaluate what the results have been some time from now. And I think the wisdom of Secretary Geithner's approach will be much clearer at that time.
Strong words. But I think there are two issues here. First, Summers line about avoiding a rush to action strikes me as sensible, but also quite different from what the administration has emphasized up to this point. For instance, at Geithner's confirmation, President Obama said:
Tim's work will begin at once. We can't waste a day.
Second, I thought about the Washington Post's great tick-tock piece on the original TARP II roll out. Summers' comments indicate that Geithner's vagueness was deliberate, but the Post piece didn't inspire confidence that this is so.