Treasury Secretary Timothy Geithner and bank regulators are just not getting along, and econobloggers are taking sides. Geithner launched an "expletive-laced critique" in a meeting with top regulators, including Fed chair Ben Bernanke and FDIC chair Sheila Bair, whom he had previously tried to push out of office. Bair and others are expected to slam Geithner in prepared testimony to Congress today. The underlying fight is clear: Who will be in charge of regulation? Geithner's dirty mouth aside, econobloggers take sides on who will lead the financial system.
Geithner is Right: Power to the Treasury. The New Republic's Noam Scheiber argued that Geither should be in charge of recession-era regulation but needs broader influence. "Inevitably, it's Treasury that must lead in this terrifying new order," he wrote. "Which is why its limitations have become so glaring." Noam Scheiber later wrote, "Somehow I don't think these tribal conflicts are going away any time soon."
The Economist's Free Exchange, which supports Geithner's position but thinks he should be yelling at Congressional leaders rather than regulators, suggested, "If ranking legislators of both parties are sceptical about the plan to further empower the Fed, I'm not sure what is accomplished by yelling at regulators." Free Exchange has criticized Bair's influence, particularly "the weird bureaucratic forces that give appointees all this sway."
Geithner Is Wrong: Power to the Fed. Tyler Cowen thinks the Fed should be in charge of regulation, not Treasury. "It's the Fed who is the fireman with the awesome power to print money, move markets, lend to the banking system on a large scale, and now even conduct fiscal policy, all without Congressional approval," Cowen said.
Dealbreaker's Greg Michaels sniped, "Apparently at this critical moment what is really needed is unwarranted blind faith in the administration." Michaels colorfully described the opponents of "Timmy G" as "the Beard, Mary Schapiro, and SheBair."
Geithner Is Right and Wrong. Tim Fernholz of the American Prospect agreed with Geithner's concerns about decentralized regulation, but said that Geithner's Treasury Department shouldnt be in charge. "Treasury's argument that the system needs a single point of accountability to avoid the confusion that wracked the government last fall seems spot on to me," he wrote, but said that single point should be the Fed, endorsing "the Administration's plan to give the Federal Reserve new powers to monitor systemic risk and impose onerous regulations."
Felix Salmon suggested that Geithner's strategy, though well conceived, is ill-fated for regulation. "If regulators aren't allowed to oppose Geithner's plan in public, then they might just quietly start siding, emotionally, with the financial-services industry which generally opposes any new regulation at all," Salmon wrote. "This is a recipe for failure, especially if the regulators are dragged reluctantly into the new scheme, rather than being genuinely in favor."
This article is from the archive of our partner The Wire.
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