Timothy Geithner's Best Asset: Everybody Hates Him
A lack of ideological bias has allowed him to pursue practical solutions to deal with crises
If you're a conservative, then you probably have no love for Treasury Secretary Timothy Geithner. He wanted to end the Bush tax cuts for the rich in 2010. You might think his foreclosure prevention plan was a mess. But if you're a progressive, then you probably don't love the guy either. He wasn't particularly aggressive in pursuing cramdowns or principal reductions for struggling homeowners. He also doesn't tend to be too hard on the banks. So who does like Geithner? President Obama must -- he worked to ensure that Geithner wouldn't resign earlier this year when his family moved back to New York. It isn't hard to see why: Geithner is a rare breed of high-level official who looks for practical solutions without letting politics get in the way.
Jackie Calmes at the New York Times highlights the president's surprising unwavering desire to keep Geithner around as other economic advisors departed over time. Calmes notes that both sides of the aisle have attacked Geithner's policies and positions over the past couple of years. Let's look at some of the chief reasons why people don't like Geithner.
He Went Too Easy on the Banks
Those who lean left sometimes criticize Geithner for being too friendly to the banks. Indeed, some even accuse him of having worked for Goldman Sachs. (He didn't.) In fact, Geithner's financial reform proposal that preceded Congress' legislation set the tone for many of the provisions that eventually were passed -- and we all know how much noise the banks have made about that bill. He also helped to ensure that the government got back more than it provided the banks in the 2008 rescue, as taxpayers ultimately made a profit on the bank bailout.
To be sure, he could have been harder on the banks. But don't forget: the financial crisis was a time when the banking industry nearly collapsed. The entire purpose of the bailout and subsequent stability programs was to ensure that the industry survived. Even if harsher punishment was justified, it would have been impractical until the broader economy had improved. So even if Geithner did want to go harder on the banks, he likely understood that doing so would make everyone worse off.
His Housing Policy Was Too Aggressive / Not Aggressive Enough
When I first read the Treasury's mortgage modification plan in early 2009, I thought it would result in a fairly large number of modifications. I was wrong -- it will struggle to reach the 1 million mark. The program was crafted as a way to gently persuade banks to modify mortgages without compelling them to do so with lots of carrots but few sticks. And remember, this was before we knew about all of the bank's foreclosure process flaws.
Still, critics on the right think that government-induced mortgage modifications are unfair to borrowers who dutifully pay their bills, while critics on the left want to see the government aggressively force banks to write-down principle to end foreclosures. Either option is extreme. Geithner took a moderate approach by providing incentives for banks to modify mortgages without compelling them to declare deep losses on underwater loans that could endanger stability.
He Didn't See Such a Deep Recession
Perhaps the most unfair criticism of Geithner is that he didn't realize how bad the recession would be. It's certainly true that he probably didn't expect that unemployment would be 9% 34 months into Obama's first term. But then, who did? Only a select few anticipated this much pain for the U.S. economy. None of Obama's other major economic advisors got it right either.
So to criticize Geithner for not pushing for a bigger stimulus bill in 2009 just doesn't make sense. At the time $787 billion was thought to be fairly aggressive. But more importantly, there are very real political obstacles for having made the size of the stimulus much larger. If it approached $1 trillion, a psychological boundary begins to materialize. The public can handle billions, but trillions just sounds like too much money. That's also a part of the reason why we saw $700 billion chosen for the size of the pool of funds used for the bank bailout in 2008.
A Pragmatic Approach
In all of these examples, Geithner has taken a pragmatic approach. One of the most common Republican criticisms against Geithner was his lack of private sector experience. He is a career policy guy. This can be dangerous, because if you live in policy circles for too long, your ideology can blind you to practical solutions. Despite his background, however, Geithner never fell into the partisan trap. He generally chose a practical approach.
This is the right mindset for dealing with crises. Few want to see the government bail out anyone with taxpayer money. But the chaos that would have ensued if the U.S. banking system had crumbled in 2008 was far worse than the moral hazard that a bailout created. That's why the Bush administration looked past its free market politics and intervened.
As the economy has remained in a fragile state, Geithner has taken on a similar approach, putting the most sensible solutions before the most politically convenient. And that's why nobody likes him. No matter your political persuasion, you can criticize Geithner for some policy that conflicts with your principles. But Geithner has left the politics to politicians and focused on doing the little that government could to help without making matters worse. That might not make him popular with the right or the left, but his approach should be appreciated by those of us who don't believe that either party is correct all of the time.
Image Credit: REUTERS/Jason Reed