Still a punching bag, Treasury's Geithner takes credit, criticism

McClatchy NewspapersFebruary 25, 2010 

WASHINGTON — Treasury Secretary Timothy Geithner is still standing.

That wasn't a sure thing a year ago, after a confirmation flap over unpaid taxes that was followed by a major speech so wooden that his political future was measured in weeks.

Then there's the heat he took for the big bonuses paid to executives of bailed out firms and backdoor payoffs to Wall Street banks during the rescue of insurer American International Group. He remains the go-to-guy for politicians who want to hold the Obama administration responsible for high unemployment and job losses. Audio: Geithner on jobs and the economy

"Probably as a Republican, I should hope he never leaves," said Texas Rep. Kevin Brady, one of Geithner's harshest critics.

A year into the job, though, Geithner can cite some accomplishments: a stabilizing housing sector and a recovering economy.

A career public servant in finance and a known quantity in foreign capitals, he's played a part in resolving virtually every major domestic and global financial crisis since President Bill Clinton ended the Mexican peso crisis in 1995 with a controversial bailout.

Most historians agree that decision by Clinton, against the sort of political pressure now facing President Barack Obama, saved Mexico from financial ruin and boosted U.S. prosperity.

"I didn't cause them, though — just want you to know that," Geithner said jokingly of those events, in a lengthy interview with McClatchy during a recent trip to Raleigh, N.C.

He's also a more complicated figure than the caricature his detractors have sketched of him, and he defends the administration's much criticized decision to prevent a deeper recession by bailing out AIG and big Wall Street banks.

Geithner admits that he labors under the perception that the administration bailed out Wall Street at the expense of the little guy.

"It's the most compelling, dominant, basic part of the narrative of this thing, and it's the hardest thing to explain as a necessary affair. The only way I know how to explain it is the following: The worst thing you could do for the average American is let the system collapse," Geithner said. Audio: Geithner on the importance of last year's recovery efforts

"It's the kind of tragic paradox of what's necessary in a financial crisis. The progressive, fair, just, humane, moral thing to do is to make sure you act with as much force as you can to make sure that the system hangs together. And to not do that consigns the average American to a much worse fate."

Obama's team "knew it was going to be politically costly, he knew it was going to be deeply unpopular, but he was willing to do it, and his overwhelming dominant imperative guidance to us was to make sure you do enough, soon enough, that you are actually fixing this," Geithner said of last year's marching orders.

Those orders led to proposals to overhaul the regulation of financial markets. The House of Representatives acted late last year on much of what Geithner proposed, but similar Senate legislation is moving at a glacial pace in the face of fierce lobbying by banks, many of them beneficiaries of federal bailouts.

There's a real danger that the longer it takes to pass, the weaker any overhaul will be. With the economy growing at a 5.7 percent clip in the last three months of 2009, the walk along the abyss in 2008 drifts from memory, and the urgency for change weakens. Audio: Geithner on the economy

Geithner recognizes the danger in delay, but he remains confident that a sweeping revamp that includes real consumer protection will get through Congress this year.

"There's a deep, broadly felt political imperative for Wall Street reform . . . I think if you look at most surveys about what people care about, it's not a Democrat or Republican thing. And how could they feel otherwise? I think people basically feel like we've got to change what was broken," the he said.

What about the big lobbies against an overhaul?

"I think the financial community and the business community would like to have this brought to Earth, so they understand what the new rules are going to be and that there is less uncertainty. And I think I'm sure some of them think if they just delay, it will go away. But it's not going to go away," he said.

Geithner thinks he has buy-in from Senate Minority Leader Mitch McConnell, a Kentucky Republican and a thorn in the administration's side.

"I think the political force for this is very strong. And Senator McConnell was very clear and direct with me, and he was with the president . . . on financial reform, (Republicans) said that's something they may be prepared to work with us on," he said.

Still, the Senate Banking Committee hasn't found a bipartisan consensus despite months of effort, and many rank and file Republicans seem to loathe the 75th Treasury secretary.

Frequent critic Brady did credit Geithner for bank "stress tests" that forced lenders to add cushions against future losses, a "calming the waters" move that helped end financial panic. He insisted, however, that average Americans see Geithner as the poster child for unpopular bailouts.

"I still believe he needs to go," Brady said, advocating a "fresh start" for the economy.

The White House has no plans to make a change.

"Tim was an essential and a key player in developing a strategy that helped restore confidence and start to turn the economy around," Rahm Emanuel, Obama's chief of staff, said in a statement to McClatchy. "The president will continue to look to Tim as a partner going forward as we fight to create good jobs and rebuild our economy."

Geithner doesn't get enough credit for lower borrowing costs and other real-world economic improvements over the past year, said Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee. Audio: Geithner on credit and the economy

"I think he's done a very good job of doing what was most important, which was trying to stabilize the financial system," Frank said. "I think he's done well. We all were frustrated because trying to get it stabilized took longer than we thought."

Many liberal Democrats, however, think Geithner is too close to banks, angered by his resistance to taxes on financial transactions and other efforts to punish banks for leading the nation into crisis. Audio: Geithner on financial-sector compensation

Adding to this perception were erroneous reports that he once worked at Goldman Sachs. He didn't. Even the wife of a top-level administration official recently suggested to Geithner that he could eventually return to Goldman, unaware that he'd worked in government for almost his entire career.

"Part of what's challenging people is I don't really fit anybody's basic mold of anything. I'm not an economist, I'm not a lawyer, I've never been a banker, I've never been a regulator in the real sense," he said.

Geithner, a Dartmouth graduate, married his college sweetheart, Carole, a therapist who specializes in grief counseling. He entered the Treasury Department in 1988 and rose through the ranks in the Clinton administration, becoming undersecretary in 1999.

After a brief stint at the International Monetary Fund from 2001 to 2003, he became the president of the powerful Federal Reserve Bank of New York in November 2003. He wasn't the first pick, but when another candidate faltered, Geithner was helped along by lobbying from two former Clinton Treasury secretaries, Robert Rubin and Larry Summers.

Stiff in public, Geithner, 48, is affable in private, often poking fun at himself. He isn't a politician, evident during a stop at an art gallery before TV cameras in North Carolina. He ignored an adorable toddler running around his legs, a "photo op" that few politicians would resist.

Although he's able to shake off criticism, Geithner said it takes a toll on his children, noting, "You grow up a little faster if you are thrown into something like this."

He's made time to build a Martin kit guitar at home with his teenage son, and adds that his kids aren't too impressed by dad's name on the currency.

During his down time, Geithner watches "SportsCenter" on ESPN. He calls himself a latecomer to "House, M.D.," the Fox drama about an irreverent doctor, played by Hugh Laurie, who's called in to solve tough diagnostic problems.

Geithner said he identifies with Laurie's character because "you're solving problems when you can't be sure you know what the right answers are, and you haven't seen many of them before. And that's the economic story of the past two and a half years."

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