There are different opinions floating around these days concerning the tenure of Tim Geithner as Secretary of the Treasury.
The official view of the Obama Administration, in which Geithner has been a part, is that his prudence, wisdom, and incisiveness helped save the world financial system from going into free fall after the 2007 market plunge. The view of critics on both the left and right, meanwhile, is that Geithner fronted for Wall Street after that plunge, and helped it benefit mightily in the years since while Main Street has been sinking into the muck.
A middle-of-the-road version of these two competing views is that Geithner found such a mess when he came to Treasury that it had to be unraveled slowly, and that he did this in ways that admittedly allowed Wall Street to recover rapidly while Main Street’s own recovery has been slow and painful, but this was a necessary compromise. And now, with Dodd-Frank passed, a tough, new SEC head in place to discipline Wall Street, and the housing market picking up at last, Geithner’s overall performance can be viewed as mixed — not great but not all that bad.
I have still another view on Geithner and what he’s done (and failed to do) at the Treasury. It’s this:
He was up to his ears in best-and-brightest Wall Street shenanigans while heading the New York Fed. When appointed by Obama, however, he believed that things should change in big ways. His predecessor at The Treasury, Hank Paulson, had tried the free market big change cure — let Bear Strearns go under without a government bailout. This approach failed horribly because it turned out that Bear Stearns wasn’t a separate part of the world’s financial cat’s cradle that could just be allowed to disappear, but was so linked with so many other parts that another big time unraveling would bring everything down.
Geithner saw he couldn’t do the old “let the market sort itself out” number. Alas, he soon realized he couldn’t do the old New Deal “let’s finally totally reform the screwed up markets” number either.
He couldn’t do a New Deal rerun in this realm for the same reason he couldn’t do a Hank Paulson writ large. After markets began to be deregulated in the 1970s, there was so much Wall Street “innovation,” so many new products came on line that melded in ways often bizarre when their interactions could even be understood, that genuine attempts at markets reform could be a cure as dangerous as the disease.
What did Geithner end up doing? And his boss President Obama end up doing? And Fed Chairman Bernanke end up doing? And all the other major players end up doing?
The non-government players patched the holes they could identify with more innovations (there’s an estimated 25 percent more financial products available today than in 2007), and the central bank government players churned out new phony money to replace the phony values that had been lost in the great crash — and they continue doing so today (while The Fed in this country is stepping away from quantitative easing a.k.a. money printing, the Bank of Japan and the EU’s central bank have begun their own huge press runs).
So here’s what it all comes down to: Tim Geithner, Wall Street Man, confronted a Rube Goldberg world economic system that gets more Goldbergian by the day. A world economy that is really only held together by inertia, endlessly generated patches, and government money printing games. Geithner did little to make it better, just helped it get worse because he had no choice. And now he’s just lucky to be getting out before it all collapses.
When will this collapse occur? Beats me.
I once knew a guy who was a chain smoker. After the Surgeon’s General’s Report on the dangers of smoking he still sat at his desk every day, ashtray overflowing, smoke hanging heavy in the air, and when you approached he would issue a husky laugh and say: “So if cigarettes kill you, why ain’t I dead?”
I didn’t stick around that office long enough to find out if smoking killed him shortly thereafter. Or years later. Or if he’s still around and puffing away. You can know the obvious, but not always its timing.
Tim Geithner and the other best and brightest, the rich and richer, have always known what they were doing individually. What they didn’t know was what their collective under-regulated efforts would generate — our present Rube Goldberg world economy.
But hey. Why sweat stuff like this? Just pass the duct tape, mama, and drop another ice cube in my Bushmills.
(Check out Kay Wood’s new Kickstarter project if you get a chance — The Big Belch. It’s a real hoot. The Big Belch Kickstarter Project)
Copyright 2013 The Moderate Voice