Yalman Onaran and Michael McKee, Bloomberg News
It was 2004 and Tim Geithner, president of the Federal Reserve Bank of New York, had a message for the Federal Open Market Committee in Washington. He told his 18 colleagues gathered around the long mahogany table that a clearinghouse was needed to monitor risks in the burgeoning $5 trillion market for credit-default swaps — the over-the-counter derivatives that would later spin out of control and help take down Wall Street.
In a move that may have foreshadowed his role as President Barack Obama’s Treasury secretary, Geithner over the next two years nudged financial firms to voluntarily clear a backlog of swap trades. They stopped short of creating a clearinghouse to bring more transparency to the market.
“Geithner was making noise on reining in derivatives, but he didn’t push hard enough,” says Jane D’Arista, a former economist at the Congressional Budget Office in Washington and a longtime Fed observer. “Maybe he’ll be more forceful now that he’s in a position with real power. But I’m not so sure.”
From his years as a Dartmouth College student and mid-level Treasury official through his stint at the New York Fed, Geithner, 47, has thrived as a backroom negotiator and conciliator. Now, as he struggles to rescue Wall Street from a crisis that happened on his regulatory watch, investors and economists question whether the 75th Treasury secretary can transform himself into a bold leader equal to the challenges ahead.
Wall Street executives have cheered Geithner’s nomination.
“Treasury Secretary Geithner possesses the intelligence and experience needed to partner with President Obama and his economic team to lead us to a recovery,” says Robert Wolf, head of UBS AG’s Americas unit based in Stamford, Connecticut.
The rookie secretary has already learned that the honeymoon won’t last long. After Geithner presented a $2.5 trillion financial rescue plan on Feb. 10, the Dow Jones Industrials tumbled 4.6 percent because investors found it bereft of details. Geithner also gave no indication that he would act quickly to dismantle the weakest of the banks, a move that Joseph Mason, a former bank regulator who teaches finance at Louisiana State University, says he should take now.
Japan prolonged its credit crunch and recession for almost a decade before it finally nationalized two of its biggest banks, the Long-Term Credit Bank of Japan and Nippon Credit Bank, in 1998.
“The key to all our problems is the zombie banks,” Mason says. “We’re giving them money, which is not going to solve anything. We’re repeating the mistakes of Japan, which wasted a decade by not moving decisively against its zombie banks.”
No Treasury secretary since Henry Morgenthau, who served from 1934 to ‘45 under President Franklin D. Roosevelt, has faced so many crises at once. After receiving $800 billion in loans, guarantees and capital injections since October, the financial industry is still hunkered down, unwilling or unable to put the wind back into the sails of capitalism. Geithner played a role in shaping the $787 billion stimulus plan, and now he and Lawrence Summers, head of the National Economic Council, must recommend to President Obama whether to give General Motors Corp. and Chrysler LLC an additional $14 billion in loans on top of the $17.4 billion Bush administration bailout or force them into bankruptcy. At the White House, the new Treasury secretary may have to compete for the president’s attention with Summers, his former mentor, and Paul Volcker, who has been clamoring for more power as chairman of the Economic Recovery Advisory Board.
Geithner’s strengths — his methodical style and bureaucratic savvy — were honed over 21 years in government, as he dealt with crises from Asia to New York.
“He really understands process and decision making and how to advance an agenda,” says Michael Froman, who was former Treasury Secretary Robert Rubin’s chief of staff. “Some people are just better at it than others, not just having the big idea but breaking it down into the several dozen steps that need to make it work. That’s Tim.”
The Treasury secretary’s experience at the New York Fed from 2003 to ‘08 gave him an inside view of Wall Street that will help him choose the best remedies for today’s crisis, says Alex Pollock, resident fellow at the American Enterprise Institute in Washington and a former president of the Chicago Federal Home Loan Bank. “He’s very well qualified,” Pollock says.
‘He’s Not Change’
ACORN, the Association of Community Organizations for Reform Now, has come under recent scrutiny for their involvement in voter registration fraud. However, the accusation of “voter fraud” is misleading because the fraudulent forms in question were submitted to the government by ACORN. It takes a particularly dumb criminal to turn himself in…before a crime has actually been committed. Also, unless “Mickey Mouse” shows up to vote in November, the forged form with a voter registered as the famous Disney mouse remains an example of “registration fraud,” and not “voter fraud.” No vote has been cast, so no real harm has been done.
It is ACORN’s policy that any case of form fraud has to be flagged, reported, and delivered to the government, along with the employee who forged the document.
Because so many vicious rumors are circulating about the organization, here is first a brief summary of what ACORN does. The group is a grassroots organization that fights for basic citizen rights, such as the right for affordable housing and the right to vote. ACORN has led communities around the country to rally behind living wage ordinances. These ordinances often require employers to pay not just the minimum wage, but a living wage, which is an important distinction for anyone who has ever had to choose between buying their medicine and paying the heating bill.
ACORN has been very successful in helping to implement the “living wage standard.” More than 70 communities have now adopted this standard.
Lately, the media has focused on the voter registration sector of ACORN’s work. According to the organization, since 2004, ACORN has helped more than 1.7 million low- and moderate-income and minority citizens apply to register to vote. As we know by now, poor people overwhelming vote Democrat.
Some other ACORN tasks include fighting predatory lending, finding affordable housing for poor people (predominately black people and Hispanic people,) providing Katrina relief, improving public education, and fighting for stricter gun control laws.
It seems like a strange coincidence that ACORN, a group focused on community organization, regulation, and empowering poor citizens of color is now the focus of attacks from an administration famous for gutting government programs and neutering the public sector in favor of privatization.
The Bush administration gets a hard-on for profit. If any government job can be outsourced to the private market, the Bushies gut social spending, even if it ultimately means sacrificing quality of service. Just look at the basic example of the horrible conditions at Walter Reed Army Medical Hospital. Caring for veterans is a staple service of any civilized government, and yet that job was outsourced to a private company. A five-year $120 million contract was given to a company called IAP, which was chaired by a former executive from Halliburton, the multi-national corporation where Vice President Dick Cheney once served as CEO.
Another example of the Bush administration’s preference for privatization over public service is the treatment of the U.S. Post Office. If you haven’t been to a public post office in a while, let me paint a picture for you: Imagine a leper colony post-nuclear annihilation. Under the Bushies’ watchful eyes, U.S. post offices facilities have closed and government jobs have been destroyed. Meanwhile, Bush reminds us that he’s a fan of deregulation, while he visits a FedEx facility.
No shit. Yet again, Bush chose profit over community. Now, the GOP is going after one of the largest community organizations in the country. Americans have come to expect this kind of cronyism and privatization and total negligence from the Bush administration, but citizens don’t seem to be connecting the dots when it comes to the ongoing harassment of ACORN.
The perpetrators of these crimes have not been identified. Meanwhile, the GOP continues the discrediting process of ACORN. It does behoove the McCain campaign, and any future Republican campaign, to discredit ACORN, one of the largest voter registration organizations and low-income mobilization forces. If ACORN’s reputation is sullied now, it will be easier for Republicans to make the argument that more ACORN-provided registration forms should be tossed out in the future.
Getting rid of ACORN will be another feather in the Bush administration’s cap. This grassroots community organizing machines runs in direct conflict with the Bush dream of a privatized planet. ACORN demands housing regulation at a time when the Bush administration is still trying to clean up the mess from years of market deregulation. ACORN demands representation for poor minorities (who overwhelmingly vote Democrat) during a time when McCain is desperately clawing for votes in states that are normally Republican strongholds. ACORN demands good public schooling at a time when McCain is hollowing out schools with his vouchers that will effectively rob poor children of a chance at public, secular education and stick them in private classrooms with religious agendas.
In the midst of all this, ACORN has been labeled a terrorist group with suspicious motives. Is anyone surprised? No wonder the GOP is desperately trying to neuter ACORN before the group manages to mobilize some seriously pissed-off, poor people.