“The taxpayers were propping up the hollow shell of AIG by stuffing it with money and the rest of Wall Street came by and looted the corpse.” — New York Congressman Edolphus Towns
These harsh words were directed straight at Treasury Secretary Timothy Geithner during Wednesday’s House oversight committee hearing looking into the federal aid given to American International Group (AIG) in 2008.
Geithner was the president of the Federal Reserve Bank of New York during the AIG bailout, and as such he’s become the political scapegoat for all things fishy surrounding the bailout deal.
This week’s AIG hearings are just the latest example of the Treasury Secretary sitting firmly in the Congressional hot seat. In November, Geithner made a big splash by throwing a virtual tantrum in front of Congress, pointing fingers at Republicans and trying to blame them for the lack of regulation that he claimed caused the financial crisis.
But Geithner’s problems are bigger than just his combative jousting with Congress. The Treasury Secretary seems to have lost President Obama’s ear in the latest bout of Washington ire directed at Wall Street. The president hasn’t turned to Geithner, but has enlisted the help of former Federal Reserve Chairman Paul Volcker to help impose new bank regulations. In fact, the president even branded these proposals the “Volcker Rule.”
The move toward Volcker’s proposals, which some are calling Glass-Steagall 2.0, represent a break from Geithner’s more moderate regulatory agenda. In fact, there have been multiple news reports suggesting that the Treasury Secretary expressed skepticism behind closed doors about the Volcker Plan. Well, based on what the president clearly wants to do, I think we know who Obama’s dog in this fight is.
The logical next step here is to suspect that maybe the Treasury Secretary’s days in office are numbered. After all, given the unpopularity of the president’s economic agenda vis-à-vis the bailouts, AIG, the stimulus package, et al, he would make a convenient fall guy.
I suspect, however, that Mr. Geithner will not be forced to resign by the president. After all, right now no one wants his job. After all, it’s a tough task trying to sell U.S. debt right now. Yields will likely have to continue climbing steadily in order to boost up demand for the glut of Treasury bills out there. And, when the Federal Reserve finally does raise short-term interest rates, the interest on the U.S. debt will soar. Add to this negative mix the dollar’s woes vs. rival foreign currencies, and you get a situation where any Treasury Secretary will have to smile and say things are all right, even when most people know it’s a lie.
Poor Tim, he’s being beat up by Congress, abandoned by the president and he faces a tough, thankless and nearly no-win situation trying to sell the world on the health of the ailing U.S. economy. It’s almost enough to make you feel sorry for the man. Almost.
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