Two months ago, I gave a thumbs down to Obama’s entire economic team, including the then-nominee for secretary of the Treasury, Timothy Geithner. Now, I am sorry to say that Geithner is even performing worse than my very low expectations of him. The country gave him a free pass on his confirmation despite his tax problems, because he had been previously involved in the rescue of the financial system as president of the Federal Reserve of New York. We thought that would allow him to have a running start on solving this crisis, but instead it seems to have hobbled him.
It is only a matter of time before he is replaced. The names of his potential replacements are already on commentators’ lips. Obama is in the middle of his Hurricane Katrina, and Geithner has become as much a liability to him as Michael “Brownie” Brown, former head of FEMA, became to George Bush.
In ordinary times, we might be able to wait for him to grow into the job, but these are not ordinary times. This is probably the most challenging period in the last century to be the Treasury secretary. The global financial system is at the edge of a cliff and is barely hanging on by its fingertips. Even Odgen Mills, the secretary of the Treasury during the Great Depression, probably did not have it as challenging as the current office holder. During the Great Depression, they did not have to contend with complex financial instruments, massive amounts of leverage, and the international nature of the current economic crisis.
With the unprecedented good will that Obama had at the start of his administration, Geithner, if he had prepared a plan, could have immediately nationalized the insurance giant AIG and Citigroup. Essentially, AIG is already nationalized because the American taxpayer owns 80% of the company and has given AIG $170 billion and counting. If it had been private, the government would have had an easier time stepping in and preventing the AIG bonus controversy.