Asking The Wrong Questions On Tim Geithner
The startng point of the discussion is Neil Barofsky's criticisms of Geithner's refusal to consider measures that truly help homeowners and consumers if such measures in any way are opposed by the banks.
Using Ezra Klein's interview of Barofsky, Yglesias writes:
Team Tim would say that they're trying to create a well-capitalized banking system in order to bolster the broader economy. Team Neil counters that the broader economy would be better served by a policy that imposed steep losses on banks and instead repaired household balance sheets. Beneath all the anger and accusations and counter-accusations is a fairly wonky policy disagreement about the relative importance of household balance sheets versus the credit channel to laying the preconditions for growth.
So who's right? I think this is actually a much more difficult question than partisans on either side are willing to acknowledge. Team Tim has bolstered their argument with the overblown notion that homeowner bailouts "launched the Tea Party" via Rick Santelli and are therefore politically impossible and thus one doesn't even really need to address the merits of the case. On the other hand, Team Neil has never really presented a coherent alternative course of action that takes real account of the consequences of imposing very large losses on the banks.
This simply misstates the issue. As someone who supported (and supports) TARP, my criticism, and I think Barofsky's, are primarily aimed at the failure to condition bank bailouts on their taking actions that helped homeowners. Exhibit A is of course the disastrous HAMP program.
I don't think Geithner's motivations really matter on this. His policies on the homeowner crisis were simply incompetent, disastrous and by any measure a complete and utter failure. If that answer is difficult for you, then you are either ill informed or not telling the truth.
You can argue that Geithner faced political constraints that did not allow him to go further, but that is not what Team Geithner has ever said. They said they got the policy just as they wanted. This seems likely in that there was over $40 billion available to structure a much better homeowner relief program (for say, a HOLC program.)
Drum is a little better, but not much. He writes:
This is basically a long way of saying that we didn't do enough and we didn't spend enough money. Yes, the banks had to be rescued. But homeowners should have been rescued too. The stimulus needed to be bigger and longer. And the Fed should have ignored the wailings of the wealthy and temporarily targeted a higher inflation rate. None of this would have stopped the recession, but it would have made it a lot shorter and shallower. It's a crime that millions have suffered needlessly because we didn't have the guts to stand up and do this.
But this is the Team Barofsky argument.Sure there are other criticisms in terms of bank reform, but on the issue of homeowner relief, Drum is agreeing with Barofsky.
The long and short of it is Tim Geithner has a been a terrible Treasury Secretary when the country needed a great one.
Speaking for me only
|< Friday Morning Open Thread | Quote of the Day >|