The Smart Move: Geithner Isn’t Going Anywhere

Thanks, Al, for the sanity.  I just saw Booman's takedown of la Hamsher at http://www.boomantribune.com/story/2009/3/23/133631/000, which is equally sane.

I agree with you, Al. Would have preferred if the crisis had been addressed differently. Nationalization of instituions with haircuts to not only the stockholders but also the bondholders. But the plan is what it is, and I don't know the right approach. Rescuing the culprits on the taxpayer dime is hard to swallow, but it's far better than a great depression. I guess we'll find out, in time, whether this approach works. Really hope Geithner knows what he's doing because, otherwise, we're all screwed.

Ah, the intellectuals are always at risk for this ...utopianism.  Ends without appreciating that the means are important.  Respect for the practicality of getting from here to there in one piece or with as little damage as possible -- which means to some extend preserving the current system enough to bear our weight as we lay down new boards that can bear our weight.

Their zeal makes them look past the realities of what that could mean.  They are also angry and want to take their measure of revenge against the financial emperors who have gotten us here and stripped us of our wealth and self respect.  Understandable but as Obama said last night, the best policy is not made in anger.

They are angry and idealistic and impatient and all three spell what we have -- at least on the left.  The right is just -- well -- lost -- not moving backwards or forwards

Paul Krugman backed Hillary Clinton's economic polices in the primary, knowing that she'd bring back the economic policies her husband's administration implemented... which included doing virtually nothing about the merger mania of the '90's, which led to companies being too big fail & having to be bailed out.  What  what would our economic future be if Krugman's candidate had been elected president?  Fortunately, we won't have to find out.

Al,

Something tells me who these people want in is Krugman. For example HuffingtonPost posted a youtube video of a random guy singing and asking why we have Geithner instead of Krugman. They wanted it to sound like the video of this guy was a movement to get Geithner out and Krugman in.

But from what people were writing in the comments section, there are now a lot of people who are pushing back against the dump geithner pitch.

Lizagreens - Perhaps they are that deluded. Krugman has already publicly stated that he's not interested in an administration job (and now that he's helped to lower the value and prestige of the Treasury Secretary position, there's no chance in hell he'd take it). Furthermore, he'd be terrible at it in the same ways that some complain about Geithner: Krugman is grumpy, short-tempered, effete, snobby, and his first press conference would be a barbeque with his ass on the grill.

Calling for Krugman - essentially an economic sports-caster of big media - to lead the team would be like calling for a TV football anchor to be quarterback in the NFL.

And, of course, good luck getting anybody that has called for nationalization of the banks through Senate confirmation. And, of course, never having been vetted for public office, lord knows what secrets await the GOP oppo researchers on a New York newspaper columnist! 

Still, you might be right. They might be that deluded.

I'll generally trust your instincts, Al, although sometimes I think you jump on people too hard. Midwestern 'play nice' behavior on my part? I dunno. But the pout/rinse/repeat post didn't move me like this one did. I think you've laid out the evil well enough to be seen.

The sucky part is that I like Greenwald, I'm glad firedoglake is around! I've had good interactions with those folks in the past.

But you and others have totally convinced me on Geithner. Looking at the Nate Silver coverage stats is interesting - and here's where the right decided to pile-on.

Obama's had to make a public declaration of support. Spending some political capital on the guy. Of course, it was done masterfully, as I've come to expect from Obama.

I've been glad to see that the organizing campaign and the air war are going hand in hand - 60 minutes on the one side, door to door on the other. Just what I want to see.

For interesting times!

It was always laughable on its face that Geithner would be dumped by Obama weeks into the job. To have such a thing tied to the AIG bonuses is even more absurd. Those on the left are pissed he is not nationalizing banks. Again, something that was ever only a pipe dream. Did anyone truly believe it was possible to have 5,000-6,000 government people swoop into the top 4-6 banks on a Friday night and take them over? We'll get a single-payer healthcare system first (i.e., when Hades freezes over).

And Krugman would never take an insider job like Sec of Treasury.

Many of the debates swirling around seem to be about what is the ideal form the banking system should take, and attacking any plan that does not create the commentator's ideal form.

It seems to me that Geithner (and Obama) are more concerned with getting the banks to resume lending by whatever means are necessary, and will worry about the form of the banking system later, once the worst of the recession has passed. Since unemployment will not go down until businesses are able to get the loans or credit lines they need to pay their employees, buy supplies, and otherwise run their operations on a day-to-day basis, I think this is the right decision.

To me, the one thing Geithner's efforts should be measured by is whether they allow the resumption of lending and thereby help reduce unemployment. I have not heard the word "unemployment" used by most of the bloggers discussing the issue.

Paul Krugman is an excellent economist, but he's not the economic-minded political animal that's needed in the Treasury.

It amazes me that so many of these political commentators can't see the essential politics of this situation. They argue that policy isn't headed in the right direction, and go from that immediately to calling for the head of Geithner.

There are some insightful and level-headed critiques of current policy being floated, for example I'm a particular fan of Jerome a Paris' diaries (especially the one on the rec list over at DKos at the moment). For me, the question that the CLs should be asking is, "how do we change the course of the car without driving it off the cliff?" but they tend not to get this far in their thinking.

Al, Field Hands, how would you suggest that policy could be influenced without committing lemming-like suicide?

The pattern is really getting old.

Obama does something perceived as less-than-progressive.  The howlers complain that the action is awful, doomed, a betrayal, etc.  Instead, they rant, he should do something more progressive and less bi-partisan. 

But each time, the critics fail to acknowledge that Obama may well have gone as far as he realistically could towards "the left."  They seem to think that all he has to do is loudly proclaim a goal and the rest of D.C. will just snap to attention.  And they give zero consideration to the likelihood that the alternative would be even worse.

Someone should teach them the axiom, "politics is the art of the possible."

Al, thanks again for your sane and rational approach to the scene.  Republicans are desperate, since they realize that, if President Obama manages to solve this thing, they are toast for a very long time.  As you said, they are willing to torpedo the whole economy to stop that from happening.  I don't know if Geithner is the right guy with the right plan, but President Obama must stand behind him and see it through.  We can only hope that, as before, he can see further down the road than many of us and is going to succeed once again.

JoAnn

I am truly grateful for your analysis. God bless you, Al.

Its frustrating to read people who act like Geithner can clean out his desk on a Friday, and Monday morning Treasury Secretary Howard Dean can jump right in. So I'm eager to hear what they have to say to the 3 Big Questions.

Wonderful work.  The utter certainty of the 'we're so screwed' brigades is just completely debilitating.  Thanks for taking them on. 

1 Ken Chenault of AXP

2 The president's will to have someone go to a press conference and not act like Sylvester here

:http://www.youtube.com/watch?v=KIDroMZu4SE&feature=related

3 He is very familiar w/ the role of credit and more representative of them than Geithner

Al,

I truely believe some of these people think Krugman know it all. Yesterday on daily kos rec. list there was a dairy on starting a campaign to replace Geithner with Krugman. As for HuffPost, they have been gunning for Geither all week.

Hi Al, I've been reading your column for many, many moons, now (you effectively got me through the presidential election).

You are pretty much the only safe harbor upon which my mind can rest. Thanks for being on, what I consider, the right side of the arguement. So much of this is the classic shoot-yourself-in-the-foot "progressivism" that I consciously avoid. Now is the time to be pragmatic and think through what we're really saying. We no longer are under King George, so acting like a bunch of fools will get us nowhere.

The time is ripe to be engaged and willing to participate and actually make things right. Acting like a crazed, out of control mob a-la the French of the late 1700's is untenable. (Clicking on the HuffPo front page makes my stomach turn, as it stokes the mob mentality fires).

So, again, thanks Al. Obviously the last time "nationalization" was being whispered about Citibank, the stock market just about dropped below 6000. Seeing Obama circled by both GOP and leftist hounds, foaming at the mouth, is simply sickening.

Al,

I have found myself LAUGHING out loud quite often over the past 9 weeks.  No more so than this past week.

Average Americans are just so DUMB -- they seem to actually be blaming AIG itself for the bonus fiasco rather than the Obama administration.  What the heck is wrong with them?

http://content.usatoday.com/communities/theoval/post/2009/03/64506229/1

Next, I find all of this a little too pathetic for words.  Back in the day, we used to have a word for a lot of the armchair populist -- they were poverty pimps.  Those of us who have spent A LIFETIME organizing in communities of color are not fooled by the latest cable created "populist" uprising.  Am I to believe that Hamsher, Sirota, and HUFFINGTON are going to deliver me?  What a JOKE!  I spent this weekend knocking on doors.  In total, over 1 million doors were knocked on across the country.  I plan to keep on building on the ground level.  No one I talked to this weekend even mentioned the BONUSES.  All of them mentioned how much they wanted the President to succeed in implementing his priorities. Spare me the FAKE populism.

I also have problems with the selling of the nationalization plan. This is like the Gillibrand debacle where Caroline Kennedy was put up, and everyone discussed the pros and cons of her nomination. Everyone dumped on her, and then Gillibrand is nominated with no scrutiny, who was a much worse choice at the end of the day.

Right now, there is just dumping on the Geithner plan, but we are not weighing the pros and cons of nationalization or other options. Through nationalization, there is still a cost to taxpayers. There are people who think there is no downside to nationalization. If the shareholders and bondholders take the hit, what happens to people's 401ks, pension plans and endowments that are tied up in this mess?

Also, I saw an interview with Obama were he said that he wanted to protect the integrity of the bond markets. He said they were afraid that people would not believe in the integrity of our bond markets in the long term. I thought that was an interesting tidbit and felt he was refering to foreign countries that are buying our debt.

I think we should put all the ideas on the table and debate the pros and cons, instead of trashing one plan and calling for the Treasury Secretary's head. When all is said and done, nationalization may be the best solution. That way we all know what we are getting into.

Robert M - I think Kenneth Chenault, CEO of American Express, is a fine human being (as I think Tim Geithner is a fine human being), both with integrity.

That said, a nomination of Chenault will get caught up in the same punches from the right and the left as Geithner: His company, American Express, has been slammed for many of its practices toward card holders, and for, last November, seizing upon the crisis and bailout by entering the banking industry to exploit the crisis. It's received billions in federal bailout funds already. Unlike Geithner - who never worked in the private sector - he comes out of the industry being bailed out and needing regulation.

I don't think that would disqualify him, but I'm not one of the US Senators sitting on the confirmation committee hearing. Politically speaking, you're going to get the same problems: the right will jump on his company's acceptance of bailout funds and in faux populism scream that the fox will be guarding the hen house. The left (and there is a segment of the white faux populist left whose problems with Obama include a visceral but unacknowledged racism that will extend to Chenault, as an African-American, too) will rail that he's from the industry that needs to be regulated. All of American Express' credit card lending practices will be on the table (and there's no small segment of the population that has accused it of abuse, just as with the other credit card companies, and probably a lot of it is true).

I respect Chenault, but I see a shitstorm and a long delayed process if he were to be nominated. Then again, I respect Geithner. I just think Chenault would fast get into the same pincer effect between right and left that Geithner finds himself in today, leaving the political storm uncalmed but the recovery further delayed by many months.

That said, thank you for being the first to offer a serious suggestion!

I never supported Geithner for Sec of Treas, since I knew that it was Summers who pushed for his appointment, the same Summers who helped Rubin write - and advised Clinton to sign - the Glass-Steagal Act that helped to deregulate the financial services industry.  I found the argument made by Pres Obama that Geithner was the only person qualified to serve as his Treasury Secretary specious, especially given the fact that Geithner was president of the NY Fed Reserve while all the thieving was being done and either, like the SEC, he looked the other way or, like the SEC, he was down with it all.

Pres Obama didn't tell me anything that I didn't already know last night, and for me, there's something to be said for loyalty. No, he's not going to fire Geithner but I predict he will rue the day he kept this fox, Summers and a few other economic advisers, in his hen house. The president isn't all-wise and all-knowing and he certainly isn't perfect.  He is bound to have made mistakes in his appointments, and he will also make mistakes is governing.  I think the Geither appointment is one of them.

Without replacing Geithner, other more honest and workable proposals can be put in place. Like it or not, Krugman succinctly explains why the PPIP isn't a good plan, and while I often find Krugman to be a bit behind the curve with his pronouncements, today's column is admirable. The PPIP is progress in a way, because it does get the stinking mess that is the Tier Three asset stew set up on the front burner, but that stuff is really awful smelling and the Private part of the PPIP will be holding their noses while they bid. Additionally, this is still the same old taxpayer bailout, but maybe not so egregious as the Paulson Plan that he could never bring himself to implement. I also do not appreciate the other Trillion Dollar plan, the Treasury bond buy up, and I do not appreciate the general assumptions of this administration {and all previous US administrations} that we need to unlimit growth. Indeed, while Al would maybe like to see anarcho-sindicalism one utopian day, and doesn't think the time for that is now, I think we will be facing some much more radical choices very soon and I just can't find a way to convince myself that the current, unfortunately severely compromised administration {compromised by the previous administration} is making the best choices. As for who should be running the economic show, and probably is, I would say Volcker. Keep Geithner in there as quarterback, keep Volcker as Coach, keep Krugman as the game analyst, keep Obama as the front office, keep the Taxpayers as owners and get rid of the financial players and their interests and start playing this game to win. We do not have a winning game plan, punto, my dear friend Al. I am all for everything else Obama is doing, but this area is the weak place, the economic game is weak, weak, weak. For the record, I never read Hamscher or the others on your list, except for Krugman, and I read him to get an idea of which way a certain kind of wind may be blowing and never for guidance. I have no truck with any neocon or Republican program but all the same, I am not going to Believe in an economic program that isn't honest or workable. My hope here is that this is a long game, a stance, that Obama, Geithner and Volcker, maybe Bernanke, are playing out until Obama has the three point shot set up {OK we are mixing some game metaphors now, maybe it should be field goal}, but really, this little exercise we see right now is not one I can support. It isn't a question of going through a circus in Congress to get another poor fool in there to take the hits, I do not want to go there {Congress is populated by tools}, I just don't buy the game plan, and I will be proven correct. Meanwhile, this is going to be a very interesting week and the G20 week will be one too. I love your work Al, and I hope you can see by my careful statements that I am still agreeing with you. Lets see Tim run some different plays and I could be all kinds of happy, deliriously so.

One thing that strikes me about the debate over the efficacy of today's plan is that I keep hearing pronouncements about "it will never work" or "give it a chance," with little explanation about what success even means.

Obama has made clear that this is one prong of an effort to turn around the economy.  Fair enough.  I get that it's all inter-related.  But how do we know if the bank-stablization effort prong is a success.

What does success even look like?

Yvonne S - Yes, there was no shortage of people shouting that Obama shouldn't hire Geithner (along with the unsubstantiated conspiracy theories of the sort that you repeat here: "I knew that it was Summers who pushed for his appointment, the same Summers who helped Rubin write - and advised Clinton to sign - the Glass-Steagal Act that helped to deregulate the financial services industry."

You knew that? Really? Or you speculated that, right, and called it knowledge!

You don't know that. And in any case, even if it had been Summers recommending or pushing him, the guilt-by-association extending to Geithner the opinions of Robert Rubin on Glass-Steagal is McCarthyist, no different than those trying to push the opinions of Bill Ayers or Rev. Wright upon Obama during the campaign. 

I'm the only Netroots blogger that's been sued by - and won against - one of Robert Rubin's Citigroup companies. I know more about Rubin and Citigroup than most of the bloggers that rail against so-called "Rubinites" today. And I think the guilt-by-association charges are sleazy and ridiculous. Geithner is various steps removed from Rubin, he never worked for Citigroup, he never even worked in the private sector.

So your complaints are all based on falsehoods. That's not "reality based."

And you've failed to answer my three questions - as Robert M. had the decency to do - nor spoken to the chaos and economic damage that would be caused by a sudden vacancy now at Treasury, so, really, how are we supposed to take your complaint seriously?

Al, lately most of your posts seem to be about personalities; mostly those of folks on the left you find politically naive or otherwise wanting.  Does actual policy enter into your calculations?

Maybe I've missed it, but I haven't seen Krugman, for instance, call for Geithner's resignation or firing; certainly I haven't noticed him "leading the Dump Geithner charge".  From what I can tell, he actually believes these policies are disasterously wrong. 

Last year when he obsessed about the mandate issue in Obama's health plan, I thought Krugman was being politically dumb; and his descent into ad hominem attacks in the primary was embarassing.  But this is macroenomic policy, which is Krugman's wheelhouse, and he's made some pretty convincing arguments that the Geithner banking plan is a bad idea and likely only to prolong the problem.  I've seen some try and refute those arguments (Brad DeLong is one), but AFAICT most smart people who study this stuff think he's got some points (I don't see any short-term rally on Wall Street as a serious evaluation). 

I certainly agree that firing Geithner would be a stupid move.  That has nothing to do with whether Geithner, Summers, Bernanke, and ultimatly the President, are persuing policies that will worsen our situation rather than better it.

AIG is the biggest Asian insurer as well as the biggest American insurer. If they are handled in the wrong way, maybe Indonesia would end up like Iceland. And to be honest if I were an Asian investor or politician I would be very wary of the "off switch" for my country being in American hands indefinitely. Especially if I was bankrolling it like China/Japan. What do the asian nuclear powers think of Geithners plan? A lot of people seem to ignore the foreign policy implications of any given plan and just focus on the domestic economy.

@Allie and John

I read an excellent comment here http://www.balloon-juice.com/?p=18910#comment-1182890 which seemed to explain some of the criticism from people like Krugman/Greenwald.

O/T Is it too early to label the upcoming financial reforms the Geithner reforms? A few republicans populist bluffs will get called hard, invest in popcorn...

Thanks Al.  I sure would like to know where Krugman was the past few years when AIG and Goldman and Paulsen and Co. were up to nothing but billion/trillion dollar shenanigans.

This link is a great article by Matt Taibbi in Rolling Stone.  If Rolling Stone can figure out the AIG deal now, you would think Mr. Nobel Prize may have been able to do it a few years ago. 

http://www.rollingstone.com/politics/story/26793903/the_big_takeover

You will be slammed from here to Bamako for this.  I have written at KOS pointing out the fact that so many of the white elite are losing it over Barack.  When I talk to my friends and family, the racial dynamic of this virulent critique comes up constantly. However you sure as hell better not bring this up in the bloggosphere.

Somebody must like what he is saying.

3.57 Jim -- not much time will be needed to see if the junk gets bought. But it will be a long time before the answer about the taxpayer being ahead, behind or crapped out {he and she have no say, NO SAY AT ALL in this crapshoot} can be answered. If the banks that are dumping the toxic assets {are they really assets?} on the taxpayer pull out and get some stock value traction out of all this, then in a way, that may be called a success, but I wouldn't define it that way. Someone is still holding the bag, a stinking bag at that, and it won't be me because I reside in the best Federal tax haven in the world {Puerto Rico}, but despite my lucky escape from this mess, I have a great deal of sympathy for my fellow US citizens throughout the rest of the globe, all of whom Sam expects to save the corrupt institutions inside and outside the government. It is an outrage, I sincerely cannot fathom how hundreds of millions of citizens stand for this.

Al, I have just one question:  Why can't all the people on the Left - people I generally think of as right-minded, generous, progressive Americans with nothing but the best intentions - be as sane as you?  Over and over again, all of these sectors of the Grand Progressive Coalition (which, so the Right would have you believe, is marching in lockstep toward Moscow as "The Internationale" plays gaily in the background) get riled up over some obvious bit of mainstream-media distraction, like the AIG bonuses, and lose all sense of proportion.  Do they not see that attacking Geithner and howling for his head is <i>exactly</i> what the desperate GOPers most want us to do?  Doesn't being found <i>in agreement</i> with the yammering talking heads give them the slightest pause?

Thank goodness Obama stopped listening to all these people long ago - if he ever did.  Heaven help us if he'd given in to all their armchair quarterbacking and (in the case of the Hillary diehards) concern-trolling throughout the campaign, when everybody knew EXACTLY "what he had to do to win" - namely, <i>anything</i> other than what he was actually doing.  We all know how disastrously that turned out for him.

I sigh more and more often, when reading some of the same blogs that used to be indispensable reading - maybe it's just that we just got so addicted to "anger at the Administration" as a motivator during the Bush years, that we can't let it go now that it's served its purpose.  Again, thanks for providing a much-needed island of sanity in the midst of all this clamor.

Here.

Michael - You're correct in that Krugman hasn't technically called for Geithner to go. I've corrected the diary to reflect that fact.

Al, You are a voice of sanity in the blogosphere.  One thing I tell people when they rail and ask "Why doesn't Obama do what FDR did?" is that we are only 6 months into this mess (using the middle of September as the "start date" of the economic meltdown ... I know that's wrong, but that's when the media and the average person became aware that there were/are serious problems with the economy).  No matter what we think is the "right" course, there is only so much the political system can bear at the moment.  Given the push back meme of "Obama is trying to do too much" it is clear that Obama is pushing against those limits.   The Great Depression was over 3 years old when FDR became president and the situation was dire enough that he had nearly dictatorial power ... Obama does not have that power (yet).  So, we will  not get nationalized banks until the situation demands it.  We will not get vast public works projects until the situation demands it.  Obama cannot make it happen by wiggling his magic nose ... it will only come when the more "moderate" steps have been taken, because that is the nature of the system we live in.  No way -- at this point -- to short circuit that process.  Oh, and btw, no single payer health care reform.  We will reform the system we have, not create the system we wish we had.  Just the way life goes for those adults among us....

WestCoastWizard

The Rolling Stone article is fairly flying around the internet, I got it this morning.  A very worthwhile read.

Ran into your post over on Kos and read the 60+ comments. Looks like there are some cooler heads there than I thought. Some cooling ones too. In fact, the whole comments section sounded as if it were written by thinking individuals. How wonderful. See how informed journalism raises everybody's IQ. Thanks again, Al.

@Catherine. Thanks for the link. I agree. Mr. Krugman may believe he's correct but how many times does he have to say it and, given the history, why didn't he say it earlier.

Finally someone with sanity about the situation. 

Obama has Geithner's back and Geithner has his. I'm sure that identifying whether this would remain so during tumultuous times was a leading factor in Obama's choice of Geithner in the first place.

The Obama team has almost 4 years to get the Economy back on track. So what's going on right now is just the beginning. Obama went public recently, and 'signalled' that AIG was like a "terrorist with a bomb strapped to their body and their hand holding the detonator", and that "Credit Default Swaps" and other stage 3, shaky, financial 'gambling' is the fundamental of the worldwwide economic crisis.

Note: He had to 'Go Public' like he did because the bought and paid for media, would not let this information out into the Main Stream otherwise. Obama said it plain. Everybody else was dancing around the issue wrapped in deep opacity.

What was 'O' 'signaling' ? I think it was that the derivatives traders at AIG are the eco-terrorists that are holding the country 'hostage'. And therefore... we are going to have to make some BAD deals for a while as a concession them, to diffuse the situation.

There's also been commentary, again by Obama, about establishing a 'Consumer and Business Lending Initiative', which would be a joint venture between the Fed & Treasury. "This program will start out with $200 Billon in financing for consumer loans, small-business loans and some corporate purposes" (NY Times 3/19) "Fed officials have said they hope to expand the program next month, possibly to include the huge market for commercial mortgages, and both the Fed and Treasury hope the program will eventually provide up to $1 Trillion in total financing."

This sounds like the Willem Buiter 'Good Bank' scenario come into being... but with a price. 

This 'Consumer and Business lending Initiative' could be the 'balance' that provides a quality alternative to a broken banking system. Competition will force the Big Banks to get real. 

I think that over time, Geithner will be seen as doing a good, to great, job. Let's stay tuned. 

Good post.  I've been surprised how few media voices seem to remember that Senator Shelby and other Republicans are on record as wanting Obama to fail.  Knowing that, why should we take anything they say at face value?  Whether this new bank plan will work, I do not know.  I also don't know whether nationalization/reorganization would work. Krugman strikes me as someone who doesn't really care to consider what policy alternatives are actually possible to carry through politically.  He's carrying out an academic discussion.  There are other economists critical of Treasury (Rubini, Stiglitz, Dean Baker) who seem to have less of an axe to grind than does Krugman.  Of them, Baker has some political experience but now just does policy, and Stiglitz has bureaucratic experience but didn't have the stomach for bureaucratic BS.  In other words, these seem to be people for whom political strategy not a primary consideration.  Obama and Geithner don't have that luxury.

Here I would raise the potentially wise political strategy of re-labeling so-called "toxic" assets as "legacy" assets.  Some may call this bait-and-switch, but in many ways this is as accurate or more accurate than the toxic label.  This will be even more so as Obama rolls out his proposals for re-regulating the finance, insurance, and real estate sector.  The loans, and the crisis, are a legacy not just of Bush but of the (non)regulatory regime that collapsed this past fall.  The incoming New Deal, that we will soon begin to fight over, will first of all lower expectations for profit rates.  The outrageously high profit rates of the past decade have skewed investment and fueled hyper-exploitative economic relations. The fight going forward is over how a smaller pool of profits will be split.  Expaned public education, health care, etc, these will be financial structures that return some of the profits to the people.

This is not a zero-sum game.

If Geithner does leave the Treasury Secretary post, the replacement won't be Krugman, ut former Iowa Republican Representative Jim Leach.

Democrat for US Senate (Wisconsin 2012)

Krugman, on NPR earlier today, defined success as the banks selling their toxic assets for 55 or 60 cents on the dollar. He still hasn't offered his alternative plan that would unscramble the mess without leaving tax payers on the hook -- but at least he gave a number by which he can be held accountable.

Please note, assets coming off of a recent receivership of a bank were selling at about 35 cents on the dollar, with the FDIC (ultimately backstopped by taxpayers) making up the difference. 60 cents on the dollar has been what the banks have been holding out for. So Krugman's setting the bar rather high at 55 cents. We'll see.

Of course, that still wouldn't take taxpayers off the hook. In fact, the lower the sales price, the less taxpayers are on the hook -- but, also, the worse the bank balance sheets look and the harder it will be to get them lending again.

Great post Al, you took on a lot but really nailed it.

As I've been watching the news and reading the blogs, I find myself increasingly agitated at the comments that are coming from the "activist" left - people who I am ideologically similar to. Not only are these bloggers being totally unreasonable but they are damaging the chances of any of the reform that they desire from happening. By attacking the president through the media the left is attempting to sabotage the administration through the political equivilent of a scorched earth policy.

Don't agree with the adminstration on this one issue? Here guy's have some stones, if we can damage his credibility enough maybe we can make sure he never gets anything done again!

Now, I'm not suggesting that we just sit back and agree with everything Obama says and does. Far from it but there are ways to affect change without destroying the President in the process. More than anything, what kills me is that these people don't just disagree with the President. They actively try to portray Geitner and Obama as big money, Wall St whores. It doesn't make a bit of sense. Why would two public servants risk their country and legacies just to line the pockets of a few buddies on Wall St and in big pharma? Do people realize how silly it is to make those allegations? It's conspiracy theory bullshit and needs to be called out as such.

But the larger question I have is: Why are these bloggers trying to take down Obama?

Are they still in attack mode from 8 years of a presidency that DID need to be rendered ineffective?

Are they trying to set themselves up for an "I told you so" about their original candidate of choice?

Are they secret supporters of Palin?

Are they so ideologically pure or ignorant of the American political landscape that they will rail against anything less than perfection?

I'm glad you brought up the analogy Obama used last week in Cali, about these AIG-type folks being like a person with a bomb strapped around them, with their finger on the trigger.  I found that curious, and took that to mean these people have the power to blow us up, and Obama has to figure out a way to coax them off the trigger.  And based on the fact that these people took those bonuses, despite the fact that it's taxpayer money, proves just how ruthless these people are.  I think this current plan, while not perfect, is a good step towards getting them to remove their finger from the trigger.   Obama has to deal with a real domestic threat in these banks.  No wonder he chuckled during that 60 minutes interview.   Crazy.

Thanks for this dose of reality. Two more pieces to add:

1. Some of these folks will never get off their couches to knock on doors to pass a progressive budget. They'd rather throw darts. And they'll never understand that you can't get anything done without a basic understanding of the dynamics of American politics.  The "idealism" they have has never considered that a dumped Treasury Secretary would be enormously damaging to Obama and likely won't be replaced by anyone better.

2. Luckily most Americans are NOT caught up in this. See Obama's 65% approval ratings in Gallup.

Al -- thanks for your "port in a storm"

I guess the other problem that I have with so much of the criticism of the policy is that specific alternatives get kind of mushy when you push on them.

I have asked critics elsewhere to honestly give me the down side to whatever they propose.  Usually they want some form of nationalization followed by receivership but what I question is that the process for that is given short shrift.  Many of the institutions that are core to the problem are hybrid jumbo financial institutions for which regular receivership or nationalization could not be done in the current legal framework.  We would have to pass legislation or something like that. 

Critics have also walked past the international nature of these holdings and the scope of risk to everyday Ma and Pa's if they collapse in a big way.  They pretend that the only pain to the taxpayer is from the Geithner proposal, not from their own --- that their alternatives I guess would be without cost which is total bull.  They also do not know if their alternatives would also have some probability of failing in some part.

Where is the honesty?  I am happy to debate pros and cons if we actually do that.  What I see though is a lot of anger and I think that gets funneled to Geithner.  He has become the poster child symbol of "all that is wrong with the system", even more than Liddy, the AIG CEO!  Amazing...

Obama and Geithner will weather this.  I DO think that they have to stay alert to the populist emotion wave and play it as well as deflect it onto the opposition.  Talk about elitist -- Krugman and the others were not elected or selected by me and yet I have to take THEIR solution as fact? Naw!

Again, I welcome and think it is necessary to try to have an open and fair exchange of information and discussion about alternatives and implications of alternatives.  But I won't be bullied into submission by a bunch of elitists who do not recognize or acknowledge their own anger honestly and therefore are pushed to a set of actions that may not, after the heat of the moment, really be best for the people.  Obama has not been called to overthrow all of the old system, but to deal with making it better and stabilizing it to a point where we can work towards permanent change.  As you said Al, change comes from the people, not from the elites dictating without a constituency.  Right now the little guy is still at risk and nothing these people are doing or advocating is changing that....

Putting aside the defense of Geithner for a moment, what I don't understand in your defense of his staying on is based on politics. If I have understood you correctly, one of the essential reasons you give for not firing Geithner is that, in essence, it will kill Obama politically because the Republicans will make it so. This seems to fly smack in the face of one of the things you do very well: point out time and time again how Obama is far more of a political genius than many on the left give him credit for. It is as if you are saying that if Obama fires Geithner that would turn his political Cinderella story into some kind of pumpkin. What?!

I think your seven-point doomsday scenario is, to use the word you used over and over in the Kos diary, flawed. First, I think if anyone has laid the groundwork for absorbing such a move it would be Obama. He has said time and time again, has he not, that if his administration makes a mistake (as it inevitably would, because it's human) he will admit it early and change course when said mistake was revealed. So if, in the face of not just Krugman and the bloggers you deride on this blog but experts and columnists all over the spectrum, it is shown that Geithner is the wrong leader trying to execute the wrong policies at the wrong time, why would that not fit into Obama's admit-and-move-on scenario? It's not as if Geithner has a popular constituency - my guess is that his resignation/firing/whatever would be welcome from most sectors.

But go on to your scenario of the Republicans blocking whomever Obama would appoint next (my favorites for Treasury would be Dean Baker or Robert Reich, with Joseph Stiglitz or Paul Volcker or even, gasp, Krugman running the Council on Economic Advisors) ... you see an already-hated Republican minority acting gleefully to stop someone who by then would undoubtedly be proposing a new plan (likely one, again a pure guess here, of the temporary nationalization approach of Sweden) doing so and, apparently, then triggering yet another economic plummet, transparently for the sake of political gain -- and that they would then looked at as the good guys? With all due respect, are you kidding? I would argue such a move would backfire just as spectacularly as everything else that the "Party of NO!" (as Maddow is calling them) has done. 

In short, I think you woefully sell Obama out short in an effort to try to win an argument by defending his decision to keep a guy he shouldn't keep -- and ironically, under different circumstances I get the sense you would agree. But you seem to be arguing that without Geithner there is an even worse scenario that is more catastrophic than Geithner and his plan.

To quote a wise blogger, I (respectfully as always) reject your premise.

Great post, Al.  I had figured out that Geithner's departure would be a political disaster, but I don't have the chops to think step by step though how the chain of consequences would likely go down.  The thought that a senator might place a hold on a candidate for Treasury secretary in these times is horrifying - but you're right that they would. Or that the president has to assume the worst case and act accordingly.

Supporting Geithner's plans is a dicier proposition for me.  I'm concerned by the quiet noises from people associated with the IMF that any real fix has to put the people who caused the problem out to pasture and restructure their institutions so that they can't do this again.  So far we seem to be treating these people with kid gloves, and any new regulatory oversight is lagging months behind the money we're doling out.  

I'm also concerned that we're investing in a plan too complex for most people to understand.

In short, I understand that policy matters more than the identity of the secretary. Where policy is concerned, l'm worried that this will be an expensive fix that doesn't work. Time will tell, and I'm hoping my fears will be proved groundless - but for now I'm still worried.

Hello everyone,

   I just want to reiterate what a couple of people have already mentioned, that Paul Krugman, while certainly not the most politically attuned person to the political realities on the ground, is first and foremost an extremely accomplished Economist (winner of the Nobel Memorial Prize this year), and second a very good writer regarding economic issues.  He was very clearly aware of the bubble goings on and other imbalances in the economy over the past decade.

    He has also called for the stimulus package to be much bigger, and though he's probably right theoretically speaking, I believe Rahm Emmanuel has welcomed him to try to help get something bigger through Congress, in that brilliant New Yorker profile.  In short, right on Economics, out of touch on politics.

    There has been some very astute commentary on some of the Econ blogs I have been reading, saying basically that if indeed bank nationalization has to come to pass, it will have to be when Congress (including some Republicans) have realized that it is our Last Chance.   Krugman's column today was basically just saying if we (or rather, Obama/Geithner/Bernanke/...) blow it now, there won't be a second chance.

     But I think the better take is: http://www.prospect.org/csnc/blogs/ezraklein_archive?month=03&year=2009&...

Last but not least, awesome post Al, once again.