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Defending Geithner

Noam Scheiber defends Timothy Geithner against those demanding his resignation. Scheiber is right on the merits, I think, but the politics matter. Whether Geithner did his best against a bad hand, he created a public relations disaster by bailing out Wall Street and returning it to wild profitability without doing something, anything, to satiate the public's desire for retribution against the guys who almost ruined the economy. The downside of not denying the public a piece of Wall Street's scalp is that vulnerable members of Congress now have little chance but to demand Geithner's.

And this isn't just Geithner's problem, incidentally. It's true for the whole administration. The bailouts were necessary, but they were also understandably unpopular, and there's been virtually nothing done to balance the scales. No windfall profits tax, or transaction tax. No breaking up big banks, or capping salaries across the board. Financial regulation has been sold as a constructive discussion with the banks rather than a punitive measure to prevent future wrongdoing. The absurd result is that Republicans are playing the populist card (while quietly blocking financial regulation) and frustrated congresspeople are turning on the administration, because the administration has kept them from turning on the banks.

By Ezra Klein  |  November 24, 2009; 1:38 PM ET
 
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Comments

So basically Geithner threw hundreds of billions of $$$ at a bunch of banks and Noam Scheiber considers him a genius.

Teh convention wisdom, it burns!

Posted by: leoklein | November 24, 2009 1:53 PM | Report abuse

It isn't so much retribution in my case, but a desire to prevent it from happening again and have progressive tax rates that cut the deficits to allow for policies that help the non-wealthy.

Posted by: AZProgressive | November 24, 2009 2:21 PM | Report abuse

But Ezra any balancing of the scales is Socialist!

But of course, preventing the country from sliding into total financial collapse was also Socialist (albeit more ok b/c AT LEAST it was making rich people richer).

Basically the only thing the Democrats can do to preserve Liberty is to resign en masse and abolish top-bracket taxes while invading, oh, let's say Somalia...

Posted by: NS12345 | November 24, 2009 2:27 PM | Report abuse

Geithner should quickly adopt Martin Wolf's plan to tax banking bonuses this year. It's actually not a bad policy, it is deserved, and it might allow for some catharsis.

Posted by: Castorp1 | November 24, 2009 2:35 PM | Report abuse

Omigawd, Ezra, you frustrate me. How quickly you adopt elite media themes! How quickly you turn "populism" into a dirty word!

Perhaps many Americans want retribution. I dunno. But most of us want the system to work, and we know that if you are a monstrous f*@k-up like the guys at AIG and Lehman, or a monstrous cheat who manipulated both the game and the government and pocketed billions like Goldman, and who in both cases cost the American taxpayer at least $100B and possibly as much as $500B, YOU SHOULD NOT BE ALLOWED TO DO IT AGAIN!!!!! AND YOU CERTAINLY SHOULD NOT GET RICH - rich enough to fund health care, education or retirement for thousands of Americans - DOING IT!!!!

Ezra, this is policy. The system needs to be changed so it more reliably avoids disaster and more consistently awards honest and productive behavior. Policy is what changes it. I thought you were about policy.

So please, either change this post or explain why you think this is about retribution. This is about you, sir.

Posted by: Dollared | November 24, 2009 3:15 PM | Report abuse

Scheiber is absolutely not right on the merits. This whole "the bailouts were necessary," meme is disingenuous at best. What was necessary was to stabilize the price level to avoid a deflationary spiral. There were several ways of doing this. Yes, we need a functioning banking sector. What we don't need is for that banking sector to look exactly the way it did before this crisis began. The problem people have with Geithner is he chose the path with the fewest possible consequences for the people who got us into this mess in the first place. As a consequence there has been very little substantive reform. That's bad policy, and it will cost us dearly the next time we have a financial crisis. The day of reckoning may be sooner than people think:

http://www.tnr.com/article/economy/the-next-financial-crisis?page=0,0

Posted by: nklein1553 | November 24, 2009 4:10 PM | Report abuse

It's not just the billions given to banks. Geithner is a guy who Wall Street has on speed dial. He's always looking out for their interest--whether it be regulation, taxes, or public relations. He's the point-man on China, and China is screwing US workers. He is certainly not the first Treasury Secretary to have this attitude, but he is the wrong man for the times.

Posted by: bmull | November 24, 2009 7:50 PM | Report abuse

it's really lame when you consider that the US congress finds it more palatable to discuss changing the way physicians earn money, rather than the way bankers on wall street earn money.

Posted by: goadri | November 24, 2009 8:47 PM | Report abuse

This may be an overly nuanced position, but I think there is quite a gulf between the choices of (a) free money that led to massive, record-breaking profits and (b) "retribution."

Posted by: dpurp | November 24, 2009 10:24 PM | Report abuse

Pelosi got it right - unless it is universal, transaction tax does not apply. Even if Steven Perlstein is arguing that once most Industrial nations are on board, we are covering all places where globally it is a same transaction tax. But Dubai does not belong to G20 and there is absolutely no reason for Dubai to do that so that it will continue to steal business from Europe and S. Asia. More such examples can be given.

Transaction Tax is non-starter.

More simple is:
- make capital gains payable same as regular income tax and
- simply apply 'surcharge' to salaries of folks in Financial Industry (banks, brokerages, hedge fund so on) above say 250K; whether it is bonus or regular salary.

You do not need 'Nuremberg Trials' to indict Financial Industry for the Great Recession of 2008-09. It is as clear as like Sunlight. So it must be made as an example to 'single out' these folks in Financial Industry and slap taxes on their income for at least 10 years. The scale of surcharge can be increasing as amounts increase.

Geither being a Treasury Sec. and head of IRS, he could have proposed these measure to Congress to get going these things. He is not doing that either (apart from his failure in AIG case). That is the reason, he needs to be kicked out.

Or President himself do what is needed. Otherwise, America is burning but Big Bankers are continuing their party.

Posted by: umesh409 | November 25, 2009 1:50 AM | Report abuse

Agree with most commenters here. Ezra, this post is bad on policy, low on facts, and zero in the critical thinking department. You are bleating with the rest of the flock. How smart.

Posted by: carbonneutral | November 25, 2009 12:49 PM | Report abuse

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