Geithner bashing not seen threatening job–for now

By David Lawder – Analysis

WASHINGTON (BestGrowthStock) – Those seeking clues on whether U.S. Treasury Secretary Timothy Geithner will keep his job after another congressional scolding got a big one for the “yes” column on Wednesday night — a warm embrace from the boss.

As a grinning President Barack Obama made his way to the podium in the Capitol building to deliver his State of the Union address and he stopped to put his hand on Geithner’s shoulder, chatting with him longer than others he greeted.

“They arranged it right at the end of the aisle, perfect for the cameras,” said Larry Sabato, director of the Center for Politics at the University of Virginia.

The greeting showed there was “not a chance” Obama would abandon Geithner despite the bashing the Treasury Secretary is taking over insurer AIG’s bailout, Sabato said — at least not ahead of mid-term congressional elections in November.

“Obama likes him and is likely to keep him,” added Thomas Mann, a senior fellow and congressional scholar at the Brookings Institution, a left-leaning think tank in Washington. “Firing him would be a sign of weakness on Obama’s part and he is trying to show strength and resolve.”

Geithner has become a lightning rod for populist anger at Wall Street due to his role in bailouts as head of the New York Federal Reserve and in running the Treasury’s $700 billion bailout program. With Republicans emboldened and many Democrats running scared after Republican Scott Brown’s stunning Senate victory last week in Massachusetts, lawmakers queued up on Wednesday to take swings at the Treasury chief.


At the hearing before the House of Representatives Oversight Committee, Republicans sought to lure Geithner into incriminating or at least evasive answers over how the New York Fed and AIG decided in 2008 to limit disclosures on $62.1 billion in payments of taxpayer funds to top global banks. One Republican even asked him to step down.

Democrats, led by Rep. Stephen Lynch of Massachusetts, tore into Geithner for not trying hard enough to win concessions from banks in retiring AIG credit default swaps.

“It just stinks to the high heavens what happened here. I don’t like the obfuscation,” a finger-pointing Lynch shouted at Geithner.

Geithner took the scolding but stuck to his message that no, he wasn’t involved in any disclosure decisions, but yes, he chose to pay off the banks at par value to ward off threats of a devastating credit downgrade for AIG. There was no clear indication he knew about an alleged “cover-up”.

How did Geithner perform? Several observers say he escaped mortal injury, but will need to fight hard to win trust in Congress amid lingering bailout anger and agonizingly slow job growth that has voters questioning Obama’s agenda.

“He was pinata number one for just about everybody, and he survived,” said Norman Ornstein, resident scholar at the American Enterprise Institute, a right-leaning Washington think tank. “This was not a performance that took a bunch of skeptical lawmakers and turned them into believers.”


In Minnesota, where Geithner flew on Thursday to stump for an Obama jobs and business tax credit bill, Geithner seemed to take the harsh criticism in stride, calling it “part of the privilege of office.”

Despite the show of support from Obama — one of several that the White House has had to provide over the last few months — Geithner will continue to face calculations of odds for his ouster, partly because he won’t be able to shake his association with Wall Street and the bailouts.

“Geithner is a liability to the president and his administration because of his dual role of New York Fed president that presided over the Wall Street abuses and his second role of secretary of Treasury that executed the Paulson plan,” said Tom Sowanick, chief investment officer of the Omnivest Group in Princeton, New Jersey.

“He is too close to the Goldman Sachs fraternity.”

When Obama announced plans last week to curb bank risk by banning depository institutions from hedge fund, private equity and proprietary trading activities, he called it the “Volcker rule,” signaling to some that policy-making power had shifted away from Geithner to former Fed Chairman Paul Volcker, who has been advising Obama. The administration has denied that Geithner was sidelined in the decision.

Geithner’s tenure is closely tied to the performance of the economy and if job creation does not resume fast enough to boost Democratic fortunes in November’s election, Obama is more likely to consider a change. Passing a regulatory reform bill to rein in Wall Street excesses also could cement Geithner’s position.

“The only escape for anybody in any of this is to fix the economy,” said Steve Elmendorf, a longtime Democratic campaign adviser in Washington.

“A lot of members of Congress are using this to try to make news. What they ought to do is figure out in regulatory reform a better structure that prevents this from happening again,” he added.

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(Additional reporting by Glenn Somerville in Minneapolis and Jennifer Ablan in New York; Editing by Gary Hill)

Geithner bashing not seen threatening job–for now