Originally praised as some sort of wunderkind for his financial brilliance and insider's knowledge, Geithner is proving less than competent in his role as Treasury Secretary. Part of the reason is mindset, part of the reason is cowardice.
Geithner has no good choices in front of him. That much was made evident by recent articles in various papers. But the greatest disappointment is the roll-over-and-lay-down approach he has taken with respect to financiers. This is the Wall Street mindset at its worst: the utter conviction that lack of transparency is good for business and that Wall Street could not survive without it; and that we mustn't do too much to upset the geniuses who screwed up everything in the first place.
The AIG bonuses--well-known in advance by the Treasury Department--was left a secret rather than aired so we could duke out its problems in the marketplace of ideas right away. The assumption of Geithner and Summers and their ilk was the usual presumption that they know best because this is how it's always done on Wall Street, with little regard for the PR debacle it has rightly become for the administration because there wasn't even an effort to note this problem in public early on.
Sadly the Administration is getting a black eye from this. Unfortunately, they've earned it--and then some. To think that Andrew Cuomo has to do the work of the administration to make transparent the hubris of this bonus arrangement--from the payment of retention bonuses to 11 individuals who left anyway to the placement of 100% bonus guarantees from one year to the next.
To Geithner and Summers, they think this pitchfork and firebrand-waving response of us folks in the ditches is just populism run amok. How remarkably stupid is that! This is the financier mentality in its bubble universe at its worst. What the hell did they think would happen? There wasn't even an effort to lawyer up on this, compel release of the contracts for wider scrutiny, and prepare--as so many legal professionals have commented--on negotiating better terms for the shareholders. No effort at all! None, just an "oh, well, this is how we've always done it on Wall Street" attitude. Instead of taking a stand as our shareholder representatives to AIG, they just rolled over.
This is of a piece with the additional outrage everyone here should be feeling about the fact that the collateral payments that AIG is making to all of its counterparties is dollar-for-dollar! Not the least bit of negotiating better terms and obligating banks to take some write-downs along the way.
I see an attitude problem here: a refusal to get tougher with the institutions that--like a scene more bizarre than Cleavon Little's brilliant performance in Blazing Saddles--basically hold a gun to their own heads and then make us pay them f--king bonuses to take the gun away so they can defuse the time bomb that they put in our house in the first place. This is the scenario we've inherited from AIG--that we should pay big money to its financial derivatives department staff so they'll stick around long enough to "unwind" the f--king mess they made in the first place.
I generally admire Obama for his competence and his toughness, but he's getting blindsided by his economic advisers on a repeated basis--Geithner, Summers, and I ain't got much faith in the SEC head either. He better light a fire under someone's ass there and get a bit more progressively populist himself or he may discover that the hot water he finds himself in with his progressive supporters may lead to less than lukewarm defenses of his policies in the face of criticism.