Charlie Rose interviewed Timothy at the World Economic Forum and I thought it was incredibly fascinating. It occurs to me that part of Geitner's problem is that he's little known. Most of us had never heard of him before being picked for Treasury Secretary.
Politics, as is life in general, is a dynamic process. I thought it very informative that Geitner doesn't believe in forecasting or playing economist. He firmly states, twice, that he isn't an economist. I believe we tend to think he is--or at least that he comes from that point of view. Realizing he doesn't helps us understand more of what he's doing and why.
Rose's one hour interview also informs us of what sets Geitner apart from Wall Street and GS in particular (if you can believe that he could be set appart from them).
It's a long interview so I've chosen to provide a link to the transcript rather than post the entire hour. But, here are some highlights and my take on them:
You know, we you had a crisis
caused by the fact that as an economy we were living way beyond our means.
People were borrowing more than they could afford. They were spending more
than they earned, and you had this huge growth in leverage in the financial
sector.
And when you have a recession, a crisis caused by that, it takes more
time to dig out of it. And the things that are causing growth to feel
slower now, to seem slower, weaker now, are fundamental to the process of
healing.
This is a good, and very significant, point that is not really acknowledged much. While the public might not enjoy blaming themselves, in part, for our problems The Treasury does not have that luxury. It is a fact and those are hard to ignore. Figuring this into perception of our recovery may be necessary, economically, it is hard to present politically. Pres Obama seems to have decided to seriously downplay the fact and that makes Geitner seem to be punishing the MC. In fact, the MC is going through its own correction and that makes recovery seem slower.
We see weakness in it, people are concerned by weakness in it, but
it’s really about future strength, because as the American people repair
their balance sheets, as they save more as a share of their income, as they
reduce their debt outstanding, that will make us stronger in the future.
In the short term it means growth is slower than we’d like. But it’s
fundamentally healthy for us.
Govt must always look at the long-term while the individual looks mostly at the short-term. Significantly telling from a POV standpoint, Geitner believes the MC is the engine of future growth. Therefore, to act against the MC, would be to sabotage that growth. This is a view-point very different from Wall Street's. We mostly see complaints that our Govt doesn't care about us when, in fact, Geitner cares very much. He may have studied under Summers and Rubin but he has obviously drawn a solid view of his own.
Concerning the housing market's Fannie and Freddie, Geitner is not just trying to save them.
We’re going to try to make it substantially better.
And we don’t want to be in a situation again ever where you have entities
like that (Fannie and Freddie) where you have the opportunity for private shareholders to take
advantage of the public commitment of support and earn huge sums of money,
pay that money to their chief executives.
Little of that benefit went to the homeowner. Take on huge amount of
risk that could imperil the system. And those are fundamentally avoidable
mistake. They really are.
Italics, as-well-as bolding, mine for clarity. Geitner believes that taking the benefit away from the homeowner is a "fundamental mistake". That's totally inconsistant with the claims that Geitner is a banker's tool. It also explains why we needed a person who intimately understands GS/WS, has allies and influence within those systems, yet isn't a host for their interests. It seems Geitner fits the bill. He may not be perfect but very few people with such qualifications would be.
Finally (for this diary):
TIMOTHY GEITHNER: Unemployment at 10 percent is still overwhelmingly a reflection of how serious the crisis was, how deep the damage was caused by this financial panic like we hadn’t seen since the Great Depression. And it is going to take time for that to come down.
The most important reason why it’s so high is because the economy is
not growing rapidly enough to provide new opportunities. And it’s also
true that the crisis was so scarring to confidence. It was, you know,
without precedent. Very few people running a business today in the United
States have ever seen anything like that.
CHARLIE ROSE: And so they’re not prepared to reinvest and build new
factories and hire new people because they’re waiting for what?
TIMOTHY GEITHNER: Well, they are still, again, scarred by the crisis.
They’re still a little tentative and cautious and uncertain about how fast
growth is going to be, how much demand for their products is going to be.
So although they’re investing a lot -- you know, private investment by
American companies grew at an annual rate of more than 20 percent in the
first half of the year. It looks like in the third quarter it grew close
to 10 percent, maybe a little less. But they’re still spending at a level
that is encouraging, because they’re looking past the crisis now to the
future.
And that's why it was important to Pres Obama to choose business-friendly choices for new Cabinet positions. If we can gain the allegiances of Dem friendly business's then we will also mitigate, possibly even benefit from, the Citizen's United ruling. This is an important strategy and I commend our President for taking the political risk for an economic fact.
There is much more to this interview but I've taken enough of your time. I now look forward to your thoughts.