Pulitzer Prize-winning author Ron Suskind has a new book "offering an insider's account of the White House's response to the financial crisis." In it, he writes that "U.S. Treasury Secretary Tim Geithner ignored an order from President Barack Obama calling for reconstruction of major banks."
Suskind interviewed more than 200 people, including Obama, Geithner and other top officials for "Confidence Men: Wall Street, Washington, and The Education of A President," which will be released Sept. 20. The Associated Press purchased a copy on Thursday.
The book states Geithner and the Treasury Department ignored a March 2009 order to consider dissolving banking giant Citigroup while continuing stress tests on banks, which were burdened with toxic mortgage assets.
In the book, Obama does not deny Suskind's account, but does not reveal what he told Geithner when he found out. "Agitated may be too strong a word," Suskind quotes Obama as saying. Obama says later in the book that he was trying to be decisive but "the speed with which the bureaucracy could exercise my decision was slower than I wanted."
Geithner says in the book that he did not recall that Obama was mad at him about the Citigroup decision and rejected allegations contained in White House documents that his department had been slow to enact the president's plans.
"I don't slow walk the president on anything," Geithner told Suskind.
Some of it seems rather gossipy, as "insider accounts" of the White House always are, but should be taken at face value, since the principles confirm it. Note that President Obama wasn't ordering a dissolution of Citigroup, or any other bank, but wanted Geithner to explore it as an option. That Geithner didn't shouldn't come as a surprise, nor really should the fact that there weren't repercussions for Geithner, at the time. Still in the heart of the crisis, shaking up the administration's economic team could have further destabilized the situation.
However, I think David Dayen hits on a key take-away from the story:
[T]here wasn’t a plan in place ALREADY. Citi and Bank of America were on life support at the time. There was a big public debate about nationalization or the “Swedish solution” or other methods for winding down banks. Obama actually mentioned it on 60 Minutes at the time. Treasury was engaged in faulty stress tests to supposedly see if such a wind-down would be needed. It is said that the Pentagon has plans for attacking Canada. The fact that there wasn’t a plan for winding down Citi under the circumstances is worse than insubordination, it’s incompetence.
That's why it's still a problem that Geithner hasn't lost his job in the intervening two and a half years: incompetence. The HAMP debacle itself would provide ample justification for his firing.
There's ongoing discussion on this in andrewj54's diary.