Washington's Whipping Boy

By Gross, Daniel | Newsweek, August 20, 2012 | Go to article overview
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Washington's Whipping Boy

Gross, Daniel, Newsweek

Byline: Daniel Gross

Geithner won the crisis. But has he lost the recovery?

Timothy Geithner tried to talk Barack Obama out of appointing him Treasury secretary in late 2008. Along with Federal Reserve chairman Ben Bernanke and President Obama's all-star team of advisers, Geithner was a core member of the rescue team that won the financial crisis of 2008-09. The TARP programs, market interventions, and the stimulus of 2009 stopped the panic, halted the economy's cataclysmic fall, and created the conditions for growth. "At the New York Fed and following at Treasury, Tim's actions have been heroic," says Roger Altman, a former deputy Treasury secretary and the current CEO of investment bank Evercore. "I think that history is going to view the response of the U.S. to the credit market collapse of 2008 as a historic and textbook response."

But since late 2010, the narrative surrounding the group that author Noam Scheiber dubbed "the escape artists" has been less about winning the economic crisis and more about them losing the recovery. Most of the members of the brainy, contentious Obama financial team--economists like Larry Summers, Peter Orszag, and Christina Romer--came and went rather quickly. But Geithner, whose involvement in the rescue efforts predates the Obama administration (he was president of the New York Federal Reserve when things went south in 2008), is one of the only members of the economic team to stay for the duration. His reward for sticking around? Slogging through a subpar recovery, grappling with politically imposed debt crises, and trying to cajole Europe into acting to prevent its own meltdown. Oh, and shouldering a share of the blame as the administration threatens to snatch economic defeat from the jaws of its early financial victories.

"We still have a recovery that is pretty broad based and looks pretty resilient given the broad constraints we face," Geithner tells Newsweek, stopping to talk after a flight from Europe--where he had been trying, for the umpteenth time, to convince European central bankers to decisively tackle their sovereign debt and banking crises. "I don't believe it's fair to put that on the president."

Geithner continues to serve as a lightning rod for criticism aimed at President Obama. Now comes Bailout, the New York Times-bestselling memoir by Neil Barofsky, the former inspector general for the TARP program. The acid-drenched polemic pins much of the administration's failure to fix the housing mess on Geithner. "From my experience, he was incredibly dismissive of dissenting views," says Barofsky. "We could not have a respectful disagreement on an issue like transparency in how banks use TARP funds."

The crises that catapulted Geithner into prominence began four years ago this month. I first encountered him in the fall of 2008, in the fortresslike headquarters of the New York Federal Reserve, when he sat down and walked me and two other journalists through a bunch of charts on interest rate spreads. Approachable, young (he's only 50), not averse to being addressed by his first name, Geithner has the mien of a consultant rather than a financial statesman. And the career bureaucrat made an unlikely choice for Treasury secretary. His predecessors at Treasury were generally middle-aged men who had been titans of business or finance, possessed of vast fortunes and hair that was silver or gray (when it was there at all). "If you look at a guy like Jim Baker at Treasury, or [former Fed chairman] Paul Volcker, they had a certain moral authority or personal authority," says Mort Zuckerman, the real-estate and publishing magnate who backed Obama in 2008 but has been disappointed by what he views as the failure of the administration's economic policies. Geithner's age, resume, and carriage didn't comport with the traditional image of the office. Or, as former chairman of the House financial services committee Barney Frank puts it: "I mean, part of his problem is he's young-looking.

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