ECONOMY JANUARY 24, 2013
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Timothy Geithner took over as Treasury Secretary in the middle of the greatest financial crisis since the Great Depression. In four years, he helped design the largest government stimulus package in history, and contended with a weak recovery, millions of Americans losing their homes, obstinately high unemployment and complicated budget negotiations. To his fans, he is the figure most responsible for stabilizing the banking system and preventing a catastrophic economic collapse. To his critics, he was excessively generous to bankers and failed to change a system where some banks remained “too big to fail.” In a wide-ranging interview during his last days at Treasury, he kept returning to what has become one of his signature themes—the importance of putting “policy ahead of politics.” All too often, in his view, the best economic policies have enormous up-front political costs. We began by talking about the financial crisis of 2008.
LA: Your predecessor Hank Paulson in his book describes how at the height of the crisis he would have sleepless nights, worrying that a giant financial collapse was going to occur on his watch and that he would go down in history as the Herbert Hoover of the current era. Your colleagues all say you are remarkably calm, even in the middle of a crisis.
TG: Well I was very worried throughout that period of time. Starting in August of ’07 I had moments of deep, serious concern about the future. The hardest part for me was that period between when we knew we faced an existential threat of collapse but before we figured out what we were going to be able to do. Before we figured out the contours of our plan.
LA: Was that from Lehman onwards?
TG: I would say from the end of December of ’07, there was a great sense of foreboding, gathering storm, forces beyond our control. Even as early as back in August of ’07. But it dramatically worsened in the fall of ’08, of course.
LA: When you took office in January, we had had TARP, we had had all of those guarantees in place, and yet they still didn’t seem to be working. There was still a run on Citi, still a run on Bank of America.
TG: When I first met the President in October of ’08, when he was then a senator, a candidate running, I remember saying to him that the steps that Hank Paulson, Bernanke and I and others took earlier in the fall had broken the financial panic. But at that stage the economy was still eroding at an accelerating pace and the financial system was still completely frozen. So yes, it was getting worse. When the President took office, when I came in in January, at that point we were still at the edge of the abyss. And we now know in retrospect that the economy was shrinking at an annual rate of 9 percent and the global economy was in a state of near freefall too. It felt pretty bad.
LA: The way you dealt with the financial crisis will go down as your signature achievement. It turned out to be remarkably successful economically. But you yourself have said that while you saved the economy, you lost the public. Was there any way of making politics of this work?
TG: I think that’s a great question. I think it’s hard for any of us to know. My own view was that it was going to be very hard, if not impossible to design a financial rescue that was going to be effective in protecting all the innocent victims hit by the crisis and still satisfy the completely understandable public desire for justice and accountability. Those things were in direct and tragic tension, never resolvable at that time. I always felt that the only preoccupation for people in policy at the time should be to fix the problem as quickly as we could, as effectively as we could, and only after that would other things be possible, including how to figure out not just how to clean up the mess, but reform the financial system.
LA: One of the ways that people have figured out in the past to reconcile the politics was to go populist. That was what Roosevelt did. You, on the other hand, had been resolutely against that. You refer to it as Old Testament justice, implying that while it may be emotionally satisfying, it doesn’t serve any purpose.
TG: I never used that phrase as a pejorative description. I just used it as a simple shorthand to refer to the understandable need people had for justice. But the President didn’t ask me to come do this to be the architect of a political strategy. I never felt that was my thing. I had some views on the issue, but I didn’t give them much weight. I thought my job was to figure out the financial parts.
LA: Was the talk about “fat cat bankers” counterproductive?
TG: I’m biased but I felt that in the basic strategy that the President embraced and that we put into effect, we did something that was incredibly effective for the broad interest of the economy and the financial system. I feel the President’s rhetoric over that period of time was very moderate relative to the populist rage sweeping across the country. And I never quite understood why the financial community took such offense at what was such moderate rhetoric relative to what we have seen in other periods in history.
LA: Let me ask you about the way you work with the President. Presidents vary in their degree of engagement on economic policy; some get very involved, others essentially leave it to their economics team. Where does President Obama fit on that spectrum?
TG: He’s the first president I’ve worked with closely, so I don’t really have a comparison. I know what people have said about other presidents. To me, the most important thing, and the most impressive thing, about him was that he absolutely wanted to know all the alternatives. He wanted to know the merits of the alternative choices. He wanted there to be active debate and to be exposed to all the dissent. That was hugely important to me.
I always had the sense that he was going to put policy ahead of politics. And he always made it clear to people working for him that our job was to inform him of what the relative merits were of the policy choices, not to try to do the politics for him, or to limit our prescriptions by what was politically expedient. I think the country was very lucky because as you know, there have been lots of other examples in other countries, and certainly in our history, where the leaders of the country were much more reluctant to put politics aside and take the sting of a more decisive resolution. I’ve talked about this before, but I think that what really distinguishes countries in crisis are those that are lucky enough to have political leaders who are willing to take the brutal political cost of doing what’s necessary and those countries that waited and let the populist fires burn, or decided they were going to try to teach people a lesson and put populism ahead of other things. Those countries had far worse experiences in crisis than we had.
LA: Is the President interested in economics?
TG: To govern this country, at this time, you have to be interested in economics, because it’s so essential to so many of the challenges that we face. So many of the constraints that we face going forward are going to be affected by the choices we make in economic policy.
LA: Now you’ve had a pretty full four years as Treasury Secretary. What’s been the hardest and most frustrating part of the job?
TG: I think absolutely the hardest thing was trying to design a response to the crisis that would be effective, that would work over time. That was the most important thing, because nothing was possible without that. I knew with a fair degree of confidence by the summer of ’09 that the cumulative actions we took, on top of what Paulson and Bernanke did, was going to work. I was very confident about that by that time. Even though we still had a long, rough road ahead of us.
The most frustrating part of this work, but in some ways it’s the most consequential, is how effective you can be in relaxing the political constraints that exist on policy. You can see that most compellingly now in the fiscal debate. Paulson before us and the President were very successful during the crisis in getting a very substantial amount of essential authority essential to resolving the crisis. But it has been very hard since then to get out of the American political system more room for maneuver both on near-term support for the economy, as well as reforms that would lock in a sustainable fiscal path. That is the most frustrating thing, to get the political system to embrace better policies for the country.
LA: Do you have any big regrets about either things you did, or things you didn’t do?
TG: I think about that a lot. Of course, I have regrets that it was not possible to do more. But I also feel really comfortable with the big choices that we made. I really believe that given the choices we had at the time, with the authority we had and the options available to us, that we did a very effective job. And by “we,” I mean in many ways this was a bipartisan response across two administrations that will look good against the comparison of what we know about other crises of this magnitude.
LA: If there’s a dark cloud over the economic record it’s that unemployment still remains obstinately high. Are you bothered by that?
TG: The reason why financial crises are so devastating is because of the extent of the damage that they do to the innocent. High unemployment is just one measure of that. That’s the unavoidable, terrible, tragic legacy of a financial crisis this bad. Europe and other things that happened globally have definitely slowed the recovery. But mostly it’s a legacy of the crisis.
LA: Have we run out of bullets in dealing with high unemployment? Specifically, was it the politics of the budget, and in particular, Republican opposition to a fiscal stimulus that prevented us from doing more? Or were there economic limits?
TG: I think there’s very, very substantial room to do more on fiscal policy that would be good for nurturing long-term growth. That capacity would be greater if it was accompanied by some credible long-term plan to bring down future deficits. But generally the world views the American political system as still better positioned to deal with our challenges than any other major economy, and that’s one reason why we can borrow at very low rates. I think that the best economic strategy for the country would be to combine a set of very powerful near-term investments in infrastructure and elsewhere that would help support demand with long-term fiscal reforms that would restore sustainability. I think the limits we face right now are only political, not economic, not fiscal.
LA: I’m interested in this because you’re identified as the person on the economics team who pushed earliest for a pivot to a focus on the debt situation. Is that perception wrong?
TG: It was definitely my view, and it still is, that our ability to get more growth-promoting policies out of the Congress is contingent on our ability to put in place long-term fiscal reforms that restore sustainability. That’s true for lots of different reasons. It’s true not just because, without action, the natural dynamics of demography and healthcare costs would crowd out a whole range of investments over time. But it’s also true the average person, facing deficits this large, is just uneasy supporting substantial additional growth-relevant fiscal policy without that framework. So that’s the main reason why I was a supporter of trying to make a more credible commitment to some gradually phased-in, sensibly designed restraints over time. I think without that, there was no way we were going to be able to make the case for a big long-term infrastructure program.
LA: Over the last couple of years we’ve had pitched battles over the budget between the administration and the Republicans in Congress. There are really two interpretations of what’s driving the Republicans. One is, there is indeed in this county a fundamental philosophical divide about the role of government and that what we’re seeing is this divide being played out in the political arena. The other is that the Republicans have been willing to do almost anything to hand this President a defeat. Do you have a view?
TG: There’s something strange about the debate today. The magnitude of additional deficit reduction – revenue increases or spending cuts – that you need to lock in in order to achieve fiscal sustainability is pretty modest. By most accounting, because of what we’ve already done on the spending side and tax side, we have to find another ¾ of 1 percent of GDP of policy measures. And if we did that, that would achieve the economist test of sustainability, meaning it would get the deficit down to a modest primary surplus so the debt would start falling as a share of GDP.
LA: Provided we went back to full employment.
TG: Yes, but that’s even with pretty modest assumptions about the pace of growth. Now, that doesn’t give you a lot of room for error if there’s a recession or something like that. But a very modest amount of additional adjustment is required to achieve a pretty meaningful level of sustainability. The reason I say this is because the political divisions you read about in the country, about the nature of the safety net and the role of the government in the economy are way, way exaggerated. To say it differently, you can achieve that additional margin with pretty modest changes. You don’t need to dismantle or roll back the basic safety net for seniors and healthcare to achieve sustainability. And you don’t need to contemplate what people would view as growth-killing revenue increases to do it.
In some ways, that’s what’s so frustrating about the current context, because it should be relatively easy to reach an agreement.
LA: So if you said that to Paul Ryan, would he agree with you?
TG: I think he would. We’ve had the chance to talk about this in public and in private. I think what he would say is that you also have to worry about the 50-year problem, not just the 10-year problem. And it is true that because of the demographics of the nation, and because people use healthcare very intensively in this country, if you look out 20 years, 30 years, 40 years, we’re still going to have to do some other things to change how people use healthcare in this country. We all agree with that. However I think that our view would be that you don’t want the absence of agreement on the 50-year problem to get in the way of what would be a very good set of reforms for the country for the next 10 years.
LA: Both attempts at a so-called grand bargain have failed, even though you say that the bargain actually need not be that grand. But if even that’s not reachable, how do you envisage the budget getting sorted out? Will it be done incrementally by a series of mini deals?
TG: It is easier to do it together. Some people have said from the beginning, “It’s easier to do hard things if everybody is doing hard things together.” How are you going to legislate reforms to Medicare unless there is some move towards greater progressivity in the tax system? Or, from a Republican perspective, why would they agree to raise revenues on the American if they think that’s going to finance unsustainable levels of spending that we can’t afford? That’s the case for doing it all together. But if that’s not possible, then the country will have to do it in stages. And maybe that’s easy for people to absorb. The good thing about the United States today is that we have a very resilient economy. We are a strong enough country that we can withstand, not indefinitely, not forever, but we can withstand a sustained period while the American political system figures out how to bridge these differences.
LA: So you spent thirty years working on economic statecraft both internationally and domestically. You’ve been involved in just about every major financial crisis of this era, starting with Japan, the Asian crisis, Mexico, 2008, now the euro crisis. Each one seems to be worse than the other. What lessons have you learned from dealing with all these crises? You alluded earlier to the idea of taking political costs upfront. Can you amplify on that?
TG: Well, they’re all different in their contours and causes. But they usually have this common feature, which is a huge increase in leverage in the financial system. When the shock hits or the tide turns, as people bring their borrowings down, it puts enormous pressure on the economy as a whole. These things tend to reinforce each other, amplify each other. The financial deleveraging feeds on the economic weakness, the economic weakness forces more financial deleveraging, and you have this vicious spiral.
And I think what we have all learned from history, mostly from mistakes that we and others have made is that confronted with that, you need to apply a lot of force, with a lot of speed across the full spectrum of the policy tools we have. Which means monetary policy has to be very aggressive. You need to make sure that fiscal policies are very supportive of growth so you’re compensating for the huge collapse in private sector demand. And you need to be incredibly aggressive in making sure that you recapitalize the financial system. If you do those things incrementally, where you do one but not all three, then you’ll be left with much more damage. You have to do all of them. None of them is effective individually.
LA: That’s essentially how to deal with each crisis in isolation. The problem is each crisis has been worse than the last. Is there something fundamentally flawed in the way we’ve been trying to deal with them? Can we not find some durable remedy?
TG: Are you asking if we are in this trap where the things you have to do to solve the last crisis make the next crisis more likely?
LA: Yes.
TG: I’m not an adherent to that basic view. I respect it and I understand it. But I think there’s something about human beings, and something about financial systems, where people tend to give less weight to the risk of an extreme event. So after a long period of relative stability, like we had in the U.S. and the world economy in the decade before this, that leads people to take on more risk than they should, borrow more than they should, and that’s what creates the vulnerability to crisis.
The things we did in this crisis, and certainly the things we did in financial reform, will significantly reduce the probability and the intensity of crises for a long period of time. Because there’s much more capital in the financial system. We did a pretty brutal restructuring of our financial system as a part of the crisis response. I know that markets over time will find their way around those things, and memories will fade. But if we’re lucky that will take a long time.
LA: Based on what you saw while getting financial reform through, do bankers have too much political muscle in this country?
TG: Not anymore. There’s always some risk of regulatory capture in the Congress or of regulators that would undermine reform. But I don’t think that’s our biggest challenge. It is true that there is an ongoing political effort to legislate a weakening Dodd-Frank or block appointees. But that effort does not have much political force now. I think our country is strong enough to withstand that. These are really complicated things to do. I think the harder challenge is to be able to attract talented people to come into government do these things and let them operate independent of political forces.
LA: Your famous saying is, “a plan beats no plan.”
TG: It’s not a great phrase. Really what you want to say is a good plan beats a bad plan.
LA: Ok, so what is your plan for yourself?
TG: I really don’t have a plan. I’ve been doing this for a long time, I’m going to take a long time to think about what I do next. As I should.
LA: Thank you very much.
37 comments
Mr. Ahamed, congratulations for an excellent interview, for asking Geithner excellent questions, for raising the most significant issues. A book could be written about each issue and how policy makers, including Geithner, view the issue and responded to it in this crisis; indeed, books are being written, including Blinder's, reviewed in The Book. This interview, in fact, even flows like a book. But enough praise for Ahamed. I'll add my comment to the following assessment by Geithner: "The things we did in this crisis, and certainly the things we did in financial reform, will significantly reduce the probability and the intensity of crises for a long period of time. Because there’s much more capital in the financial system." Ah, liquidity, more of it, that's the answer. Isn't that like giving a drowning person a glass of water. Sure, liquidity, or the absence of it, exacerbated the crisis, but isn't the absence of liquidity the consequence of the crisis, not the cause of it. Wasn't the crisis created because of too much liquidity, too much money seeking high returns in an economy with too few options for them, resulting in ever greater risk taking. Policy makers' first and primary response to the crisis, including Geithner's, was to focus on recapitalizing the banks (i.e., restoring liquidity), including making low (non) interest rate government loans to the banks for them to use for speculative investments to generate profits in order to increase their capital. A glass of water for a drowning man. I'm satisfied that the policy makers, including especially Geithner, avoided another Great Depression, but I'm also convinced they didn't fix the underlying problem, the result of which will be another financial crisis, the next one worse than the last. I've commented many times that high levels of inequality are self-correcting, absent intervention. In the financial collapse of 1928-29, government did not intervene, and inequality (which was at rates comparable to those today) fell precipitously (and did not return to the pre-depression levels until the current financial crisis), setting the stage for many decades of shared prosperity. Of course, lots of innocent people paid a very high price, a long and deep depression. This time the government did intervene and, as Geithner likes to point out, avoided another great depression. Thank goodness. But at what price: continuing high levels of inequality, leaving in place the very cause (in my view) of all that risk taking and eventual financial collapse. Geithner believes that the modest (in my view but certainly not his) financial (bank) reforms will avoid another financial collapse. I believe he is mistaken. Time will tell. I hope he is right and I am wrong.
- rayward
January 24, 2013 at 7:30am
This is an excellent piece. The problem with Geithner is that he knows how the financial system works, and the financial system is broken, but he's fine with that. He is the poster boy for everything that is wrong with our financial system. Media coverage of the economy mistakenly supposes that there is anything more than a tangential connection between the financial industry and actual economic activity. For the last few decades the financial industry has busted it's ass inventing and legalizing devices to insulate itself from the real economy and focusing almost exclusively on speculation and derivatives. They've created a world that even they don't understand, and it is impossible for the media to cover in any understandable manner. Meanwhile, most Americans are concerned with economic indicators for the real economy, such as unemployment rates, home prices, and inflation. But as we learned in 2007-8, none of that matters if the banks have gotten themselves in over their heads.
- Attrill
January 25, 2013 at 3:08am
Thanks for the excellent in-depth interview with open, honest questions we never even knew were so key, but do now. I was on the fence about Geithner, but after reading this interview, I definitely have a higher opinion. His phrase to the effect that he put on blinders to everything except pragmatically fixing the very critical problems, is probably why we weren't all wiped out. I am pleasantly surprised by his praise for President Obama, and his singling out the need to carefully vet all arguments and hear all competing opinions, is both refreshing and consistent with the President's described decision making around the bin Laden raid. And a major thank you to Secretary Geithner and his family for their service, with best wishes for a fulfilling future.
- smabry03
January 24, 2013 at 8:02am
Of course, it was Geithner who was not of Wall Street (his background is as a regulator, not a banker), unlike all the rest in the top jobs at Treasury (in both Democratic and Republican administrations). Geithner's popularity with his boss is understandable, not only because Geithner saved us from the abyss, but because they are so much alike; Geithner's weakness in dealing with the banks is mirrored in Obama's weakness in dealing with the Republicans. What has been the political and policy fallout from Geithner's seeming obliviousness? Most blame HCR for Obama's and the Democrat's loss on the House in 2010. Less convenient would be to place blame where it more accurately belongs: the bailout. It's the unseemly behavior of the bankers after the bailout, as described by Scheiber, that lost main street, not the abstract (and erroneous) notion that Obama was socializing health care. Sure, Geithner "saved" the financial system, but by facilitating (through no interest loans to the banks) the same activity, speculative trading, that got the banks in trouble in the first place. My metaphor yesterday was that it was like giving a drowning man a glass of water. Perhaps the better metaphor is that it is like giving an addict a line of cocaine. If, as Geithner said in his interview published yesterday, the very mild (in my view) bank "reforms" prevent another financial collapse, then history will be very kind to Geithner; if, as I suspect, we are headed for an even worse financial collapse (because the underlying cause of the last one hasn't been fixed), Geithner may share a place in history with Hoover.
- rayward
January 25, 2013 at 7:24am
Sorry, you did not cover the most important topic and the principal reason why there is so much political discord in this country. At the time of this economic calamity, the President chose (against the advice of Secretary Geithner and everyone else in the administration who understood business or could do math) to push for a health care law, a new entitlement, that would phase in taxes over time and that adds trillions in spending. Forget the DNC talking points that it includes some historically GOP ideas that were presented in the 90s when the economy was stronger. The very push for this new entitlement sucked the oxygen out of the political system for a 18 months, sacraficed employment and made it impossible for a larger (albeit temporary) fiscal stimulus. In the long term, to have national healthcare this country will need more payroll taxes and a VAT plus cost containment that will make most Americans health care worse, not better. Considering that this country may suffer employment and demand challenges for quite some time, it was the most irresponsible thing any President could do. A good interview would explore Geithner's ideas on that because it is huge and probably would have shown some disagreement with his boss. I'm sorry. Not touching upon that subject, kind of made that interview a waste of time.
- bob1239
January 24, 2013 at 8:32am
An interesting thesis rayward, but Bush and his Treasury Secretary bailed out Wall Street. I think it's still a safe bet to look to the ACA hysteria whipped up by Palin, FOX and the plutocrat astroturf patrol, expertly targeted 2010 primary voters. People weren't threatening Congresspeople at town halls with 2nd Ammendment remedies over the bailout. Maybe you're thinking of OWS.
- WandreyCer
January 25, 2013 at 9:43am
Right Bob, since the GOP was so open to the three detailed jobs plans Obama tried to get passed. You act as if Obama had/has an honest partner in policy making, who wanted to work with him to aggressively address unemployment and the economy. Give me a break. Do I even need to list the reasons proving that is a ridiculous argument to make? Really? The single only reason the oxygen was sucked out of the system was the hysteria and madness created on the right - whose life revolved around making Obama a one term President, ginning up boob bait for the Bubba's to ensure it and making sure he had no one success to point to. Americans have wanted universal health care for 60 years. Please stop with the pretense that Republicans care about anything but the acquisition and maintenance of power. Or do a more honest job of proving otherwise.
- WandreyCer
January 24, 2013 at 9:27am
A well written and well-thought piece on a public character I haven't figured out. Though he definitely added to my understanding through his insightful analysis, I believe the author lays a few things at Geithner's feet that I do not feel belong there: 1) Geithner's interview published on TNR yesterday, had him praising his boss for asking him for the best policy advice, without filtering the advice for political consequence, which I agree, is best handled centrally instead of each of the President's cabinet members baking in their own political calculations and interpretations. 2) Again, in his interview, Geithner stated he was singularly and rightfully focused, endorsed again in this article, on preventing the banks from seizing, and no one knew how hard to pull each lever at his disposal, as this crisis was unprecedented in scope and depth; 3) Legislation and budgetary support of fiscal policy in Congress was intentionally pulling against him, as GOP Senate and House publicly proclaimed was their intent; and 4) Hank Paulson basically designed the initial bailout along with Geithner, who was at the NY Fed when Paulson was Treasury Secretary, and definitely understood when Wall St. was lying as he is their poster child; all while still holding millions of shares in his former company, Government Sachs. Paulson's reputation is the one that should be held up to the disinfectant of sunlight, so we can all say together about his AIG bailout: "he built that".
- smabry03
January 25, 2013 at 10:02am
While it's not my idea of the best way to build a strong and durable economy, increased health care spending does provide a big boost to the economy, indeed, the biggest boost today. Many of America's older cities with dying industries have been re-made as, that's right, centers for health care, such as Pittsburgh and Cleveland. Of course, spending on defense and for wars can provide a big boost to the economy, as in the run-up to and during WWII, but I would prefer spending on health rather than death. But that's just me.
- rayward
January 24, 2013 at 9:42am
Scheiber: "You didn’t have to get very creative with your math to see that the banks had received trillions of dollars worth of subsidies and guarantees from the federal government between the onset of the financial crisis in 2007 and late 2009. The banks borrowed trillions from the Fed at below-market interest rates. Some banks, like Citigroup, received massively under-priced insurance policies for their toxic assets. Almost all of them were able to borrow cheaply from investors because the government backed the bonds they issued. In late February of 2009, Treasury and the Fed issued a statement pledging to “preserve the viability of systemically important financial institutions,” which many investors interpreted as a blanket guarantee of the biggest banks. That alone would have been worth hundreds of billions of dollars, if not more." TARP was only part of the overall financial benefit conferred on the banks; it was TARP and everything else that constituted the "bailout", especially those trillions in low to no interest loans from the Fed which the banks used, as was actually intended by Geithner, for speculative trading in order to generate profits to rebuild their capital. Yes, the Fed, at Geithner's direction, funded an enormous spree of speculative trading by the banks.
- rayward
January 25, 2013 at 10:26am
All of which infected Europe, now people all over the world, including here, who had nothing to do with this mess are paying for it.
- Sophia
January 25, 2013 at 11:43am
I cannot believe we are still (still!) hearing variations of the talking point, "This country's problem with x would be solved by now if our time hadn't been wasted by getting Obamacare shoved down our throats". If there is a god in heaven, please please please send us a conservative who can actually make a point worth taking the time to consider. Surely this is one out there, somewhere, over the rainbow.
- Fishpeddler
January 24, 2013 at 10:00am
Good, I was waiting for a critique of Geithner's tenure, and Noam does a nice job here. Thanks Noam.
- jet
January 25, 2013 at 8:38pm
rayward, I agree with much you've said here...that's why talk of deleveraging is crucial. this is when "liquidity" really counts...with that, as speculators are inured to seeking high returns (highly leveraged involvements), there evidently has to be careful (and rather "generous") spending (investment) in infrastructure, education, etc., and funded by a truly fair/progressive tax system that tends to reduce inequality. to the extent politics precludes such, i think that speculators will tend to patch one crisis after another, and want to search for absurdly high returns. this cycle must be broken, i think, or your worst premonitions might come true--even tho there are policies that could be effective if politics do not prevent them.
- cdmcl3
January 24, 2013 at 10:04am
First, the favorable comments are deserved, and then some. With Glass-Steagull gone along with its most vocal detractor of the 1990s, back to Texas presumably, the repetition of Great Depression wagered paper threatening loss of depositor funds was a tick, tick, ticking IUD. Timothy Geithner understood the byzantine maze and patched it, then made it look workable again. Second, the intractable Senate minority deserves mention – purposely omitting any award or honor adjective – because President Obama nominating any successor at Treasury would have invited hurricane force blame laying, finger pointing and resurgence of ordinary laissez faire dogma which led to circumventing Glass-Steagull in the first place. President Obama has timed the refresher at Treasury well. Not that it will be any easier than three and one-half years ago.
- lespin
January 26, 2013 at 9:53pm
Guys, seriously. Is the topic of whether or not the President should have pursued a new entitlement so radioactive that it opens to vitriol??? All but the left wing of today's Democratic thought it was a really, really, really bad idea. Including Secretary Geithner. Heck, Scott Brown won a Senate seat in Massachusetts (!) by promising to filibuster and kill the darn thing. A serious interview (not a love letter like this one) would have asked the tough questions. I honestly wonder whether Geithner preconditions his interviews on not being asked about it.
- bob1239
January 24, 2013 at 10:20am
"A serious interview (not a love letter like this one) would have asked the tough questions." Tougher questions, fine. Irrelevant questions, as you requested, not so fine. Look, taking a step back from the particulars of the 'Obamacare wasted precious time' meme, here is what is going on more broadly: Politicians who are against a particular bill float all sorts of objections to it, hoping to drum up more public opposition. The emphasis is not on the quality of the objections, but rather on simply finding anything that will resonate. The 'Obamacare wasted precious time' objection got some traction, so it has been repeated often. The crucial point to note, though, is that it is completely asinine. The only way it works AT ALL is as a possible liberal criticism (with which I would disagree) of Obama for having expended so much political capital on it, but that is an entirely different sort of criticism. This is why I am giving you grief about it, bob. On this website, most visitors are politically astute enough to know when the things politicians say are mere bullshit in the sense that Harry Frankfurt uses the term -- said merely for the hoped-for effect, with no concern for whether they are true. If you do not have the time or inclination or ability to make such distinctions in the speech of public officials or pundits, that's your problem, but repetition of absurd talking points is not going to work with this readership, and I reserve the right to cruelly denounce it.
- Fishpeddler
January 24, 2013 at 11:13am
You didn't even bother to address anything I said Bob, because you can't. No one thought it was a "bad idea", because like I said, overwhelming numbers of Americans have been requesting it for generations (yet another point you never addressed) and health care costs are destroying the economy - *policy* Bob *policy*, not politics - there is more to life than politics. Democrats did know that it was going to be a risk and a pain in the ass because of the inevitable right wing hysteria, fear mongering/lie-fests that would ensue - after watching Hillary how could they now? And they'd just spent the last 20 years training themselves to lick the boots of the right wing crazies so maybe they'd like them some day. Democrats were habituated to cowardice. Should Obama have cowered in the corner instead of leading on this? The single most important structural issue that would help stabilize the middle class and the economy for the long term? Because Sarah Palin tickled the yokels ignorance buttons so skillfully? Thank God he did not. If "everyone" thought it was such a bad thing, then why did each of the stakeholders - the ADA, hospital consortiums, nurses, insurance companies - et all, all take out prepared, detailed proposals and sit down at the table to craft this act once Obama was elected? They knew it was going to happen and were ready to do it correctly. Seriously, Roi was right - your responses are so telling. What is best for the country does not occur to you. What you think really matters is game playing and politics, very typical of Republicans.
- WandreyCer
January 24, 2013 at 11:23am
Very enjoyable interview with terrific questions. This is what I come to TNR to read. Like Mr Geithner, I am baffled by Wall Street bankers who think President Obama has picked on them unfairly. The obliviousness and self-regard of those [mostly] men is staggering.
- DC Spence
January 24, 2013 at 11:30am
(...seems many are sincerely fed up with "politics" over policy. i think that the Q&A here gently touched on this--just a bit--on the matter of "populism" without necessarily stirring up a welter of "politics" here. that said, i might as well say that, yes, the ACA seems cumbersome, but the best is yet to come, as "Obamacare has paved the way to some extent, and relates to the idea of spending/investment we need and can accomplish along with meeting other worthwhile priorities............)
- cdmcl3
January 24, 2013 at 11:40am
Fishpedler: You're patronizing in tone and adjectival. I am very politically astute -- astute enough to remember when TNR was edited by the likes of Michael Kinsley, Mike Kelly and Andrew Sullivan and there were really diverse viewpoints presented and some thought provoking things written from the right as well as the left. Let me put this another way. You're sitting down with the outgoing Treasury Secretary. It's well reported that the folks in the administration who had ties to the business community (high ranking folks like Geithner and Emmanuel) were against creating a new entitlement. You're now talking about how we obtain revenue to fund (wait for it) entitlements. Why in the world don't you ask him about that? Fine, keep the ACA tax hikes and Medicare-provider cuts, why not just cut back on the spending? Ask the tough questions on his opinions and see what he says. Does he really think putting 25% of our population on Medicaid makes a whole lot of sense? WandreyCer: GOP cooperation? Dems had overwhelming control of both the House and Senate from 2008 to 2010. They could pass whatever they wanted. Boy, did they. The only concern was pleasing the moderate Dem wing in the Senate. The ACA form is not the result of GOP obstinance, but because a fair number of moderate Dems (I'll name them: Wyden, Conrad, Webb, Nelson, Lieberman, Pryor, Lincoln, Baucus) didn't even want to do health care then and supported those amendments. The stimulus was written by Nancy Pelosi with enough moderation in size to keep those Senate Dem votes in line. The Senate was filibuster proof when the Dems passed most of this stuff. We can agree to disagree whether there was a crying public need for this. I tend to think that the public agreed with the President on "get out of Iraq" and upper income tax hikes. Consensus on that. But when the ACA was passed it WAS bi-partisan. Bi-partisan in its opposition. This wasn't Dems versus the GOP -- it was Dems versus many of their constituents. But for the ACA, I don't think the GOP takes the House in 2010. Has there been cooperation since then? Well, the President and the GOP don't agree on a whole lot but they did seem to hammer out a "payroll tax holiday" which seemed pretty popular where I work. But that funds an entitlement. Unless you're talking about taxing some rich guy, tax cuts are more popular than entitlements. Where I work, people are pretty annoyed that their health care premiums are going up. And we haven't hit the point where the 40% excise tax on employer provided health care hits in 2018. Has TNR really become a refuge of hard core lefties? I really can't be the only one who is skeptical of more entitlement spending. And, Fishpedler, I can't go to Redstate cause I get shouted down as a RINO. These comments make y'all sound like the left wing version of Redstate. --Bob
- bob1239
January 24, 2013 at 1:28pm
Wow bob I guess you think it will fix the economy to have more dying or getting their health care at the ER? Speaking of "radioactive," my goodness. And I completely agree with what the others have said above about the jobs bills and the general obstructionism in Congress - but then why should we be surprised? The avowed purpose of the Right is to destroy the US government. Listening to NRA leaders only reinforces this point; I think they're terrifying. Those automatic weapons aren't "protection" against burglers are they. Or raccoons.
- Sophia
January 24, 2013 at 2:02pm
Irony, you overlooked the part about their original claims having no basis in reality. These are, simply, fraudulent, and their issuance reflects an abuse of the authority of the issuing office. The reversion to the legal process for claims not formally disputed within the brief 30-day window (the invoice, by the way, does not have to be sent to the recipient via registered mail so it can and often does lie for weeks in the uncollected mail of constantly travelling expats) is purely an operational process. As I noted, the Court's hands are tied (as any such judge will admit in Court) despite the substantive nature of any counter-argument if the requirements of a timely and formally registered dispute have not been made. Such abuse of authority is largely possible because of the significantly devolved legal authority granted to the self-governing communities (Gemeinde) and their administrative offices under the law. As a result, there is often a long legal path between the decision of an Authority (Behoerde) -- regardless of the level of incompetence, illegality, or abuse -- and a Court review. In some cases, the consequences are deadly, as in the 2010 case of a Brazilian mother killed by the child's Swiss father who was a known risk (he had attempted to kill and in fact paralyzed an older child from a prior relationship and served prison time for the crime). This case, one of a long and continuing history of many horrendous abuses of children that occur in these Swiss communities led to a fundamental change of law that completely stripped these often incompetent and power-abusive Guardianship Authorities (Vormundschaftsbehoerde) of their roles as of Jan. 1 2013 and replaced them with a Child (and Adult) Protection Authority staffed by trained specialists with direct recourse to the Courts. The corruption is not limited to the administration of these small communities though, as a case from mid-2012 shows: the Swiss President (or the equivalent, given that this is a role that rotates among executive cabinet members) fired the head of the federal tax department for corruption. http://www.nzz.ch/aktuell/schweiz/widmer-schlumpf-stellt-steuerchef-frei-1.17257694 As it turns out, the tax boss was not only corrupt, but was found to have instituted a culture of total corruption among member of staff in the department over a period of years. As for your comment about Germany, I think you are correct. My German friends also report similar astonishment. One easily finds corrupt business practices among German businesses but not among the administrative authorities. The problem in Switzerland runs deep, as teoc alludes to. And the efforts to clean it up, in large part to make for a climate hospitable to hosting foreign businesses, pits the outward-looking Swiss business community against the inward-looking isolated Swiss living communities.
- vst
January 25, 2013 at 6:14am
As to health care costs: one place to start is by looking at the middleman (insurance industry) and also the added cost of shuffling papers and dealing with insurance issues at the "point of sale," ie doctor's offices, hospitals and "billing services." Also though the whole idea of for profit medical care is dicey, to wit the J&J hip replacement situation. This is really bad. So is the fact that medical care is bankrupting people and that's WITH insurance. A 15 minute appointment shouldn't cost hundreds of dollars. Drugs are way too costly. We can't make a decent living and even as property values fall rents are soaring. I think some of these corporate "people" ought to be in jail.
- Sophia
January 24, 2013 at 2:07pm
(well, anyway, the original Q&A was good...as for certain warmed-over stuff, never mind.....)
- cdmcl3
January 24, 2013 at 2:36pm
" Dems had overwhelming control of both the House and Senate from 2008 to 2010. They could pass whatever they wanted." So you're politically astute, eh bob? The day Obama was inaugurated in January of 2009 a GOP caucus met and decided that not one Republican would cooperate with the new president on anything, ever. A super-aggressive minority, like the Nazis were in the Reichstag before Hitler took over and the Bolsheviks were in the Duma before Lenin took over, can, using legislative rules, muck up the works completely. Ever hear of the filibuster? And several of the Dems in the Senate were and are Blue Dogs, DINO's. I'm against outrageous entitlements for everybody from the poor to the rich, too, but if they were discontinued or even cut back significantly, half the cities in America would be on fire, and a police state wouldn't be far behind. And you're politically astute? How about the astute folks where you work blaming the real reason for the increase in their health care premiums--the health care monopoly that mercilessly gouges the sick, the injured, and the dying in America for outrageous profits? You and your co-workers are not that economically astute either, bob. BTW, I am not a hard-core lefty. I have several conservative beliefs. I wrote a book comparing political correctness to fascism. It's just that the Right in America is no longer conservative. It's as mush-minded as those on the extreme Left. And, if you think the Dems could have passed any legislation they wanted for 2 years after Obama was first elected, you fall into that category. You have swallowed a Party line whole, without even thinking about it.
- magboy47.
January 24, 2013 at 3:12pm
bob wrote: "You're patronizing in tone and adjectival." I all but called you out as a doofus, so I don't know how that qualifies as 'patronizing'. Why not just come out and call me an ass? I can take it. And I have no idea what you mean by adjectival -- "of or relating to or functioning as an adjective"? I don't get it. Is this a typo or am I just not getting joke. I'm glad to see, at least, that you've altered your point enough to make it not entirely nonsensical. Ok, NOW I'm being patronizing, I guess. It will never cease to amaze me that a person such as yourself can never admit, "Yeah, my point was pretty lame". Instead, you just keep rephrasing the point (read 'making an entirely new point and pretending it is somehow the same') until you stumble across a wording that is at least marginally intellectually defensible. So, in the present case, we have gone from "sucked the oxygen out of the political system for a 18 months, sacraficed employment and made it impossible for a larger (albeit temporary) fiscal stimulus" to "Does he really think putting 25% of our population on Medicaid makes a whole lot of sense?" These aren't even remotely the same point, but you throw out the "Let me put this another way" in the hopes of saving face. Sorry, too late.
- Fishpeddler
January 24, 2013 at 3:38pm
OK Bob - but I don't understand your point, please clarify. The intra-party horse racing was representative of the country and quite nicely disproves the whole urban legend that Democrats were simply able to do as they pleased. I forget that people even say that sort of thing, it's so silly. On this side of the aisle, we always expect our most cherished goals to be torpedoed by our side, ala Moynihan and Clinton. We've never known any different. We simply aren't like you guys. We eat our own. Democrats have never marched lockstep to the orders from Above, ala the Prescription Drug Law, Iraq II, the good old Tom Delay days, Obama's entire first term (including a jobs bill for returning vets that was pointlessly shot down, how pathetic is that?). The Democrats had to thread the ACA needle - you know, trying to get something huge done that Americans have been demanding for sixty years and strengthen the economy (I'm not interested in glossing over that with "agreeing to disagree" I'm afraid. You can either flesh that out or leave it out) with the backdrop of unbelievable nonsense and manufactured hooey that was disgraceful. I'm sorry if I sound like a crazy lefty calling it that, but I assume you too watched elected officials threatened with '2nd Amendment remedies' at town halls they voluntarily called about the ACA, complete with threatening jeering mobs. Such behavior simply does not deserve the bloodless, whitewashed term 'obstructionism.' You also refuse to acknowledge Mitch McConnell's infamous quote about the first priority of business in the middle of an economic catastrophe - that commenced under Bush - was to make Obama a one term President. My point is - if you choose to ignore how these sorts behaviors directly impact the political culture of this nation, and how incredibly irritating you are waxing on about the Fall of Civilized Discourse with that sort of history glowering right behind you - you know, protestors with bones in their nose? Get it? - then I have every right to balk at your supposed desire for real debate. Frankly, you either address the elephant in the room, or herd of elephants in this case, or don't expect to be taken seriously. With all due respect, you do seem like a nice man but I've watched supposed moderate Republicans like you sit on the sidelines and twiddle your thumbs while your party turned in to a fanatical nihilistic lynch mob. I grew up on honorable, decent Republicans I dearly loved like Bob Dole, John Warner, Richard Lugar - even grumpy old Alan Simpson. Their replacements shouldn't be allowed to break their air. My patience is almost worse for you guys that watched it happen.
- WandreyCer
January 24, 2013 at 3:59pm
i meant to type "breathe" their air.
- WandreyCer
January 24, 2013 at 4:10pm
Krugman comments on this interview, saying that Geithner is wrong to suggest that political divisions aren't so great as to make the path to fiscal sustainability impossible. Krugman says Republicans don't care about deficits, other than to use as an excuse to gut social security and Medicare. He may be right. But his criticism of Geithner is misplaced: Geithner's point, that political divisions aren't that great, is meant to prevent Republicans from using their usual scare tactic that we are doomed, doomed unless we immediately cut social security and Medicare. That doesn't work if the path to fiscal sustainability is easily achievable, politically as well as economically.
- rayward
January 24, 2013 at 4:19pm
Good interview, though I agree some harder questions should've been asked, particularly regarding the inadequacy of reform and likelihood of future crises, which could be even larger. Geithner seems to me a decent, hardworking fellow, but so very wrong on some of the basic principles of the crisis he was called on to deal with, and the necessary consequences of its aftermath. Rayward, great initial comment. Liquidity won't solve everything--only better management of risk (and a return to economic investment based on long-term thinking, that brings in long-term gains on its principle--the type of investment we had during the boom years of the mid-twentieth century, with all their technological innovations that increased business profitability: transistors, microchips, airplanes, etc).
- Curran1
January 24, 2013 at 5:24pm
Bob, you also seem a decent fellow, but I'll demonstrate the general factual wrongness of your assertions based on only one statement of yours, which is objectively untrue: "GOP cooperation? Dems had overwhelming control of both the House and Senate from 2008 to 2010. They could pass whatever they wanted. Boy, did they." The Democrats NEVER had sixty votes in the senate (or, at least, not since January of 1979). But if we're generous and include the bitter and self-absorbed Joe Lieberman in their caucus numbers, though he was not a Democrat and routinely voted against them on core agenda items, Dems held a 60 vote threshold ONLY from July 7th 2009 to August 25th of that year (!) (i.e. the time between Al Franken's seating and Ted Kennedy's death). Exactly seven weeks, no more! So your assertion about "2008 to 2010" is flat wrong, not to mention that Democrats simply don't function as a unified parliamentary party, and haven't...ever. As for the 'boy, did they,' ...just no. Democrats were very clear about wanting more economic recovery investment and a public option for health insurance to reduce costs through bargaining and competition, as well as legislation to remove the most discriminatory parts of Taft-Hartley. They were blocked in all these things by the GOP and the aforementioned Joe 'bitter because no one wanted him to be president' Lieberman, (who I used to have some sympathy for on foreign policy, before he became a rubber stamp on the strategically and tactically incompetent war policies of George W. Bush, under whom I served in a theater of war). So, to sum up: you're full of shit, and your memory of the political scene at the time is a delusion.
- Curran1
January 24, 2013 at 5:46pm
Aww, gee guys, thanks for the love guys. I'm nice! This just started with me asking why the reporter didn't ask the outgoing Treasury secretary a single question about a policy that he did not agree with. Big policy. Kind of remade the health care system and added a couple of trillion to baseline spending. BFD as the Vice President would like to say. It would kind of be like asking former Bush Treasure Secretary Paul O'Neill about why he got wiggly on the Bush tax cuts. Oh, wait. That's my point..... O'Neill was asked about it repeatedly and constantly and it was in every major media publication! On the cover of Time even! Responding to a few of these -- public option? Not crazy because that's what Medicare is, of course. But anyone who advocates that needs to realize you need more payroll tax and a VAT to finance such a thing. There is just not enough general revenue in the coffers for it. And face up to the choice. We'll be accepting less growth and higher unemployment for this guarantee. Europe does it. It's just a choice. Sophia: It's not insurance profits. The ACA caps insurance profits and also caps the executive compensation of all insurers now. The health insurance industry is basically a regulated public utility now. I don't know how the carriers can be demonized now, but folks who want an entirely public system will continue to do so to suit their ends. The real reason that health care is expensive is that most Americans (I'm not just talking high earners here, but state and federal government workers, military and their family, seniors, really most people) have really good health care coverage and we use an awful, awful lot of health care. There's no price transperancy whatsoever. (Ask yourself -- do you know what your doctor charges an hour?). Just speaking for myself, I think a lot of doctors are overqualified to handle the front line work and regular visits.... I have received better care talking to PAs and RNs, frankly -- they can prescribe and sometimes they catch things because they're less distracted. But old people especially (like my mom) need to get a blessing from a "doctor" or they are friggin freaked out. My view is you don't need 6 years of post-grad work and a residency to tell me I have strep. We need a little more price transparency in the system to encourage smarter health care decisions. I don't think the ACA moves in that directly. I think it inflates the cost of health care even more and then attempts to subsidize that inflation with exchange subsidies and more medicaid spending (which leads to more inflation). I know you all believe health care is a right and I honestly respect that (really). Food is a right. You don't eat; you die pretty quickly. And I think we can agree that if supermarkets gave out free apples paid for by taxpayers the price of apples would inflate -- inflate pretty dramatically actually. Health care is not that much different. It's going to get pricier. No, no, no I need to stay GOP and I'm not a Dem. I voted for Dem Presidents in 1992 and 2008 and then spent the next two years of my life banging my head against the desk. GOP it is. A word on gun control. I suspect you all live in places where there is a police district within a half mile, maybe a few blocks. 911 calls result in the cops being there in less than 10 mins. I have a cabin out in the woods where it is a cool 30 miles to the closest law enforcement (which consists, I think, of three officers covering 50 square miles -- who knows where they are). I own guns, not just for hunting, but for the protection of me and my family, because some of the houses and trailors around me look like they're inhabited by those guys from Deliverance. I am not talking mag capacity, or anything else (I'm pretty ambivalent on those types of regs) but if you do not understand that there are many areas of this country where folks feel, legitimately, they need firearms for their own protection, you're not getting how an awful lot of the country lives. A lot of the country lives in areas where cops are an hour away, at least. I kind of think no one should discuss gun control unless they spend a night in my cabin. If you're nice, I'll let you.
- bob1239
January 24, 2013 at 8:36pm
Healthcare reform doesn't fall under the purview of the treasury secretary, jackass .xcept indirectly. The interviewer correctly focused the talk on the unprecedented (since 1930) financial crisis and the administration's response to it, in all of which Geithner had a much more central role. Tax cuts and Paul O'Neil are not equal to Geithner and all other major domestic reforms that affect the economy (and so ultimately affect treasury...in a positive manner, fiscally, I'd note; ask the CBO). Your objection is thin, and smacks of an obsession to poke at the perceived illegitimacy of a policy you don't like, which a majority of Americans now support, whatever way you can. My advice to you: deal with it, and don't criticize healthcare reform to on procedural grounds when the GOP is infinitely more ruthless at maximizing parliamentary maneuvering to push its own agenda (hint: reconciliation is supposed to only be applicable to bills that reduce the deficit, but the Bush Tax Cuts were pushed through by having the house pass an EVEN MORE ridiculous and irresponsible bill, then paring it down by a few billions over nine years, so that the reconciliation version, which thus needed only 51 senate votes, could be classified as a deficit reducer, when it actually increased the deficit by about 2.5 to 3 trillion over ten years). I find all your objections thin, selective, and hypocritical--especially your complaint that Healthcare detracted from focus on the economic recovery while your beloved GOP was waging a fire and blood retreating action to prevent any useful action on the economy. So, yeah, just deal.
- Curran1
January 25, 2013 at 1:50am
PS - Public Option reduces federal outlays through increased bargaining power, so no extra payroll taxes are necessary (generally people pay their own [low] premiums); you're confusing a public option with a single payer system, which is cheaper, but much farther to the left and tax funded (most countries with such an option pay circa 60% as much as the US on healthcare, as a percentage of GDP, btw). Get your terms straight if you're going to enter the discourse... I don't know why I'm bothering...
- Curran1
January 25, 2013 at 1:54am
I didn't read the comment, but I'm thrilled to see that bob wrote 10 paragraphs of response. Assuming that he spent at least 15 minutes writing it, we know now that he has spent at least 15 minutes of his life actually thinking about these issues. Prior to this thread, I'm quite convinced his lifetime total was 0 minutes.
- Fishpeddler
January 25, 2013 at 9:44am
Puff piece. Geithner is in the pockets of the finance industry. The thing he made most sure of is that his friends on Wall St. kept receiving huge bonuses--while all the time, criminal acts took place. TNR should be ashamed to print this article.
- bebopluvr
February 7, 2013 at 1:45pm