This morning on Capitol Hill,Treasury Secretary Tim Geithner and his former colleagues at the New York Fed will defend the concessions given to big banks as part of the bailout of AIG in front of members of the House Oversight Committee. Of course, it isn't just the AIG bailouts Geithner will be defending himself against, it's everything that's happened since he took over as Treasury secretary, starting with his own embarrassing tax problems, the administration's perceived failure to discipline financial institutions, the rejected regulation plans, the high unemployment rate, and the entire populace's misery and anger and doubt and despair in general. But is that really fair?
Is it fair to hold this one guy accountable for so much? It would be nice to blame someone. It's always good to have a figure on which to focus one's rage, a Saddam Hussein type, or a Dubya type if you will, and Geithner, with his bad temper and poor public speaking abilities and failed regulatory plans, slipped easily into the part after his first stammering press conference. And after a year of feeling just kind of ill at ease with him, a nebulous discontent, we now have a real grievance to point to: the New York Fed's dealings with AIG's counterparties. An obviously highly questionable situation in which the entity, at the time headed by Geithner, handed over billions of dollars of taxpayer money with extreme haste to financial institutions that were supposedly in dire health themselves but have since bounced back extremely, freakishly energetically, like — well, like vampires after a gory feast on human blood. But did Geithner actually do anything wrong?
He claims not, of course. "We acted because the consequences of AIG failing at that time, in those circumstances, would have been catastrophic for our economy and for American families and businesses,” he'll say in his prepared remarks this morning. He also plans to deny he had anything to do with the attempts by the New York Fed to cover it up, claiming he was already transitioning into his role with the Obama administration.
Logically, it seems highly unlikely that someone in Geithner's position would do something purely to curry favor with and benefit financial institutions, or try to cover something up during a historically important transaction that would obviously later be scrutinized. Geithner and the New York Fed probably did do what they did because they thought it was for the best. And they likely attempted to do it quietly because they thought that was for the best, because if people knew the bare facts of the matter* they would be pissed off, and that kind of anger wouldn't be good for the country or the administration or anybody. Of course, now that's happened. People are pissed off, and it isn't good for anybody. But does Geithner know that, and is he going to acknowledge it? It doesn't seem like it, from his prepared remarks today:
“Everyone should realize that because of the actions of the Treasury and the Federal Reserve, the American financial system is now in a position where it can provide the credit necessary for economic growth.”
Of course, everyone doesn't realize. And that, more than whatever decisions were made over what to do about AIG in the heat of the moment, is the real reason we should be furious at Geithner and the administration. For a White House that prides itself on transparency, that has a freaking Twitter feed, the lack of communication is stunning. If the Treasury secretary wants to stop being blamed for everything that's wrong with the economy, he needs to start offering something more than platitudes. Starting today.
*Repeated again with only the slightest hint of judgment in the lead paragraph of this morning's Times: "Weeks after rescuing the American International Group with an $85 billion taxpayer loan in late 2008, Federal Reserve Board officials rejected a proposal that would have forced the insurer’s trading partners to return $30 billion in cash that they had received from A.I.G. in the preceding months; the Fed chose instead to let the banks keep the cash and to receive additional billions from taxpayers."