Morgenson rebuts the Geithner hosannas

The Treasury Secretary's legacy in context

There’s been an unsettling amount of hagiography in the last few weeks as top Obama financial regulatory officials departed and reporters thanked them for being their background sources.

First there was Robert Khuzami, ex-Deutsche Bank CDO-practice overseer and SEC chief wrist-slapper, whom The New York Times lavished with tough-guy adjectives—and a(nother) tough-guy photo shoot.

Then there was Lanny Breuer, head of the Justice Department’s criminal division, who got a less gentle send-off, exiting with a Frontline foot to the rear. The Washington Post did find it within itself to write that that “Breuer is widely credited with aggressively going after white-collar crime in the aftermath of the crisis.”

And, of course, Tim Geithner, who was rewarded with his name on the currency for having the banks he oversaw as head of the New York Federal Reserve collapse and send the economy over a cliff. The Washington Post said, “Geithner is, in his bones, a crisis fighter, and his greatest legacy is for conquering the biggest one of them all.” Another Post headline read:

Tim Geithner’s legacy: an unpopular bailout that helped save the economy

That piece contained the most amusing anecdote of the Geithner legacy tour, in which he says “fuck the banks” regarding regulatory reform. Geithner: bank smasher!

In an accompanying transcript of Geithner’s farewell remarks to the administration, he positioned himself as a supporter of fiscal stimulus. But Geithner was a key opponent of Christina Romer’s efforts to get the much bigger spending package that was needed to fill the hole in private-sector demand in 2009 and 2010. He infamously called textbook-economics stimulus spending “sugar” and urged Obama to focus on debt. We know this from a 2011 Post story.

The New York Times’s exit interview was awfully soft too, reporting that “A regulator of Wall Street but not a creature of it, he will probably be the least likely former Treasury secretary to land there” and allowing Geithner to spin his abysmal housing record, which has added to the suffering of millions of families, unrebutted.

So it was a nice corrective to see Gretchen Morgenson’s column in the Times on Sunday. Her headline:

Banks, at Least, Had a Friend in Geithner

No “fuck the banks” spin here.

Morgenson picks apart Geithner’s legacy, noting that too-big-to-fail banks are bigger than ever, thanks in large part to Geithner’s policies, which included opposing moderate, common-sense legislation to cap the size of banks and limit their leverage—how much debt they have relative to capital.

And she spells out Geithner’s housing failures, noting that the HAMP program fell 3 million borrowers short of its own goal:

One reason for this is that the program was flawed from the start.

First, the Treasury made the program voluntary, awarding funds to participating banks but failing to penalize those that did not. The program was all carrot, no stick.

Worse, the initial plan didn’t require the banks to write down second liens they may have held — like home equity lines — from borrowers whose original loans were modified. This let the banks put their interests ahead of both borrowers and those who held the first mortgages.

She also notes the supposed TARP profits touted by Geithner and his supporters don’t account for the tens of billions of dollars of subsidies in the form of super-cheap funding.

As the exit profiles stop, the real fun begins: Watching where these guys end up next. Presumably, the days of waltzing right into Citigroup, say, from high public office, for $15 million-a-year gigs with no responsibility, are over for now. More likely: A six-month break to disinterest the press followed by a sinecure at Cadwalader or a return to Covington or some such.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,