Tags: Geithner | Obama | economy

Geithner Is Not the Problem

Tuesday, 31 Mar 2009 08:15 PM

By Christopher Ruddy

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The new Treasury secretary has come under harsh criticism, with some Republicans even calling for his resignation.

Critics say he fails to inspire confidence and hasn’t been quick enough in devising schemes to save our banking system or putting together a team to implement these plans.

I have watched my share of congressional hearings on CSPAN, and Geithner strikes me as smart, able, and articulate, although he isn’t telegenic, and his professorial style doesn’t make you feel warm and fuzzy.

The truth is that the complaints about Geithner really are aimed at President Obama, but Republicans are reluctant to shoot arrows at a commander in chief with 60-percent-plus approval ratings.

The Obama-Geithner situation is comparable to Ronald Reagan’s foil in David Stockman.

Stockman was Reagan’s powerful director of the Office of Management and Budget. Stockman became a media villain for his budget cuts (remember when he had ketchup declared a “vegetable” for the federally funded school lunch program?).

But Stockman was doing nothing more than fulfilling Reagan’s wish: cut the growth of federal discretionary spending.

Despite this fact, Reagan remained likeable and “Teflon,” so the media targeted the wonkish, bureaucratic, less-than-telegenic Stockman. Sound familiar?

So I have no problem with Geithner, who is only acting after he drank Obama’s Kool Aid.

It was Obama who signed off on a nearly $800 billion so-called stimulus program, two-thirds of which goes to government and healthcare employee unions that backed his election — and for pork-barrel projects to be spent over the next 10 years.

In the worst financial crisis since the Great Depression (we are told), Obama persists in calling for massive tax increases on the most productive Americans, who already pay almost half of all federal taxes.

As he does this, the White House seems perplexed that the stock market has crumbled almost from the day he won the election in November.

Rather than focus on fixing the economy by stimulating the consumer economy today, Obama has been trying to plug all the holes breaking in an ever-weakening dike.

For whatever reason, the Obama gang wants to see the world backwards. Financial writer Henry Blodgett’s blog reveals ”Geithner’s 5 Big Misconceptions.”

It’s an excellent read on the misconceptions the Obama folks have taken as articles of faith.

For example, Blodgett pulls apart the recent Obama-Geithner plan to rescue America’s banks from “toxic” assets.

Blodgett notes the Obama administration view: “The banks aren't lending because their balance sheets are loaded with ‘bad assets’ that the market has temporarily mispriced.”

Blodgett offers the “reality,” responding: “The banks aren't lending (much) because they have decided to stop making loans to people and companies who can't pay them back.”

How can consumers pay back their loans?

Well, the key is to stimulate consumer spending and stop the free fall in housing prices.

If the Obama administration took immediate and dramatic steps to do that, such as across-the-board tax cuts and significant tax credits for home purchases, the economy would begin rising almost immediately. The stock market, I believe, would soar.

A stabilized housing market, with values once again creeping up, not only fixes that sector of the economy but also suddenly gives real and rising value to those so-called toxic assets: bad securitized mortgage paper on the banks’ books.

Rather than improve the housing market, Obama and the Democratic Congress have done little to stimulate housing, save a paltry $8,000 credit for new home buyers during a short time frame offered this year. (The Democrats reportedly considered a larger credit, but since Republicans backed the idea, they had to be punished for not supporting the final Democratic bill.)

Obama seems to be intent on doing everything but fix the economy’s root problems.

Meanwhile, not busy enough with the economic crisis, he also is trying to solve America’s healthcare woes, fix our ailing education system, and save the world from global warming as he turns the nation green and away from oil dependence.

And that’s just his domestic program!

Abroad, he is trying to remake America’s global role, while solving Iraq’s problems and pacifying both Afghanistan and Pakistan.

Although Obama deserves credit for putting together a strong national security team and offering at least a coherent international plan, why has he yet to put together a strong economic team at the Treasury Department?

Clearly Obama made Iraq and our international problems a priority during his transition period. But he forgot that our pressing economic problems are integral to America’s security and the world’s.

Obama’s latest new mission as Rome burns? He wants to start running a car company!

This past weekend, he forced the resignation of America’s leading (once) private automaker. His administration plans to replace GM’s board with “outsiders.”

Obama says doesn’t like GM’s current management or plans. He, Timothy Geithner, and others in his administration apparently know much more about the automobile business than anyone was aware.

So our young new president is superman. In the morning, he can solve the problems with the Taliban in Afghanistan and in the afternoon, micromanage a car business in Detroit.

Meanwhile, at the same time the federal government has engaged in its recent coup at GM, it has given notice that it may well place the business into bankruptcy anyway to clear the company of its enormous debt.

Why GM couldn’t have done this itself, months ago — without billions in taxpayers funds and the interference of the federal government?

And why have banks like Citicorp been spared bankruptcy with no demands by the government that that they default on their bondholders?

Good questions. I guess I shouldn’t ask such things and just be happy that Barack Obama is now in the Oval Office offering change and hope.

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