President Obama Fails His First Hard Choice
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Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age. -- President Barack Obama in his Inaugural Address
Barack Obama is failing his first hard choice as president by pushing hard for Tim Geithner to be confirmed as secretary of the treasury despite Geithner's serial cheating on his taxes and Geithner's utter failure in his previous job as head of the New York Fed.
Geithner's low personal profile and Wall Street's high comfort level with him will probably guarantee he'll survive Wednesday's hearing before the Senate Finance Committee. Who wants to dwell on this little guy when we finally have something big to celebrate? Besides, how important is one appointment? Newsweek thinks it's pretty important. They just listed Geithner as the 15th most powerful person in the world.
"Tim Geithner, when I nominated him, was rightly lauded by people from both sides of the aisle, from the market, from labor, as somebody who was uniquely qualified." Obama responded when questioned about Geithner's taxes. "Is this an embarrassment for him? Yes. He said so himself. But it was an innocent mistake. It has been corrected. He paid the penalties."
Geithner didn't make one mistake. He committed multiple transgressions over the course of many years. To call them "an innocent mistake" is as insulting as deducting your kid's expensive summer camp as a child care expense, which Geithner tried to do. Furthermore, Geithner paid the majority of his missing taxes and penalties only after he was nominated to be secretary of the treasury. His situational ethics are directly at odds with the culture of personal responsibility that Obama has set as his foremost goal.
Obama's selection of this ethical goal shows the shrewdness of our new president. The world didn't plunge into a deep recession just because real estate was overvalued, credit too highly leveraged, and so on. Our financial markets and models broke because they ignored the power of social norms and sent the regulators home. Markets were supposed to be self-correcting. They certainly adapted to a lack of scrutiny. A CEO's pursuit of self-interest at the expense of his shareholders or even the solvency of his own company was the natural outcome of such folly.
As head of the New York Fed, Geithner was Washington's eyes and ears on Wall Street before this crash. He saw and heard nothing coming. From crisis day one, Geithner confused the financial health of the big bankers with the financial health of the country. It's no surprise that Wall Street and both sides of the political aisle want Geithner to pick up the reins from Henry Paulson without pause. They want stock prices to head back up without a fundamental change in the rules of the game.
President Obama is nothing if not pragmatic. He knows that many Republicans fear that if Geithner's nomination is nixed, someone more stringent could be appointed. While Obama's sticking with Geithner shows political strength, it may betray Obama's anxiety about the upended global economy. Geithner not only speaks Chinese, he speaks Kissinger. His first job was working for Kissinger & Associates. This fall, the Chinese government became the largest holder of U.S. Treasury debt. It can't hurt to have someone on our side of the counter who speaks the same amoral language.
However, the domestic cost for keeping Geithner could literally be enormous. Obama has repeatedly called upon the wealthy to pay a larger share of federal taxes. Already he may postpone part of this pledge because of our weak economy. In the meantime, how well is the president preparing the richest in our nation for, as he warned in his Inaugural Address, a new age? As they shift their funds around, how many wealthy elites will have Secretary Geithner in mind when they contemplate making "an innocent mistake" likely to escape the IRS' notice?