Tuesday, December 2, 2008

Ben Stein gets it absolutely right on this one!



Ben Stein's critique of Obama's choice for Treasury, Tim Geithner, is right on!

Article below:

Posted on Tuesday, December 2, 2008, 12:00AM
The change it had to come
We knew it all along.
We were liberated from the fold, that's all.
And the world looks just the same
And history ain't changed
‘Cause the banners, They are flown in the next war.

I'll tip my hat to the new Constitution
Take a bow for the new revolution
Smile and grin at the change all around
Pick up my guitar and play
Just like yesterday.
Then I'll get on my knees and pray
We don't get fooled again.

This snippet from the greatest of great songs by the Who keeps running through my head as I read about Timothy F. Geithner, chosen to be the new secretary of the Treasury by President-elect Barack Obama. I have studied this song for decades and never has it been more apt.
If it were scientifically possible to create a man who is the exact opposite of "change" in the political and financial realm, which is what I recall Senator Obama talking about during the campaign, it would be Mr. Geithner.

Scion of East Coast eggheads, a Dartmouth graduate, an honor student at the Johns Hopkins School of Advanced International Studies, this is no Che Guevara. Mr. Geithner was a colleague of Henry Kissinger at Kissinger Associates, a toiler at the Council on Foreign Relations and a bureaucrat at the Treasury under Larry Summers and Robert Rubin (of course, of Goldman Sachs). Mr. Geithner even made his Brooklyn-born self into a fly fisherman in the mold of Paul Volcker.

Mr. Geithner appears to be the Eastern establishment finance gentleman and scholar incarnate. A frequent defender of scant financial market regulation, à la Alan Greenspan, Mr. Geithner makes Paul O'Neil and John W. Snow, the first two Treasury secretaries under George W. Bush, look like Lenin and Trotsky.

In no sense does this make Mr. Geithner anything less than a fine man and possibly a superb steward at 15th and Pennsylvania N.W. But it does raise some interesting questions about just what kind of "change" Mr. Obama has in mind in the economic world.

Along with Henry M. Paulson Jr., the current Treasury secretary, Mr. Geithner was part of the decision not to save Lehman Brothers when it fell into crisis two months ago. Yet it now seems that allowing a bank as central as Lehman to fail was the shove that sent the world's financial system over the cliff. The rescue of Citi and the market's reaction tells us a lot about just how important a failure that fiasco with Lehman was.

We could have avoided the whole catastrophe of the last ten weeks if Geithner had had a clue. I wonder if Mr. Geithner would now acknowledge that he made a spectacular mistake. I wonder if he would promise to never even consider allowing a big financial institution to fail, and to do everything conceivable under the Constitution to keep the country from falling into a depression.

From what I read, Mr. Geithner helped fashion the so-called Troubled Asset Relief Program, the bailout program that received $700 billion from a terrified Congress a couple of months ago. Mr. Geithner and Mr. Paulson, as well as Ben S. Bernanke of the Federal Reserve, told the legislators that the money was needed to avoid financial calamity. It would be used to buy troubled assets - that is, loans - from banks and insurers and unclog lending.

After some fits and starts the legislation passed. Then for two months plus the Treasury didn't use a dime of the money for that purpose, after all, but instead bought stock in banks and for other similar purposes. This was a bait and switch of historic proportions. You need only consult bank stock prices to see how well it has worked. Earlier this month, Mr. Paulson declared that he would not buy troubled loans at all. That move battered the bond market and especially the commercial real estate bond and REIT markets.

I have not heard one word from Mr. Geithner repudiating those moves. It would be nice to know his position on them. Maybe his part in rescuing Citi tells us he and Paulson have learned something. That would be nice.

Perhaps while he's at it, Mr. Geithner might explain just what he's been doing as head of the Federal Reserve Bank of New York for the last five years. That job involves vital supervision of key "money center" banks. When did he notice that there were problems in excess leverage involving questionable assets and issues of accountability of hedge funds?

Did he do anything about it? Did he call in the lords of finance and tell them to cut down on leverage, to stop selling credit default swaps they could never pay off in a downdraft, and to act like bankers instead of gamblers? If he did, he kept it pretty quiet, and it didn't have much measurable effect. What's his explanation?

Now step back and ask the basic question: Was he, in his five years at the New York Fed part of the problem or part of the solution? I do not doubt that he worked cooperatively to put liquidity into the system along with Mr. Bernanke. But when the moment of decision for Lehman Brothers came in September, where was he?

And as the clock of destiny is ticking now for the auto makers, and thus for all of us, where is he? Or, to put it even more bluntly, it sure looks as if Mr. Geithner, charming as he may be, is not stepping up to save an economy deeply imperiled by the failures of the current financial ruling class. I have not seen one word from him that shows any marked difference from his boss, Mr. Paulson.

In fact, if it had been possible for George W. Bush to run for and win a third term, wouldn't Mr. Geithner have been exactly whom he would have chosen to replace Henry Paulson if Mr. Paulson ever decided to leave the Treasury? But wait a second. Didn't Mr. Obama campaign against Bush policies? Is he now giving us a third Bush term? Geithner at Treasury, Gates at DOD, Mrs. Clinton at State? Sure looks a lot like what Bush would have chosen if he had been able to run and win.

Not that this is a big surprise: There is a permanent ruling class in this country, whatever they call themselves, no matter how they talk about change. They may not be very good at it, but there they are. "Meet the new boss," as the Who said, "same as the old boss."

7 comments:

STF said...

One of the few times I've found myself in agreement with just about everything Ben Stein says.

Part about Geithner in a 3rd Bush term cuts particularly deep . . . OUCH!

Great show today . . . Bill knows his stuff.

Scott

Mike Norman said...

Yes, Bill was terrific. That's why it was so frustrating to hear Obama say, "You would have been upset if I didn't choose people with Washington experience, etc." It's an insult to the wealth of capable talent we have in this country who could lead us out. And BTW, Bill HAS Washington experience!!

STF said...

CNN Money has an interesting video interview with Pete Peterson posted. Apparently, he was on the NY Fed's BOD when they hired Geithner. Peterson speaks glowingly of Geithner throughout the interview.

Scott

Mike Norman said...

I had Peterson on my show one time and I tried to get him to admit that "the checks won't bounce." He didn't, of course. (But he didn't say they would, either!)

Recently I had David Walker (Peterson's new mouthpiece and chief propagandist) and I DID get him to admit that the U.S. was not facing insolvency and that the checks WOULDN'T bounce!

To my knowledge he has never admitted that anywhere publicly before.

STF said...

Interesting that Walker admitted that . . . never seen an accountant that understood the monetary system, and he's no exception.

BTW, Bill Richardson supported a constitutional amendment to balance the budget when he ran for president . . . perfect fit for Obama's team. See the interview at http://www.ontheissues.org/2008/Bill_Richardson_Budget_+_Economy.htm

Scott

STF said...
This comment has been removed by the author.
Mike Norman said...

Another thing that should scare people is the fact that Obama speaks in cliches. He says if the rest of the world respects American leaders they will buy more of our products. Yet George Bush was (purportedly) hated by the rest of the world, but U.S. exports surged to a record.

Disturbingly embedded in his statement is the view that the U.S. needs to become a great export nation.

Luckily, China doesn't appear to be listtening: the yuan hit a 7-month low against the dollar last night, even as Paulson is over there telling them to keep it going higher.

The big question is, whether Obama and Richardson feel that they will need to "win" this contest and could that mean a competitive devaluation against the yuan?

I wouldn't put it past them.