How Will History Judge Tim Geithner?

In her new book, A Fighting Chance, Elizabeth Warren tries really hard to find nice things to say about Tim Geithner. But reading between the lines, it's very clear that she had, at best, mixed feelings about his role as Wall Street's man inside the Obama Administration. Geithner's own book, Stress Test, hasn't been as well received as Warren's. Matt Stoller:

Stress Test is an important book, because Tim Geithner is an important man. Economist Thomas Piketty may be explaining essential social dynamics of inequality, and Elizabeth Warren may be describing the need for Americans to get a break from the banks, but it is Tim Geithner who, for better or worse, actually shaped our institutional, legal, political, and economic dynamics at the moment when the system was most malleable.

That said, Geithner is not a popular man, and he knows it. “I never found an effective way to explain to the public what we were doing and why,” he writes. “We did save the economy, but we lost the country doing it.” He knows he’s never going to win the argument, he knows he can’t possibly convince people he did the right thing. Even his book tour is being described as an undertaking that "could have been worse." But he’s going to try to convince you anyway.

Stress Test is a fun, if long, book. It’s enjoyable, it’s charming, and it’s well written (or least well written by ghostwriter Mike Grunwald). It’s replete with simple and colorful anecdotes that explain the complexities of capital markets, without condescension and with a minimal amount of jargon. There are two parts to the book. The first is a set of arguments, told through his experiences during the crisis, about why bank bailouts are essential-- the financial world according to Geithner. And the second is an autobiographical account of Geithner’s life.

…Ultimately, Geithner was a hit man for American democracy-- and the middle class that sustained it. Geithner has acknowledged substantial fraud in the crisis, but he won’t even deign to answer why the administration did nothing about the individuals who perpetrated it. He doesn’t discuss distributional questions from the bailout. He sneers at the notion of justice. He argues for "anti-democratic" measures in a financial crisis, including emergency powers for the president similar to those the president has for national security. He won’t really explain why he refused to fight for writing down mortgage debt, or even what his role was in doing so. Geithner even takes time to knock Franklin Delano Roosevelt’s handling of the Great Depression. In other words, Geithner never grapples with any of the political or moral consequences of what he did. It’s just TARP-made money, baby! Or, as I’ve laid out, buckets of lies, misstatements, and omissions.

Geithner is at heart a grifter, a petty con artist with the right manners and breeding to lie at the top echelons of American finance at a moment when the government and financial services industry needed someone to be the face of their multi-trillion dollar three card monte. He’s going to make his money, now that he’s done living his life of fantastic power after his upbringing of remarkable mysterious privilege. After reading this book and documenting lie after lie after lie, I’m convinced that there’s more here than just a self-serving corrupt official. There’s an entire culture, of figures at Treasury, the Federal Reserve, in the entire Democratic Party elite structure, and in the world of journalism, a culture in which Geithner is seen as some sort of role model.

Americans may not get the reckoning, investigations, and jail time for wrongdoers, including Geithner himself, which they want, at least not now. But they don’t have to buy Geithner’s version of events. Far less important than what kind of regulation is in place is the ethical and cultural question of whether people like Tim Geithner can continue to lie, cheat, and steal at the highest reaches of government. Hopefully, Americans have learned enough from the financial crisis so that the answer will be no.

The task of reclaiming democratic power will involve making work at Geithner’s Treasury a black mark on a resume, an embarrassment and a shameful episode. That has already started. Larry Summers was prevented from becoming the Chairman of the Federal Reserve by progressives on the Senate Banking Committee, including Elizabeth Warren, Jeff Merkley, and Sherrod Brown. This week, the same coalition blocked the appointment of Michael Barr, the architect of Treasury’s housing policies, to an open slot at the Federal Reserve board. The pushback is happening because the Geithner era is increasingly seen as a time of betrayal and lies, not just disagreements over ideas. These people are seen as bad faith cancerous operators who need to be removed from positions of power and influence. Traditionally, Democrats think that the GOP is the party of meanness, of the wealthy, and then wonder why citizens choose to vote for them. But Americans are not stupid, and they saw what Geithner, as the head economic official in a Democratic administration, did.

As a result, the liberal faction in the Democratic Party is beginning to grapple with what it means to have grifters setting the course for economic strategy. There is now a debate about whether and how to purge this toxic culture. Geithner probably wishes there weren’t, which is one reason he wrote the book. He actually has to try and justify the horror show he put on. Believe it or not, that’s progress. Next time there’s a crisis, if reformers learn anything from this book, it’s to make sure that there are no Geithner types anywhere near the levers of power.

The longterm results of Geithner's perfidy will play out to the detriment of the country. In the shorter term it;s playing out to the detriment of working families in particular. This week, economist David Cay Johnson put the lie to the headlines that the economy has been improving, when in fact, it has basically just stabilized from the Bush catastrophe. In his piece, Americans Fared Better After The Great Depression Than Today, Johnson asserts that 6 years after the Great Recession, a majority of Americans' financial situations are still stagnant. The data shows that "the vast majority of Americans, the 90 percent, enjoyed bigger income gains in the 1930s than in recent years."

In 2012, for the first time since data became available in 1917, the 90 percent enjoyed less than half of all reported income, an analysis of IRS data by economists Thomas Piketty and Emmanuel Saez shows.

From 1934 to 1980 the vast majority averaged more than 64 percent of all reported income. Since then, their slice of income pie has gotten steadily thinner. In 2012 they slipped to just under 50 percent.

At the same time, the top one-tenth of 1 percent enjoyed on average 4.5 percent of the national income pie from 1934 to 1980. Since then, their slice has more than doubled. In 2012 they got 11.5 percent of the pie.

Most telling: 95 percent of reported income gains between 2009 and 2012 went to the top 1 percent and a third of the gains went to the top 1 percent of the top 1 percent-- a mere 16,000 households.

To sum up, there are some tiny improvements in the job and income numbers, but only if you limit the analysis to the last few years. Look back a decade or four decades or even eight decades, and the story changes from an America of growing prosperity to one of falling incomes, not enough jobs and ever fatter slices of the income pie for the elite. 

As Stoller pointed out in his epic review of Geithner's book, "The financiers recovered; everyone else did not. And the economy, even today, sputters along at just above stall speed because of this… [Geithner] wasn’t trying to save taxpayer money; he was trying to appear like he was trying to save taxpayer money while funneling money to banks… [He] was hired to lie, steal, and cheat on behalf of bankers, and he did so." Right… Democrats are better than Republicans. I never saw such low turnout for elections as the ones last Tuesday. It won't improve in November and the coming epic collapse of the Democratic Party in Congress will give brain-dead Beltway pundits something to babble about for weeks.