Getting Geithner

If you haven't yet had a chance to look at Gary Weiss' profile of Tim Geithner, consider doing so now. I've been reflecting on the conclusion:

With such talent surrounding him, and with the administration beginning to fill all those vacant desks at Treasury, it's more than remotely possible that ­Geithner will turn out to be more of a Truman than a Paulson Lite. But for that to happen, he'll need fresh ideas and a wider circle of acquaintances--and old habits die hard. In early March, as the hellish tornado of criticism was touching down, Geithner was reportedly spotted having lunch at the Four Seasons restaurant in Manhattan with his mentor Pete Peterson. One can only imagine what the two men talked about, but the scene at the end of the 1972 movie The Candidate comes to mind. Having reached the pinnacle of government service, climbing about as high as one can without actually being elected by anybody, Tim Geithner may now be asking, "What do I do now?"

Politics is personality driven. The outcome of last year's presidential race hinged, in no small part, on perceptions of who was going to be able to bring change to Washington. Barack Obama clearly won that perception battle, and it carried him to the White House. But Obama still faces institutional constraints, which is why he hasn't been able to deliver on every last one of his campaign promises within the first hundred days.

People look at the surprising continuity between Hank Paulson's tenure and Geithner's and tend to read that as being an issue of personality -- that Geither lacked the courage or the know-how to alter the trajectory of banking policy. But it would be just as easy, and more logical, to conclude that Geithner has largely followed Paulson's path because Paulson's path is the only good one available. People forget the extent to which circumstances have tied Geithner's hands. When he arrived, bail-out laws were already on the books and much of the TARP was spent. It is clear that the administration's top priority upon entering office was a stimulus plan rather than a banking rescue. One can argue about whether that was the correct approach or not, but the choice left Geithner short of resources; political capital was exhausted on the bill, as was precious time and budget room.

And of course, Geithner faces the same Congressional constraints that are confounding other administration officials as they plot to get health care and energy legislation through the Senate bottleneck. There is a popular idea that if only a charismatic figure had occupied the spot at Treasury, like Paul Volcker, then his confidence would have carried a better policy through Congress, but people forget that Paul Volcker didn't have to push his interest rate increases through a skeptical, angry, and often stupid legislature. Does Geithner need new ideas to succeed? Maybe. But it could also be the case that there are no new and better ideas out there, and that the legislature is ill-prepared to receive them in any case. Politics is all about personality, it's true, but policy is about institutions. No change at Treasury is going to alter the institutional forces channeling bank policy down its current path, I'm afraid.

---

/contributors/Ryan-Avent