Friday, August 6, 2010

Understanding the Hit Job on Geithner

The former chief economist at the IMF, Simon Johnson, is out with a hit piece at NYT on Treasury Secretary Timothy Geithner.

The gist of his column is that Geithner is causing worries behind the scene among political insiders:

...if you look carefully at the details, you understand why so many pro-reform people behind the scenes are becoming increasingly frustrated with Mr. Geithner’s philosophy.

I suspect this was Simon moving to weaken Geithner's value in the eye of the President, ahead of President Obama naming a person to head the Consumer Financial Protection Bureau. Johnson's hit is unlikely to do long term damage to Geithner.It is likely that Geithner is too well protected for that, but the thinking has to be, "Why not fire a shot and maybe it will sway the president to put less weight on Geithner's anti-Elizabeth Warren view?"

The suspicion is that Blackberry addict Obama reads Simon Johnson regularly.

Remember, it was Johnson who fueled the flames when Lloyd Blankfein failed to attend a D.C. sit down that Obama called. Blankfein's excuse was that his plane couldn't takeoff because of fog. Johnson's view was that Blankfein dissed the president, and could have made the trip.

Following Johnson's comments, Goldman started getting the cold shoulder at the White House, which culminated in high profile SEC charges against them. It appears that Goldman has since worked their way out of the dog house, but it is likely that Blankfein's career will be cut short.

Johnson is a Warren supporter for head of the CFPB. As I pointed out in my review of Johnson's book, 13 Bankers, Johnson is aware that Wall Street has captured the current regulators, but instead of Johnson moving to the logical conclusion, that power centers in general can be captured, Johnson wants new regulatory agencies, e.g., the CFPB, which he somehow naively believes won't be captured.

It appears, in other words, that Johnson has bought Elizabeth Warren's propaganda campaign, hook, line and sinker. He really thinks that Warren will be immune from Wall Street influence. The Wall Street elite will get to her, but even more dangerously, her basic lack of understanding of basic economic means that when she isn't carrying water for the big boys, she will be instituting regulations that will suffocate the rest of the financial sector.

Bottom line: There is no new concern about Geithner. The concern by Warren supporters is that Geithner has the President's ear and will dissuade him from naming Warren to head the CFPB.

No comments:

Post a Comment