Ezra Klein: Noam Scheiber defends Timothy Geithner against those demanding his resignation. Scheiber is right on the merits, I think, but the politics matter. Whether Geithner did his best against a bad hand, he created a public relations disaster by bailing out Wall Street and returning it to wild profitability without doing something, anything, to satiate the public's desire for retribution against the guys who almost ruined the economy. The downside of not denying the public a piece of Wall Street's scalp is that vulnerable members of Congress now have little chance but to demand Geithner's.
And this isn't just Geithner's problem, incidentally. It's true for the whole administration. The bailouts were necessary, but they were also understandably unpopular, and there's been virtually nothing done to balance the scales. No windfall profits tax, or transaction tax. No breaking up big banks, or capping salaries across the board. Financial regulation has been sold as a constructive discussion with the banks rather than a punitive measure to prevent future wrongdoing. The absurd result is that Republicans are playing the populist card (while quietly blocking financial regulation) and frustrated congresspeople are turning on the administration, because the administration has kept them from turning on the banks.
The right response to the financial crisis and to extremely high paychecks for actions of dubious social utility is:
- to bail bankers into the risks they make their firms assume--to mandate Silicon Valley compensation schemes.
- to impose high capital requirements--and to smoothly and swiftly shut down organizations that fail to meet them immediately.
- to establish progressive income and wealth taxes.
Delivering Tim Geithner's head to congress does none of those things. And it weakens the administration: Geithner is where he is because for thirty years everyone who has dealt with Tim (except when he is paying his self-employment taxes) has found that when Tim is on your side, you tend to win. He is very good at a huge number of dimensions of this, where "this" is the business of government.
The administration, the country, and the world face lots of challenges right now. And weakening it does not seem to me to be smart.