There is an overwhelming sense in America that the Bush administration, in tandem with Wall Street, is the main source of blame for the current financial crisis that we face. A recent CBS poll on the subject of blame for the crisis found that 54% of the country entirely blamed one of those two sources, and that an additional 21% partially blamed them. By contrast, only 2% blamed the Obama administration entirely, and another 21% blamed the Obama administration partially.
The blame for the crisis appears entirely accurate, and I see no reason to dispute it. However, if a new, lengthy, must-read, New York Times article on Treasury Secretary Timothy Geithner is to be believed, Geithner is practically the sole architect of the bailout and overall response to the financial crisis. At every turn, from the actions of the reserve banks to the creation of the various TARP / TALF / PIPPP programs, it was Geithner's decision to offer enormous, no-strings attached loans to the failing financial institutions the caused the crisis:
Last June, with a financial hurricane gathering force, Treasury Secretary Henry M. Paulson Jr. convened the nation's economic stewards for a brainstorming session. What emergency powers might the government want at its disposal to confront the crisis? he asked.
Timothy F. Geithner, who as president of the New York Federal Reserve Bank oversaw many of the nation's most powerful financial institutions, stunned the group with the audacity of his answer. He proposed asking Congress to give the president broad power to guarantee all the debt in the banking system, according to two participants, including Michele Davis, then an assistant Treasury secretary.
The proposal quickly died amid protests that it was politically untenable because it could put taxpayers on the hook for trillions of dollars. (...)
But in the 10 months since then, the government has in many ways embraced his blue-sky prescription. Step by step, through an array of new programs, the Federal Reserve and Treasury have assumed an unprecedented role in the banking system, using unprecedented amounts of taxpayer money, to try to save the nation's financiers from their own mistakes.
The long and short of the article is that the bailout plan is almost entirely Geithner's construction, even back in 2007 and 2008 when the Bush administration was still in office. This means that even though the Obama administration did not cause the financial crisis, by hiring Geithner as Treasury Secretary, they have placed themselves entirely on the hook for the bailout itself.
Whether the bailout succeeds or fails (I believe fails is more likely), and whether it ends up transferring hundreds of billions in losses from Wall Street to the public sector (which, once again, seems highly likely), by putting the person who designed the bailout as Treasury Secretary, President Obama made this bailout his own. There is no way to shift responsibility for it. As such, the Obama administration has, in a real sense, taken on a level of risk in the political sector that the bailout has put taxpayers are on the hook for in the financial sector. If the bailout does not work, and the economy does not recover, in three years time Republicans will have a legitimate opening for the Presidency, so long as they nominate someone who opposed the bailout in the first place.
Not only do I feel extremely uncomfortable with the public being on the hook for Wall Street's financial losses, I feel very uncomfortable with Democrats being on the hook with this bailout plan. Our post-2010 electoral future is directly tied to its success or failure. That sucks pretty bad, but it does leave me hoping that, somehow, the Geithner plan will actually work. As a party, our continued ability to govern depends on it.
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