In the early weeks of the Obama administration, Treasury Secretary Timothy F. Geithner seemed like the ultimate short-timer.
There was the rocky confirmation stemming from his failure to pay some personal income taxes. Then after taking office, Geithner’s first major speech on the financial crisis was an unmitigated disaster. The markets shuddered at the dearth of details about his plans to stabilize the financial system, and the Dow Jones industrial average plunged 382 points.
Washington was abuzz with talk that he soon would be on his way out. But today, high-level administration officials say the still-controversial Geithner isn’t going anywhere. If anything, Geithner’s stature and influence at the White House have risen after a string of policy successes.
He’s credited with helping to revive the banking sector, cut projected losses from the $700-billion bailout fund to about $50 billion and push through the most sweeping overhaul of financial rules since the Great Depression. That legislation significantly enhances his powers as Treasury secretary.
“The president is very, very comfortable with Tim,” White House senior advisor David Axelrod said. “Tim’s proven himself over very difficult terrain, and he is a calm, steady, thoughtful presence, so there’s no doubt the relationship they’ve formed is a strong one.... I expect him to be here for some time to come.”
With Obama’s top economic aide, Lawrence Summers, stepping down at year’s end, Geithner, 49, is poised to become the dean of the president’s economic team.
“He has been in the room for every conversation since Day One. That institutional memory is quite significant,” said Keith Hennessey, who served as a top economic advisor to President George W. Bush.
Even so, Geithner continues to be a lightning rod for criticism as the economy struggles to emerge from the deep recession.
House Minority Leader John A. Boehner (R-Ohio), some other Republicans and even a handful of Democrats, including former New York Gov. Eliot Spitzer, have called for Geithner’s resignation because of persistent high unemployment. Many liberals accuse him of being too close to Wall Street, which has recovered much more quickly than Main Street with the help of bailout money.
And analysts continue to speculate about possible replacements, such as New York City Mayor Michael R. Bloomberg.
“Geithner’s right when he says the financial sector had to be saved. … but it didn’t have to be saved in this fashion,” said Simon Johnson, a liberal MIT economist who coauthors a popular blog about the financial crisis.
Johnson has criticized Geithner for being too generous to Wall Street in the bailouts and not tough enough in the financial reform legislation.
That law, which Geithner helped write, provides incentive for him to stay and gives President Obama a strong reason to stick with him so he could help implement one of the administration’s major legislative accomplishments.
Under the overhaul of regulations, Geithner is in charge of setting up the law’s centerpiece, the powerful Consumer Financial Protection Bureau, and chairs a new council of financial regulators overseeing the economy for signs of risk.
But concerns from liberals that he won’t be tough enough on banks are believed to be part of the reason Obama appointed Harvard law professor Elizabeth Warren as a special advisor to Geithner to help launch the consumer bureau.
Still, final authority in setting up the agency rests with Geithner. And the wider responsibility of implementing the financial reform law should appeal to him, Hennessey said.
“This is right in his lane. He knows this stuff really well,” he said. “You combine this with the relationship to the president and the fact that he’s the secretary of the Treasury, he’s got a lot of influence.”
Geithner is steeped in financial regulation after working for 13 years at the Treasury from 1988 to 2001, then at the International Monetary Fund before serving as president of the Federal Reserve Bank of New York from 2003 to 2008.
A registered Republican early in his career before turning independent. Geithner rose to prominence at the Treasury Department in the late 1990s for his analysis of the South Korean financial crisis. At the New York Fed, he was a key player in the Bush administration’s response to the financial crisis in 2008.
That expertise led Obama to tap him as one of the youngest Treasury chiefs ever. In that role, Geithner helps brief Obama on the economy every day the president is in town and spends more time in the White House than most previous Treasury secretaries.
Geithner appears to have settled into life in Washington, moving his wife and two children from New York to suburban Maryland last year. And Obama recently praised him, along with his whole economic team, for doing “an outstanding job.”
But that team is changing. Budget Director Peter R. Orszag left in June. Christina Romer, chairwoman of the Council of Economic Advisors, left in early September. And the White House recently announced that Summers would return to Harvard University.
“Larry is a towering intellect and a hugely valuable resource, but Tim’s influence was pretty strong to start with,” White House advisor Axelrod said.
Obama’s choice of Geithner after the 2008 election was widely praised. But that view quickly changed with the disclosure that he had failed to pay $34,000 in self-employment taxes from his time at the International Monetary Fund. A third of the Senate, including three Democrats, voted against his confirmation.
Then things got worse. On Feb. 10, 2009, Geithner delivered a much-anticipated televised speech about the administration’s plans for stabilizing the financial industry.
People expected details, but instead he sketched broad initiatives — stress tests to determine the health of the largest banks, a public-private initiative to purchase toxic mortgage-backed securities from financial institutions and an effort to slow home foreclosures.
Geithner’s performance was widely panned, the financial markets plunged and speculation about his fate began.
But the reaction was unfair, said Phillip Swagel, who served as chief economist at the Treasury Department from 2006 until early 2009.
“In retrospect, that speech is actually very good. It gave a road map of where everything was going, but people were expecting more,” Swagel said, blaming Obama for raising expectations. “It turns out everything he said, he did.”
Not all the initiatives have been successful, though. The plan to purchase toxic assets never really took off, and the administration’s mortgage modification program to ease foreclosures has struggled.
But the stress tests and the increased capital they forced financial institutions to raise are credited with stabilizing the financial system at a time when many people were calling for a more radical move — nationalization of some of the largest banks.
Economist Johnson gives Geithner credit for the right approach in the stress tests, though he believes they could have been tougher and forced the banks to raise more capital.
“It wouldn’t surprise me if he stays as long as President Obama is president,” Johnson said.