In terms of a warm-up act, you could hardly ask for better than Barack Obama. But even after the president went on TV Monday night and got Americans ready to hear just about anything, Treasury Secretary Tim Geithner still laid a colossal egg Tuesday morning.
With Obama’s stimulus plan making its bumpy way through Congress, Geithner outlined a bank rescue that sounded vague, invasive and expensive.
Even before the Senate could pass Obama’s $827 billion stimulus plan, here was the administration talking about another trillion-and-a-half dollars for the financial sector.
And while he was gauzy on the details, Geithner was sure of one thing — this would be just the beginning.
It surely must have made the president wonder whether he has been betting too big on Geithner.
Obama was so smooth bantering with reporters that he made Bill Clinton look like Roger Clinton. And he hyped on multiple occasions the bank bailout package that Geithner would deliver the following morning.
“I don’t want to pre-empt my secretary of the Treasury. He’s going to be laying out these principles in great detail tomorrow,” Obama said in brushing aside one of the questions about how the second half of the Troubled Asset Relief Program would be structured.
Not only did Geithner’s rollout lack specifics, but he made what once seemed rather straightforward — using the second half of the $700 billion Wall Street bailout passed last year to acquire and quarantine bad debt — seem like a bigger boondoggle than the stimulus package.
Geithner, in his first big moment since his tax-troubled confirmation hearings, seemed to be vamping rather than explaining. He was like a doctor fresh out of med school preparing a patient for bad news.
The secretary said he was “exploring a range of different structures” for how to determine what to pay for the toxic mortgage debt that is still piled up at financial institutions.
“We are going to have to adapt our program as conditions change,” Geithner said. “We will have to try things we never tried before.”
It was right about then that financial markets started diving.
Wall Street wanted the government to get behind a new bank to gobble up all the bad debt weighing down financial institutions.
That was pretty much what Geithner’s predecessor, Henry Paulson, was pitching when he persuaded Congress to give him the first $350 billion for the plan.
Paulson bought bank stock instead and passed the buck to Geithner.
Pulling together some of the first real leaks from the new administration, New York Times reporters Edmund Andrews and Stephen Labaton concluded that the decision to proceed with the bailout in this way was the result of Geithner winning an internal power struggle with Obama loyalists like David Axelrod.
The Chicago team wanted to strike a more populist tone, with less money and more stringent terms for banks. They reportedly feared a backlash against fat cats.
That was sensible, especially if the huge plan was coming from Geithner, who didn’t pay his taxes, looks a straight-arrow Dartmouth boy and just got a $435,000 bonus when he left the Federal Reserve Bank of New York.
Red state Democrats like Sen. Ben Nelson of Nebraska were already bracing to get an earful from constituents when they go home for Presidents Day break.
From the moment Nelson gets off the plane in Omaha on Friday until the moment he returns to Washington on Feb. 23, he will be hearing about stimulus pork and what could be a multitrillion-dollar bailout for banks that made bad loans.
That won’t make for a very happy Blue Dog.
The administration no doubt believes that the best way to spend all of these trillions for stimulation and bailouts is to get it all over with at once. Obama has talked about this as the “winter of our hardship,” and he doesn’t want it to become our springtime of hardship as well.
A few months from now, people will have forgotten the difference between a TARP and a stimulus. They will just remember that we spent enough money to burn a wet elephant and be happy not to hear about it anymore.
But the risk inherent in the two-track stimulus and bailout plan is that if either component fails, it could deepen resistance to Obama’s overall agenda.
The president must wonder whether he accepted the wrong nominee’s withdrawal when he let Tom Daschle walk the plank.
Political Editor Chris Stirewalt can be contacted at [email protected]. His column appears Sunday and Wednesday.
