“Your legacy,” the newly installed Treasury Secretary counseled the recently elected President, “is going to be preventing the second Great Depression.” Quite a legacy if one ignores on-going recession, permanent high unemployment, rampant health care and higher education costs, legislative gridlock, China ascendant, all played out to the distant fiddling of the inflamed Euro-economy.
“Your Money, Your Vote” debate kicked off by asking Republican presidential wannabes what they would do to buffer America’s anemic economy against the bunga, bunga of Italy’s economy, the world’s seventh largest. One-time frontrunner Herman Cain announced he would “assure that our currency is sound. Just like — a dollar must be a dollar when we wake up in the morning. Just like 60 minutes is in an hour, a dollar must be a dollar.” Dollars to donuts, most folks wouldn’t be hiring a financial advisor based on fortune cookie advice. Clearly, though, there is an element out there that has no problem subjecting the world’s biggest economy to master plans scribbled on the back of bev-naps.
True to his Harvard Law School roots, the current occupant of the White House opted for an elitist approach to the worst economy since the Great Depression. He signed up central banker types, including a former Treasury Secretary and a former Fed Chairman. Timothy Geithner, whose five years heading the NY Fed placed him at the helm for the economic meltdown of ’07-‘08, was named T-Sec. Given his renowned intimacy with New York financiers, Geithner knew how to serve his masters by covering them with a $700 billion TARP at crunch time. No man is a hero to his valet and Geithner says he could’ve “cared less about Wall Street.” But he had to get credit flowing again, even it went to core perpetrators of the meltdown.
The docudrama “Too Big to Fail” portrayed current Fed chair Bernanke, dropping the D bomb on congressional and banking leaders: go along with the Bush economic team or detonate the next Depression. Exiting from the actual meet, John Boehner looked drawn and quartered as if he had just faced the Grim Reaper. But Depression prevention was “not enough” for the incoming President, so he set about to reform a bloated, inefficient health care system by extending it to the 45M uninsured. The jury is literally still out on that aspect of Obama’s legacy and, like almost everything else in America today, subject to slow death by deadlock.
Meanwhile, Treasury actually realized a profit on the widely despised TARP bailout, even as the banks have opted to sit on trillions while taking record bonuses for themselves. Mad Money’s Jim Cramer gushed recently that “Tim Geithner did a lot to make our institutions stronger…. He’s one of the greatest Treasury Secretaries we’ve ever had!” He has become this Administration’s Indispensible Man, the President beseeching him to stay on through the end of his first term.
Geithner’s bank-centric approach has not come without collateral damage. Bloomberg reported that Geithner-led NY Fed instructed crippled mega-insurer AIG to cross out references to $62B in swap payments to banks like Goldman Sachs, which were made at 100 cents on the dollar, no haircut. Geithner reportedly assured the banks that the dreaded doyenne of consumer financial protection, Elizabeth Warren, would never head the newly formed bureau. Though he denied “slow-walking the President,” the T-Sec reportedly ignored Obama’s early directive to dissolve troubled Citigroup (which had previously offered Geithner CEO).
Nothing has suffered more in T-Sec priorities than jobs. Geithner has intermittently lip-serviced the problem, lately with a Jobs Bill he knows is not getting past Republican blockades. In fact, the most arbitrary job barrier was thrown up on Geithner’s own turf by federal agencies closely interconnected with Treasury. On July 6, 2010, OCC, FDIC, NCUA and FHFA, the conservator for mortgage giants Fannie Mae and Freddie Mac, unloosed a coordinated strike against Property-Assessed Clean Energy (PACE) programs. PACE obligations, they contended, would pose a threat to “the safety and soundness” of mortgage products.
Launched in 2008, Long Island Green Homes was the first operational residential energy efficiency retrofit program in the nation. A typical retrofit is $9,400, averaging yearly savings of $1,114 that generally covers the homeowner’s monthly obligation, secured by the property. Energy use and emissions are cut over 25%, saving homeowners money, enhancing property value all while putting hard-hit tradesmen to work.
None of this matters much to the holders of a couple of trillion dollars of toxic subprime mortgages. In PACE, legislatively affirmed in 27 states and promoted by a Vice-Presidential White Paper, they imagined the second coming of toxic instruments and the chance to demonstrate what tight-fisted regulators they’d finally become. Fact is that if 5% of the nation’s 80M houses were retrofitted it would amount to a 0.6% rounding error of Fannie & Freddie’s total exposure. At the same time, this shovel-ready work would create 435,000 job years nationwide never to be outsourced.
The Town of Babylon, along with the State of California and several counties, filed suit against FHFA who fundamentally argued that they were accountable to none, even the courts. A Federal judge in California’s Northern District ruled otherwise and appeals are heading to the next level. In its suit, Babylon argued that FHFA had unilaterally abrogated state and local sovereign rights in determining what infrastructure could be remediated for a public purpose. In an aberrant departure from Washington gridlock, a bipartisan group of congressmen (23 Reps/29Dems, with Peter King the sole Long Islander to date) has embraced this principle by sponsoring the PACE Protection Act. Message to Feds: ‘Hands off our incandescents and back off of our local energy efficiency programs!’ Go figure.
Watching this mountain be made out of a mole hill, Geithner has held himself back behind the wizard’s curtain, as if PACE could conceivably be the straw that breaks the economy’s back. The Indispensable Man, who corralled the world’s most powerful bankers, could put the leg in legacy by delivering a swift kick to his in-house regulatory bureaucrats. As Othello’s Iago knew, so should Obama’s Iago, that, “Reputation is an idle and most false imposition; oft got without merit and lost without deserving.”