Geithner Must Go

An early litmus test of Barack Obama’s willingness to push policies to help the middle class in his second term — as promised ad nauseum throughout the campaign — will be whether or not he gives Treasury Secretary Geithner the sack.

That would send a small signal that things are different this time.

And it’s the subtext of an article published today by the Washington Post on its front page today (Zachary A. Goldfarb, “Why has the U.S. recovery sputtered?”), which describes Geithner’s lethargic and pessimistic response to initiatives proposed by “seven of the world’s top economists,” gathered by the President at the White House. Geithner’s response was to preemptively blame an obdurate Congress. Aside from failing to even try to find ways to put the obstinate House on the defensive by forging broad support among homeowners — Obama operatives told their supporters they would mobilize them to push popular reforms post-election (and there are certainly few better ways to build upon one of the specific points of protest that came out of the Occupy movement), he could at least recognize that there are ways to support similar proposals at the Fed, as William Greider points out in The Nation.

This is moral and political cowardice at its worst, especially now that Obama has postponed taking any immediate action to address some of the other critical issues that face the nation that have fresh momentum (climate change, campaign finance reform, etc.).

Economic recovery, the president says, is his immediate priority. If so, then why keep a Treasury Secretary and sometime tennis partner who has so obviously shilled for Wall Street for the last four years, and is openly willing to demonstrate how prepared he is to put the brakes on any new policies the president may have, including one the president’s first-term economic advisors told the Post is an obvious “missing link” in Obama’s first term. Nearly 11 million American homeowners — over 20% still owe more than their properties are currently worth.

Christina D. Romer, Obama’s former top economist told the Post there needs to be a bigger focus on reducing mortgage debt – i.e. principal reduction: “[W]e are likely going to need to help homeowners that are underwater…Many of these troubled loans will need to be renegotiated and the principal reduced if we are going to truly stabilize house prices and get a robust recovery going.”

The Post does remind us that Obama has expanded programs to better tackle mortgage debt, announcing more federal funding to write down loans. But it’s clearly not enough, and Romer and others “don’t see the kind of aggressive approach that could make a big difference.”

Perhaps the blame for the president’s incremental, halting and timid approach to helping the bottom 20% cannot be placed entirely on Geithner. But it fits the pattern: As Ron Suskind reported in “Confidence Men,” it was Geithner who ignored “the president’s clear, unequivocal orders involving Citigroup…as a potential first step in a wider restructuring of the banking sector,” slow-walking it into the garbage can while taxpayers kept pouring hundreds of billions to prop up the icon of financial deregulation and corporate arrogance.

Let’s not forget that while Geithner’s priority was to bail out Citigroup – the HUD’s inspector general concluded after auditing the bank that it (and others) had defrauded U.S. taxpayers in handling of foreclosures on homes purchased with government-backed loans.

Coddling corporate criminals and “Country Club Sopranos” is just one of many pathetic patterns that suggest how little Obama steered the government away from the policies of his predecessor — but that’s one that others besides Geithner (e,g, Eric Holder) should have to answer for.

The point is, if making the middle class whole is really the priority, then it’s long past the point when Obama needs to send a clear signal that things will be different this time.

Obama can either toss out Geithner and start helping Main Street or risk going down as the president who — despite all the soaring rhetoric to the contrary — solidified the gross inequalities that Citi’s analysts suggest are converting America into a “plutonomy.”