Tim Geithner is an awful choice for Treasury secretary, but not for the reasons other objectors are suggesting.
Geithner is accused of employing an immigrant with an elapsed work visa. From my perspective, this is a complete nonissue. If Geithner wants to hire an illegal immigrant to mop his floors, nobody’s rights are violated. He wants his socks laundered, an immigrant wants a job, and they make a mutually beneficial trade.
Geithner also reportedly failed to pay self employment taxes from 2001 to 2004, a shameful oversight for a man responsible for spending hundreds of billions of taxpayer dollars over the past year in various bailout schemes. While he certainly should have been aware of his obligations, given the subjective, contradictory and virtually impenetrable tax code, it’s easy to get lost amid a sea of paperwork.
The Tax Foundation1 estimates over $250 billion is spent in compliance costs, simply figuring out how much we owe each year. Why is it that even college-educated professionals need to spend hundreds of dollars simply figuring out their tax obligation? He has since paid his obligations – with interest.
No, the problem with Geithner is, well, Geithner himself.
The Real Bailout Czar
In an age of bailouts, Geithner is the original Bailout Czar2. It was Geithner, after all, who was the instrumental figure in arranging JP Morgan’s (JPM3) takeover of Bear Stearns4, a deal in which $29 billion of taxpayer money was pledged as a backstop against illiquid and toxic assets.
It wasn’t Hank Paulson, but rather Tim Geithner who put together the plan to have the government rescue5 AIG, to the tune of $85 billion and growing.
It has been widely noted Geithner was in favor of stepping in with taxpayer dollars to save Lehman Brothers. I guess it’s pretty easy to spend taxpayer dollars when you aren’t even paying your own taxes.
If you are unfamiliar with Geithner, simply go the Federal Reserve’s web site6 to see a line-item balance sheet of his work: billions of tax dollars for AIG, Bear Stearns (look for “Maiden Lane LLC”; it’s the corporation created for Bear Stearns’s liquidation), commercial money markets and loans to primary dealers.
What Happened on His Watch
Of course, the financial deterioration at most of the large banks now begging for bailouts occurred under Geithner’s watch as president of the Federal Reserve Bank of New York. One could argue he missed the credit storm despite being in the catbird seat for more than five years.
He has, according to The Wall Street Journal7, been looking for “as much firepower as possible” as Treasury secretary. Take note: That “firepower” is your tax dollars.
There is uniform agreement that the TARP — along with all the trillions in bailouts and backstops that have gone along with it — has been a complete disaster, as we predicted it would be from the start8. Now Obama seems poised to rely on the guy who was responsible for getting this bailout train underway.
Wealth is not created because of a bailout, backstop or government stimulus plan. Geithner’s history suggests he believes government intervention9 is key to growing the economy.
It hasn’t worked since Bear Stearns. Eight trillion dollars later…why would it work now?
1http://www.taxfoundation.org/
2http://www.smartmoney.com/investing/stocks/car-czar-has-no-place-in-capitalism/
3http://www.smartmoney.com/quote/JPM/
4http://www.smartmoney.com/investing/stocks/feds-bear-bailout-hobbles-free-markets-22721/
5http://www.smartmoney.com/investing/stocks/aig-adds-massages-to-its-bailout-tab/
6http://www.federalreserve.gov/releases/h41/Current/
7http://online.wsj.com/article/SB123145793576866147.html
8http://www.smartmoney.com/investing/stocks/tax-rebates-to-neediest-wont-stimulate-economy-22537/
9http://www.smartmoney.com/investing/stocks/government-intervention-problematic-despite-rally/
This article originally appeared on Smartmoney.com.
