Capital Insights with Jack Kern: Two Feds are Better than One
- Nov 24, 2008
In a stunning announcement, Timothy Geithner was named as President Elect Obama's pick for Treasury Secretary, replacing Henry Paulson. To give you some idea, "Timothy F. Geithner became the ninth president and chief executive officer of the Federal Reserve Bank of New York on November 17, 2003. In that capacity, he serves as the vice chairman and a permanent member of the Federal Open Market Committee, the group responsible for formulating the nation's monetary policy.
Mr. Geithner joined the Department of Treasury in 1988 and worked in three administrations for five Secretaries of the Treasury in a variety of positions. He served as Under Secretary of the Treasury for International Affairs from 1999 to 2001 under Secretaries Robert Rubin and Lawrence Summers." (Information from the Fed website.)
I've been openly critical of Henry Paulson, the bait and switch tactics employed by the Treasury monkeys and the complete lack of planning and transparency on the TARP initiative. I am, however, pleased to see that Geithner was given the nod for this very important position. There are a couple of reasons for this.
First, and most importantly, the position of Treasury secretary has all too often been given to Wall Street barons, and as part of the political patronage system that needs reforming, Wall Street experience isn't usually aligned with the needs of the rest of the country. Next, The U.S. banking system has the ability to throw the rest of the world into a deep recession or depression if confidence isn't restored with any level of speed. Having Geithner working closely with Ben Bernanke will offer two advantages that will make the process easier – they've already worked together for many years on economic policy, and they're not from Wall Street and share a disdain for the kinds of financial pioneering that created the current mess.
Because Geithner has international experience under Rubin and Summers, he is more likely to be able to bring central bankers to the table and formulate some global strategies that will ultimately help to rebuild credit markets.
Lastly, the appointment firmly puts that control of monetary policy back in the hands of the Fed, where it was wrestled away by the Bush Administration. So going forward, good riddence to Henry Paulson, who was duped by the banks and only succeeded in helping them build their reserves and welcome back Ben. Now maybe we'll see some policies that actually work.