Geithner vs. Axelrod: A cage match in which the taxpayer seems to have won

Many years ago, in the dark ages, when Bill Clinton was the savior of the Democratic Party and I was a 38-year-old Deputy Under Secretary of Commerce for International Trade Policy Development (the longer your title in government, the less power you have), I went on a trip to China. It was with Secretary of the Treasury Lloyd Bentsen and his team. I was new to the government and did not know most of them. They, I’m sure, didn’t have the slightest idea why I was on the plane. Certainly, they treated me like cargo. Bentsen looked at me like I was a stain on his new carpet, and the others seemed to resent that I was taking up a seat that could just as easily be used to bring home souvenirs.

But also on that plane was a scrawny character who looked like he had just escaped from Camp Wackahoochee. He was even younger than I (in fact he looked like he was there for International Bring Your Kid to Sensitive International Diplomacy Week), and his name was Tim Geithner.

Over the years, I came to know Tim better and watched with some admiration as he rose through the ranks at Treasury, took the helm at the New York Fed, and more recently slipped into the chair once occupied by Bentsen. He still looks like a summer camp escapee, but over time he has proven to be exceptionally smart, dedicated, and in every observable respect, a good guy. But as of the arrival of this morning’s paper, he has transcended all that and risen to another level on his already very impressive trajectory upward. If The New York Times is to be believed, Tim is becoming a leader, a force to be reckoned with in the Team of Egos. 

Today’s paper reports that Geithner had to fend off advice from David Axelrod and other politicos on how to structure the financial rescue package. It reported:

Some of President Obama‘s advisers [the paper cited Axelrod] had advocated tighter restrictions on aid recipients, arguing that rising joblessness, populist outrage over Wall Street bonuses and expensive perks, and the poor management of last year’s bailouts could feed a potent political reaction if the administration did not demand enough sacrifices from the companies that receive federal money. 

They also worry that any reaction could make it difficult to win Congressional approval for more bank rescue money, which the administration could need in coming months.”

Wasn’t this supposed to be the administration that left the policymaking to the pros? Wasn’t this supposed to be a set of issues that was too important to sacrifice it to the compromises and distortions of politics? Oh, I get it; I know you need political support to get things done and without that even the best policies are only unfulfilled ideas. But, recent history has proven repeatedly what happens when matters of the greatest national interest are spun into imperfect solutions by the Roves of this world. Which is why the fact that Tim prevailed reflects so well on him and ultimately on President Obama. If the polls must be heard, fine — although minimizing their involvement in policy areas where they don’t have a great deal to add of a substantive nature is probably a good idea — but in the end, it is important the policy guys win. That didn’t always happen in the Clinton or the Bush years. It is heartening that on this absolutely vital set of issues, President Obama seems to have listened to the voice of his inner wonk. Actually, I don’t want to minimize that with glibness. It’s an early an important test of his leadership.

A perfect example of where politics and policy collide, although perhaps a smallish one in a large, complex, generally very well constructed, well thought-out financial rescue 2.0 proposal, is the issue of executive pay. Does it feel good to slap all kinds of constraints on the greedy fat cats who ran these Wall Street firms? Sure. Are some limits, sensible? Also, yes. But look at it another way: We are giving these institutions billions of dollars of taxpayer money. If you were giving an institution billions of your own money and you wanted the best chance of getting it back someday, would you then say, “OK, now you can only spend an entry-level salary on the person who is going to be responsible for my cash.”

(New hires at Blackstone were making around $400K a couple of years ago. $500K is what a twenty-something makes on Wall Street. Obscene? Sure. But this is our money we’re talking about; let’s be reasonable … as this proposed package is.)

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