Spotlight Fixed on Geithner, a Man Obama Fought to Keep
WASHINGTON — As friends, donors, cabinet members and celebrities like Tom Hanks, Jay-Z and Stevie Wonder partied at the White House one evening last August to celebrate President Obama’s 50th birthday, the president tapped a lesser-known guest on the shoulder.
“Take a walk with me,” he said to Carole Sonnenfeld Geithner, within earshot of others.
Their stroll on the South Lawn was Mr. Obama’s last step in a lengthy effort to keep her husband, Timothy F. Geithner, as secretary of the Treasury for the rest of the president’s term. Having worn down Mr. Geithner, Mr. Obama wanted to explain to Mrs. Geithner why it was important that her husband delay his return to New York.
That Mr. Obama went to such lengths to keep Mr. Geithner, after not having done the same with others on his economic team who had left at midterm, underscored how much he had come to rely on Mr. Geithner.
The question for outsiders as varied as Tea Party Republicans and liberal Democrats is why Mr. Obama would be so insistent that Mr. Geithner stay. As Treasury secretary, he was the highest-ranking member of an economic team that underestimated the depth of the downturn, and he has managed both to anger Wall Street firms and to be a target of criticism at Occupy Wall Street rallies.
For Mr. Obama, however, Mr. Geithner has emerged as the indispensable economic adviser who has outlasted every other member of the original inner circle and whose successes easily outweigh his missteps. The two are not friends exactly — Mr. Geithner rolls his eyes at the idea of playing golf, the president’s preferred form of relaxation — but they are what David Axelrod, Mr. Obama’s political adviser, calls “kindred spirits.”
Europe’s troubles, perhaps more than anything, highlight what Mr. Obama likes about Mr. Geithner, because they help show how the effects of the financial crisis could have been worse in this country.
After a rocky first few weeks in the job, Mr. Geithner managed to stabilize the country’s troubled banks by forcing them to own up to their problems and seek additional funds from both the government and the private sector. The Treasury has even earned a profit for taxpayers on the still-reviled bank bailout program.
European leaders — defying repeated advice from Mr. Geithner, by phone and in five trips so far this year — have taken a much less aggressive approach, applying one Band-Aid after another to address their mounting debts and ailing banks, only to discover they must do more.
“They’re moving ahead, but we just need them to move ahead more quickly and with more force behind it,” Mr. Geithner said of European leaders on Thursday, after meeting with Pacific region finance ministers in Honolulu.
Many outside analysts believe that if Europe had followed the Treasury’s lead sooner and forced banks to hold more capital, its financial institutions would not be so vulnerable.
Yet the administration’s success in stabilizing the financial industry stands in contrast to its inability to bring down unemployment and foreclosures. The administration, like many private economists, misjudged the length of the downturn, and Mr. Geithner was among those who pushed for more emphasis on deficit reduction than on doing more to help the economy in the short term.
As a consequence, Mr. Obama’s economic team failed to help him prepare Americans for the pain ahead. It has proved a defining mistake of the Obama administration.
Although Congress limited the administration’s options, many economists fault Mr. Obama and Mr. Geithner for being too timid in intervening, especially to help homeowners. In White House meetings, Mr. Obama has repeatedly voiced frustrations — sometimes brandishing letters from distressed homeowners — that the administration’s initiatives have not helped nearly as many homeowners as advertised.
“I just don’t think they tried hard enough, and I’ve told the administration that,” said Alan S. Blinder, an economist at Princeton and former vice chairman of the Federal Reserve. “They haven’t done the really difficult things — like using a lot more public money. Yes, there are legal complexities, political difficulties and all that. But stemming this epidemic of foreclosures was — and still is — vitally important.”
Officials say that Mr. Obama does not blame Mr. Geithner either for the persistent housing problems or for the administration’s miscalculations of the slump. Many underestimated the crisis, they note, and Congressional Republicans’ opposition has limited the administration’s options. Mr. Obama saw Mr. Geithner, especially in the first year, as responsible mainly for the financial system, rather than as captain of the economic team, as other previous Treasury secretaries have been.
Europe’s worsening crisis, and the potential for contagion, loomed large in Mr. Obama’s arguments that Mr. Geithner remain at the Treasury Department. Also, with further budget battles with Republicans ahead, Mr. Geithner’s departure could signal additional instability to financial markets — especially given the likelihood that Senate Republicans would try to block confirmation of a successor — and distract the White House just as Mr. Obama’s re-election campaign is under way, officials said.
Aides say that nearly as important to the president as Mr. Geithner’s expertise in battling financial crises has been his style in doing so. He was cool in a crisis, and while he was just as confident as the other members of the administration’s first team of economic advisers, with its big egos, he was the self-effacing one who could break the tension with a little sarcasm, a lot of profanity and his high-pitched giggle.
Born two weeks apart in August 1961, the president and Mr. Geithner each spent childhood years in Asia because each had a parent working for the Ford Foundation on overseas development. Both like to describe themselves as pragmatists, and both are more private than social. Mr. Geithner’s rule at Treasury — “no peacocks, no jerks, no whiners” — is a variation of Mr. Obama’s “no drama” dictum.
One difference between them is their motivation for being in government. Mr. Geithner, who was a registered Republican as a young man, has focused on financial problem-solving since his early career at Treasury through the 1990s, including the Asian and Mexican crises back then. For Mr. Obama, the presidency is a chance to change “the trajectory of America,” as he said during the 2008 campaign.
The contrast between the ambitious activist and his adviser, the problem solver, was evident shortly after the election. In a conference call with advisers, Mr. Obama spoke of the transformative domestic policies he had promised and now would pursue. Mr. Geithner, say people familiar with the exchange, cautioned that the crisis Mr. Obama had inherited was so severe that it would constrain him.
“Your legacy is going to be preventing the second Great Depression,” Mr. Geithner said.
Vexed, Mr. Obama replied, “That’s not enough for me.”
Mr. Geithner, in an interview, declined to talk much about his relationship or discussions with Mr. Obama. Yet he suggested that he sees his value as his willingness to say what Mr. Obama may not want to hear, given that presidents often do not get unvarnished advice.
“I think you worry a lot: Do people tell you what they really think? You really want that most,” Mr. Geithner said. “I don’t think with me he ever doubted.”
In the summer of 2010, for example, Mr. Geithner tried to get the White House to fight to make sure the Bush-era tax cuts for the wealthy expired at the end of that year as scheduled — not only to reduce deficits but to be more fair.
“The most affluent 400 earners in 2007, who earned an average of more than $340 million each that year, paid only 17 percent of their income in taxes — a lower rate than many who consider themselves middle-class Americans,” Mr. Geithner said in a speech at the time, as he tried to lead the charge against Republicans’ push to extend the rates.
Yet Mr. Obama did not take up the cause, dissuaded by Democrats in Congress who were worried about how a tax fight might affect the midterm elections.
Mr. Geithner has long since come to understand that he will remain unpopular among both some supporters and opponents of Mr. Obama.
“To the extent people aren’t happy, you’d rather have the secretary of Treasury be the spear-catcher instead of the president himself,” said Geoffrey Garin, a Democratic pollster. “And if Geithner were a liability, they’d have let him go when he wanted to go.”