Rumours spread that Geithner will be replaced
JP Morgan chief Jamie Dimon in the frame to replace him, but would he do any better? Unlikely
Pity poor Timothy Geithner. No sooner has the Treasury secretary steered the US out of recession than a cross-party political lynch mob unhappy with soaring US unemployment, the sliding dollar, the slow pace of recovery and growing budget deficits, has formed to force his resignation.
Mounting criticism of Geithner led the Obama administration to issue a new public endorsement last week – but it has failed quell the anger. A new poll finds that 42 per cent of Americans think Geithner has done a 'poor' job handling the economy.
But would his rumoured successor, JP Morgan CEO Jamie Dimon, the man who rescued Bear Stearns and Washington Mutual, really be any more effective?
Dimon, who steered JP Morgan through the financial crisis almost unscathed, has let it be known "he'd love to serve his country". Earlier this month, he won political points in the capital making the case for allowing large institutions to fail and rumours suggest he's grown restless in the private sector. "He may be getting bored and may want new challenges on a broader plane," says securities analyst Richard Bove.
Scope for action by any Treasury secretary under the current economic scenario is undoubtedly limited: interest rates - nominally governed by the Fed - can't be lowered further; new stimulus spending funded by more borrowing would serve only to further weaken the dollar.
But the real anger stems from Geithner's roll in bailing out the banks - banks that, a year later, have begun dolling out billions in bonuses with scarcely any attempt at self-reform.
Last week, a Congressional report pointedly questioned if Geithner, then chairman of the New York Fed, and then Treasury secretary Hank Paulson, had steered the government bailout of AIG specifically to benefit Goldman Sachs by paying out Goldman's $11bn outstanding AIG contracts in full. To add to the insult, AIG then sought to pay more than $165m in bonuses to employees.
Geithner rejects the gathering criticism of his performance, telling Republicans last week: "You gave this president an economy falling off the cliff."
But does Geithner have reason to fear Dimon? Probably not. Treasury secretaries are rarely swapped so early in a first term. Nor in all likelihood would another Wall Street insider be offered the job. But he's likely to remain the political punchbag du jour. "Conservatives need a bad guy," pollster John Zogby told Bloomberg. "Who better than the Treasury secretary?" ·
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