If there was ever any doubt, the outcry over AIG's bonuses should have settled it: US Treasury Secretary Tim Geithner doesn't get it. By all accounts, he - like White House economic advisor Larry Summers - is a committed, hard-working, highly-intelligent man. But he is so steeped in the culture of Wall Street that he doesn't realise that what bankers like will no longer fly on Main Street.
You'd think that after running the insurance company into the ground, forcing the government to spend nearly $200 billion rescuing it, AIG's executives might reckon they didn't earn a multi-million-dollar Christmas bonus. Nope. And though he says he was as outraged as anyone else, it's now clear that Geithner knew the bonuses were in the pipeline, but did nothing to stop them.
But that's just the beginning. Geithner this week announced the details of his bailout of the banking sector. He is gambling that the assets held by the financial system, some of which were produced by an alchemy nobody seems to have yet figured out, aren't all that toxic after all. All that's needed is another wad of taxpayers money to sweeten the pot, and investors will rush in. And if he's wrong? Well, taxpayers will just have to hug up another few hundred billion dollars in debt, and the game will start over.
By then, of course, Congressional Republicans will be emboldened to frustrate ever more of President Obama's initiatives. Voters will get their turn in next year's elections. If they punish Congressional Democrats, Obama may suffer the fate Bill Clinton did two years after his election: having his presidency's bold ambitions pared back to ribbon-cutting and speeches (and, oh yes, Monica Lewinsky), after the public humbled his party in mid-term elections.
The fault is his
However, while it is comforting to those of us who admire Barack Obama to blame his employees for their errors, at the end of the day, the fault is his. He chose these people. He stands by them. And, as they squander his political capital, he will be the one who pays the price.
Sure, he has lots of it to spend. But then, his ambitions are bold, and will draw upon those immense reserves. Confronting the worst economic crisis in American lifetimes, which will drive up US budget deficits; yet hoping to greatly expand the scope of US government further with ambitious programmes; Obama is already provoking opposition. And if, a few months down the road, his bank bailouts turn out to have been big gifts to rich bankers, even his supporters will grow disillusioned.
It's not as if there aren't people in the Obama camp who couldn't temper the Geithner-Summers-Wall Street clique. The problem is that, of all Obama's nominees to the Treasury Department, only one - Geithner - has been appointed. So he and Larry Summers are kind of alone to mind the shop. That is because Obama had to take a bullet in nominating Geithner, owing to the Treasury Secretary's problems with the tax man; the quid pro quo for Congressional Democrats speeding his approval has been that his staff must go through all remaining nominations with a magnifying glass.
Was it good judgment for Obama to spend so much political capital on Geithner? And then, in turn, to enable Geithner to spend so much more? It may be I'm wrong. It may be Geithner is right, the bailout will work, the US economy will roar back, and Obama will emerge the shining hero.
It may be. But I sure am not betting on it.
John Rapley is president of the Caribbean Policy Research Institute (CaPRI), an independent think tank affiliated to the UWI, Mona. Feedback may be sent to columns@gleanerjm.com.