23 June, 2012
Getting Away with It by Paul Krugman and Robin Wells | The New York Review of Books
Getting Away with It by Paul Krugman and Robin Wells | The New York Review of Books: How did Geithner manage to dominate policy so completely? Partly it was his skill at inside politics; even when he couldn’t win an argument outright he would win by other means. Often he would simply wait people out; this was his tactic with Rahm Emanuel, knowing that Emanuel’s manic attention would eventually turn elsewhere. And crucially, Geithner was enabled by Obama’s unwillingness to break stalemates between his aides. So as public rage mounted over the bank bailout, David Axelrod, Robert Gibbs, and Rahm Emanuel turned to Geithner and pleaded with him to make bank shareholders pay some price for the government rescue of the banking sector. Geithner simply refused to yield, making the specious argument that banks had already paid a price by being forced to raise capital from the market. As Scheiber accurately points out, this ignored the fact that by backstopping the banks during their self-inflicted implosion, the US government effectively gave them an insurance policy worth billions of dollars. In the end, Geithner won.