Obama’s own job performance is now tethered closely to the success of his Treasury secretary. He selected Geithner, after all, and has endorsed his latest rescue plans.
For Geithner’s part, his job security hinges on how well his plans work in the months ahead, Mr. Shapiro says.
The Obama administration, however, confronts a risk related to Geithner’s policies, he adds: “The larger issue is whether the administration either has been or will be too deferential to Wall Street.”
Geithner falls into one camp of finance experts who say the best way out of the financial mess is to nurse banks back to health without putting them under full government control. The main rival view, held by Shapiro and others on both the right and left, is that some large institutions may be insolvent and would be most efficiently resolved through temporary nationalization.
Politically, the Geithner course means that populist ire over bailouts could persist in coming months. Obama is already navigating delicately on this issue, affirming his own frustration with Wall Street while making the case that economic recovery hinges on more help for banks.
Economically, Geithner’s bank-rescue strategy carries its own risk. The true health of banks is a central uncertainty for the economy now. The worse off banks are, the more likely it is that nationalization of weak banks would be a cheaper and quicker way to resolve the problems.