Geithner fight on fiscal cliff invokes Dodd-Frank pragmatism

One final test...

‘Fully Consistent’

The U.S. takes a “public posture of a cheerleader and a private posture of scolding and coaxing and cajoling,” said Ted Truman, who worked with Geithner as assistant Treasury secretary for international affairs in the last two years of Bill Clinton’s presidency. “They made a decision that is fully consistent with Tim Geithner’s personality not to go public with their criticism.”

He has spent more time at the Treasury than any other secretary, first joining the staff in 1988 and rising to undersecretary for international affairs by 1999. He spent two years at the IMF before being named president of the New York Fed in 2003. Geithner has been Treasury secretary longer than anyone since Robert Rubin, who served from 1995 to 1999.

International Portfolio

His international portfolio gives Geithner credibility with European central bankers and finance officials as “a former member of the fraternity,” said Truman, who is now a senior fellow at the Peterson Institute for International Economics in Washington. His relationship with ECB President Mario Draghi goes back to the 1990s, when Draghi was director general of Italy’s Treasury department.

Geithner’s emphasis on insulating failing banks dates to that period, when he was part of U.S. efforts to stem the Asian financial crisis that spread from Thailand in 1997.

He puts “lots of focus on contagion and spillover effects, and thinking that through,” said Mark Sobel, a deputy assistant Treasury secretary for international monetary and fiscal policy who has known Geithner since they played on the department’s international-affairs softball team two decades ago. “In his intellectual approach to crises, a tenet is you have to amass power to try and quell” them.

Despite the camaraderie, European leaders have been slow to follow Geithner’s suggestions, such as using the ECB to boost the firepower of the euro area’s rescue fund.

Little Leverage

“The U.S. has very little economic or political leverage in Europe,” said Eswar Prasad, a professor at Cornell University in Ithaca, New York, and former IMF official. Other than passing on lessons learned during the financial crisis, “it’s hard to see what else” it could do.

Geithner has at times been frustrated “that the Europeans were not able, or willing, to act fast enough to stop their economies from being dragged down,” said Michael Barr, who worked under Geithner as assistant secretary for financial institutions in 2009-2010.

Geithner will be leaving the Treasury more than a year after he initially wanted to, with he and the White House in a “kabuki dance” from about March to August 2011 over when he could resign, said Daley, then chief of staff.

During the summer, he occasionally inquired about the search for a potential successor, and one day asked how the vetting was progressing, according to Daley.

“I said, ‘Tim, nobody’s in vetting,’” Daley said. “You go convince the president, and until he tells me to vet somebody, I ain’t vetting anybody. So, your problem.”

Obama wanted Geithner to stay, and Geithner agreed he would remain at least through the 2012 election.

Geithner hasn’t announced what he will do next. In a September interview in New York with Charlie Rose, Geithner said it’s “not really my thing” to sit at a desk and write a book, though he didn’t rule it out.

Wolin, Geithner’s deputy, said his boss understands that “what matters is what the history books write, not what the newspapers write on that day. He’s playing for the long game.”

Bloomberg News

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