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Geithner's stature and influence at the White House increase

After recovering from a rocky start, the Treasury secretary is credited with a string of policy successes. But he continues to be a lightning rod for criticism.

October 08, 2010|By Jim Puzzanghera, Los Angeles Times

But that team is changing. Budget Director Peter R. Orszag left in June. Christina Romer, chairwoman of the Council of Economic Advisors, left in early September. And the White House recently announced that Summers would return to Harvard University.

"Larry is a towering intellect and a hugely valuable resource, but Tim's influence was pretty strong to start with," White House advisor Axelrod said.

Obama's choice of Geithner after the 2008 election was widely praised. But that view quickly changed with the disclosure that he had failed to pay $34,000 in self-employment taxes from his time at the International Monetary Fund. A third of the Senate, including three Democrats, voted against his confirmation.

Then things got worse. On Feb. 10, 2009, Geithner delivered a much-anticipated televised speech about the administration's plans for stabilizing the financial industry.

People expected details, but instead he sketched broad initiatives — stress tests to determine the health of the largest banks, a public-private initiative to purchase toxic mortgage-backed securities from financial institutions and an effort to slow home foreclosures.

Geithner's performance was widely panned, the financial markets plunged and speculation about his fate began.

But the reaction was unfair, said Phillip Swagel, who served as chief economist at the Treasury Department from 2006 until early 2009.

"In retrospect, that speech is actually very good. It gave a road map of where everything was going, but people were expecting more," Swagel said, blaming Obama for raising expectations. "It turns out everything he said, he did."

Not all the initiatives have been successful, though. The plan to purchase toxic assets never really took off, and the administration's mortgage modification program to ease foreclosures has struggled.

But the stress tests and the increased capital they forced financial institutions to raise are credited with stabilizing the financial system at a time when many people were calling for a more radical move — nationalization of some of the largest banks.

Economist Johnson gives Geithner credit for the right approach in the stress tests, though he believes they could have been tougher and forced the banks to raise more capital.

"It wouldn't surprise me if he stays as long as President Obama is president," Johnson said.

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