Geithner and Summers Consolidating Power (Auto Bailout Edition)

[Joanne98]

It looks like Tim Geithner and Larry Summers are executing a land grab. From the New York Times:

President Obama has dropped the idea of appointing a single, powerful “car czar” to oversee the revamping of General Motors and Chrysler and will instead keep the politically delicate task in the hands of his most senior economic advisers, a top administration official said Sunday night.

Mr. Obama is designating the Treasury secretary, Timothy F. Geithner, and the chairman of the National Economic Council, Lawrence H. Summers, to oversee a presidential panel on the auto industry. Mr. Geithner will also supervise the $17.4 billion in loan agreements already in place with G.M. and Chrysler, said the official, who insisted on anonymity.

The official also said that Ron Bloom, a restructuring expert who has advised the labor unions in the troubled steel and airline industries, would be named a senior adviser to Treasury on the auto crisis.

For the record, we have never been happy about the prominent roles Geithner and Summers are playing. Both played significant roles in creating and maintaining the system that lead to our financial mess. They are simply unable to see beyond their ideological blinkers. And as proteges of Robert Rubin, they are epitomes of what Willem Buiter calls "cognitive regulatory capture".

So consider the fact set. Geithner is clearly over his head and overloaded. He announced a multiifacted plan to rescue the banks, and it will take a full-bore effort over the upcoming weeks and months to sort that out. And Reuters indicates that Geithner is Obama's "designee" on the auto program.

The last thing you want to do is overload someone who is already in danger of muffing a crucial project. But here we go, Geithner and Summers now have more to do, and the auto industry bailout is coming to a head shortly. This was already set to be handled by a "car czar". The car czar has instead been supplanted by a car committee, which does not strike me as wise (it adds interpersonal dynamics into a process that would benefit from clear leadership). And having the overloaded Geithner and bull in the china shop Summers as leaders means that other participants, most importantly those who know something about the industry, are likely to be marginalized.

Consider the track record: this duo sidelined Paul Volcker, who brings enormous experience, a first class reputation, and a willingness to question orthodoxy. That says loud and clear that they place self interest above doing the right thing. Volcker is an enormously valuable resource, but apparently his connections, his skepticism of bankers, and his towering height made him too much of a threat.

http://www.nakedcapitalism.com/2009/02/geithner-and-summers-consolidating.html

[navarth]

1. Ominous.

I think they have the unions in their sights. Ominous.