Treasury Secretary Timothy Geithner and bank regulators are just not
getting along, and econobloggers are taking sides. Geithner launched an
in a meeting with top regulators, including Fed chair Ben Bernanke and
FDIC chair Sheila Bair, whom he had previously tried to push out
of office. Bair and others are expected to slam Geithner
in prepared testimony to Congress today. The underlying fight is clear:
Who will be in charge of regulation? Geithner's dirty mouth aside,
econobloggers take sides on who will lead the financial system.Geithner is Right: Power to the Treasury.
The New Republic's Noam Scheiber argued that Geither should be in charge
of recession-era regulation but needs broader influence. "Inevitably, it's Treasury that must lead
in this terrifying new order," he wrote. "Which is why its limitations
have become so glaring." Noam Scheiber later wrote
, "Somehow I don't think these tribal conflicts are going away any time soon."
The Economist's Free Exchange, which supports Geithner's position but
thinks he should be yelling at Congressional leaders rather than
, "If ranking legislators of both parties are sceptical about the plan to
further empower the Fed, I'm not sure what is accomplished by yelling
at regulators." Free Exchange has criticized
Bair's influence, particularly "the weird bureaucratic forces that give appointees all this sway."Geithner Is Wrong: Power to the Fed.
Tyler Cowen thinks the Fed should be in charge
of regulation, not Treasury. "It's the Fed who is the fireman with the awesome power to print money,
move markets, lend to the banking system on a large scale, and now even
conduct fiscal policy, all without Congressional approval," Cowen said.
Dealbreaker's Greg Michaels sniped
, "Apparently at this critical moment what is really needed is unwarranted blind faith in the administration." Michaels colorfully described the opponents of "Timmy G" as "the Beard, Mary Schapiro, and SheBair."
Geithner Is Right and Wrong.
Tim Fernholz of the American Prospect agreed with Geithner's
concerns about decentralized regulation, but said that Geithner's
Treasury Department shouldnt be in charge. "Treasury's argument that
the system needs a single point of
accountability to avoid the confusion that wracked the government last
fall seems spot on to me," he wrote, but said that single point should
be the Fed, endorsing "the Administration's plan to give the Federal
Reserve new powers to monitor systemic risk and impose onerous
Felix Salmon suggested
that Geithner's strategy, though well conceived, is ill-fated for
regulation. "If regulators aren't allowed to oppose Geithner's plan in
then they might just quietly start siding, emotionally, with the
financial-services industry which generally opposes any new regulation
at all," Salmon wrote. "This is a recipe for failure, especially if the
are dragged reluctantly into the new scheme, rather than being
genuinely in favor."
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