Would Barack Obama have appointed Tim Geithner as Treasury secretary had he been privy to the minutes of the Federal Reserve’s meetings with its regional leaders, which became public yesterday? Geithner, who headed the New York Fed at the time, comes off as utterly clueless about the potential for the housing bubble to plunge the economy into recession, much less the Great Recession.
“We think the fundamentals of the expansion going forward still look good,” he said at the December 2006 meeting. Three months earlier, he pooh-poohed the idea that the weakening of the housing market could have any spillover effects. “We just don’t see troubling signs yet of collateral damage, and we’re not expecting much,” Geithner said. And as a grace note to this sonata of obtuseness, here’s Geithner’s comment to Alan Greenspan at the February 2006 meeting at which Greenspan stepped down as Fed chair: “I’d like the record to show I think you’re pretty terrific, too."
There were some economists in the Democrats’ ambit who believed the housing bubble held catastrophic potential for the economy, most notably Dean Baker. But, three years into Obama’s presidency, Baker is still outside the government, while Geithner is the one member of Obama’s original economic team who’s still inside. At least future presidents will have the opportunity, thanks to Barney Frank and Ron Paul, who authored the legislation requiring the Fed to open the minutes of its meetings, to see what folly transpired during Fed deliberations, and to use that knowledge to winnow the field of potential appointees of conventional-wisdom doofuses.