Geithner: The first man blamed becomes last man standing on economic team

Treasury Secretary Timothy Geithner has fended off repeated calls for his resignation to become the last man standing from President Obama’s original economic team.

While the president’s inner circle is undergoing a makeover as part of the pre-election “retooling,” Geithner remains the economic mainstay from the earliest days of the administration.

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One would have been hard-pressed to imagine that scenario during the rocky start of Geithner’s tenure. Not only was he assuming the top economic job amid a historic financial crisis, he also faced several political challenges, beginning with the revelation during his nomination hearings that he had failed to pay roughly $50,000 in taxes.

The heat on Geithner only increased after it was revealed that one of the companies bailed out during the financial crisis, American International Group (AIG), was paying out huge bonuses to its employees. Republicans and Democrats blamed Treasury and called for new leadership. 

“The scope of the work at the beginning was overwhelming,” said Jake Siewert, a counselor to Geithner. “There was a firestorm and a whole series of issues — autos, AIG — that were difficult to manage and that a peacetime Treasury isn’t equipped to deal with.”

Senior White House adviser David Axelrod told The Hill that Geithner proved his mettle amid the storm. 

“Tim earned the respect of everyone in the White House during those very difficult early days. He was steady and focused at a time of maximum pressure and peril,” Axelrod said. “And when he spoke, you always had the sense that he had thought things through in a really careful and responsible way.”

Much of the criticism directed at Geithner centered on the billions of dollars in bailout money given to the financial and auto sectors. But that criticism has died down in recent months as many of the programs have begun to offer good news.

The economic recovery is still stubbornly slow-going, but several of the bailout programs executed under Geithner’s watch have begun to recoup taxpayers’ money and even turn a profit.

“I think a lot of people underestimated Secretary Geithner,” said Douglas Elliott, a former investment banker and now fellow at the Brookings Institution.

Last August, then-House Minority Leader John Boehner (R-Ohio) called on Obama to fire his entire economic team, starting with Geithner, citing its lack of “real-world, hands-on experience” in the business arena and general failure to right the economy.

But asked last week whether the demand to fire Geithner still held, Michael Steel, a spokesman for now-Speaker Boehner, said, “It hasn’t come up in a while.”

While Geithner was generally well-respected for his intellectual chops before joining the administration, his political skills were an open question. 

“The biggest problems he had early on were communications and political problems,” Elliott said. “It makes sense that his background hadn’t really prepared him for those issues.”

Observers say Geithner has learned how to navigate the high-octane political skirmishes that come with the territory at Treasury. 

“His forte was never politics,” Siewert said. “He’s not political at all, but he put together a team that was pretty deeply seasoned in Washington.”

“His New York focus has been replaced by a D.C. focus,” added Scott Talbott, senior vice president of the Financial Services Roundtable.

Now Geithner’s influence could be growing in the White House as the president takes on a new team of economic advisers. Obama announced on Friday that Gene Sperling, a veteran of the Clinton administration and close adviser to Geithner, would replace the outgoing Lawrence Summers as director of the National Economic Council.

The departure of Summers follows a number of other personnel changes in the West Wing. Peter Orszag, former director of the Office of Management and Budget, left the White House in July and was later replaced by Jacob Lew. Christina Romer resigned as chairwoman of the Council of Economic Advisers around that same time and was replaced by Austan Goolsbee.

Media reports indicate that Paul Volcker, the head of the president’s Economic Recovery Advisory Board, will be leaving soon as well.

Amid the turnover, the administration has tapped Geithner to lead the charge on what is expected to be one of the first majors fight in the new Congress: approving legislation raising the debt ceiling for the federal government.

Republicans have argued that any hike to the debt limit, which currently stands at $14.3 trillion and could be reached by the end of March, needs to be accompanied by serious cuts in spending. The administration, on the other hand, is arguing that the debt limit, which if reached could result in a default on U.S. debt obligations, is too serious a matter to be used for political gain.

On Thursday, Geithner fired off a feisty letter to congressional lawmakers on the debt limit, warning that it would be “deeply irresponsible” to block a needed increase to the ceiling, and doing so would result in “catastrophic economic consequences.”

“Responsibility for creating the debt is bipartisan, and responsibility for meeting the nation’s obligations must be shared by both parties,” he wrote.

Boehner responded to the letter by saying that while America cannot be allowed to default on its debt, the American people would not stand for an increase to be passed without serious action being taken on spending. He did not mention Geithner by name in the rebuttal, however.

Geithner has enjoyed a run of good news as some reviled bailout efforts have begun to wind down.

The Troubled Asset Relief Program, which was authorized as a $700 billion program, is now estimated to cost the government as little as $25 billion, according to the Congressional Budget Office.

Meanwhile, Treasury earned $13.5 billion in early December after a successful initial public offering of General Motors’s stock. The selloff of 411 million shares nearly halved the government’s investment in the company, reducing its stake from 60.8 percent to 33.3. Of the $50 billion the government invested in GM, $23.1 billion has been paid back.

The government actually turned a profit on its investment in Citigroup, making $12 billion after the Treasury sold all 7.7 billion shares of the company that were purchased during the crisis.

Even reviled AIG is moving toward freeing itself of government assistance, announcing in December that it had lined up over $4 billion in private credit that will allow the government to convert its preferred shares into common shares that can be sold to the public.

As for how long Geithner might continue on as secretary, he has said in the past that he serves at the pleasure of the president, and will do so for as long as he’ll have him.

 Sam Youngman contributed to this report.