By Peter Schroeder - 08/08/11 02:10 AM EDT
Speculation about Geithner’s departure kicked into high gear following July reports that he was eyeing the exit once the debt-limit fight had been resolved. That chatter kicked into high gear following the last-minute agreement to raise the debt limit, which Geithner only stamped out last weekend.
The Treasury Department announced Sunday afternoon that Geithner would be staying, and the man himself elaborated on his commitment to the Obama administration and the task at hand later in the day.
While Geithner spoke highly of the job he is keeping, a slew of complications also made any sort of a clean exit extremely challenging for the face of the president’s economic policy.
On the political front, the August recess normally would have been a natural time for Geithner to make an exit, but even that would have been tough this year. The debt limit drama had been dealt with, and Congress is yet to embark on a major effort on any number of other economic issues where Geithner would need to play a leading role, such as tax reform or housing reform.
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But lawmakers are already lining up a wish list of projects for when they return, and the newly minted “supercommittee” of lawmakers charged with tackling the deficit will begin their work in earnest in mid-September. And on his own end, the White House is adamant it wants to re-focus on jobs now that the debt limit has been dealt with.
In addition, this month could mark the last real break politicians will take before the 2012 campaign season gets in full swing. Given Geithner’s visible role on the president’s economics team, and the primary role the economy will play in the campaign, the August break may have presented the best time for him to make an exit before campaign season kicks into high gear.
But while the politics may have slowed down a bit in August, economic turmoil across the globe has picked up steam. In the days after lawmakers headed back to their home districts, financial markets have been rocked by volatile activity and unprecedented developments.
The Dow Jones Industrial Average had its worst day of trading since the financial crisis on Thursday, shedding 512 points in one of the top 10 worst days in history for the blue-chip index. And credit rating agency Standard & Poor’s downgraded the United States’ credit rating for the first time in its history, throwing the reputation of Treasury bonds, thought to be one of the safest investments on the planet, and that of the nation’s political system into question.
Geithner’s visibility as the face of Obama’s economic policy was evident following the downgrade, with a handful of Republican lawmakers immediately calling for his resignation, coupled with the continued pressure from House Speaker John Boehner (R-Ohio) for the president to remove him and start fresh.
If that weren’t enough, the economic crisis in Europe has now spread to Italy, and the Obama administration will have a key role to play in that matter as well. Geithner has been discussing the issue with his European counterparts, and the United States is a key member of the International Monetary Fund (IMF), which is also helping nations navigate through the crisis. Geithner is the governor of the IMF, as is customary of Treasury Secretaries, and the United States is the largest contributor to the fund.
Further complicating Geithner’s exit would have been finding a replacement for him, and getting that person quickly in place. Given the administration’s recent history trying to get nominees confirmed – coupled with a slow-going pace of naming nominees in the first place –a Geithner successor would have most likely faced a long confirmation battle. When the administration has put forward a nominee for economic spots, it has often been met with opposition from Senate Republicans. Such opposition ultimately scuttled MIT economist Peter Diamond’s efforts to join the Federal Reserve Board, and Richard Cordray is likely in for a long fight as he tries to become the first director of the Consumer Financial Protection Bureau.
And lawmakers are not expecting the bright light on the economy would make the confirmation of any potential replacement any easier.
"Since at this point all of the nominees ... are put on hold by some of my Republican colleagues, I'm not sure we'd get to a Treasury secretary confirmation," said Sen. Mark Warner (D-Va.) in a recent MSNBC interview before Geithner said he was staying. "Which isn't the way a government should work ... [we should] vote a guy up or down; don't leave him hanging."