The same could be said of him.
Once the focal point for criticism of the administration’s struggle to resolve the financial crisis, opposed by almost all Senate Republicans for confirmation, and the butt of jokes by late-night comedians, Geithner has emerged as President Barack Obama’s most powerful economic policy maker. His influence on everything from overhauling housing finance to remaking the corporate tax code is reminiscent of the clout that Robert Rubin and James Baker enjoyed when they ran Treasury.
“Many would have faltered during those tough days at the beginning, but he didn’t,” said Roger Altman, founder of the investment bank Evercore Partners Inc. and a former deputy Treasury secretary under President Bill Clinton. “And, between the success of the TARP investments, the auto rescues, and the overall recovery in the banking system, he’s now on top.”
At a Bloomberg Breakfast yesterday, the 49-year-old Geithner parried with leading reporters from nine news organizations on a variety of subjects, from budget battles with Republicans to U.S. differences with China over its currency policy.
He outlined a two-pronged approach to closing the federal budget gap: lowering the record $1.6 trillion deficit to more manageable levels over the next five years, and then tackling the longer-term peril posed by entitlement programs such as the Medicare health-insurance system.
He voiced hopes that Congress would avoid a government shutdown in the standoff between Republicans and Democrats over this year’s budget, even as he reiterated his criticism of the Republican spending-reduction plans as unrealistic.
And he said the U.S. has picked up support over the last six months for its campaign to pressure China for a stronger yuan to help ease global trade imbalances.
Two years ago, it was Geithner who was feeling the pressure. Tarred by an uproar over his underpayment of federal taxes, he won Senate confirmation as Treasury secretary by the slimmest margin since World War II. His rollout of a bank-rescue plan on Feb. 10, 2009, triggered a 4.9 percent drop in the Standard & Poor’s 500 Stock Index as investors dismissed his proposal as inadequate.
A lot has changed since, for the economy, the financial system and for Geithner himself. After contracting at a 4.9 percent annual clip in the first quarter of 2009, the economy has righted itself, helped by Obama’s $814 billion stimulus package, and is on course to rack up its fastest growth in seven years, according to economists surveyed by Bloomberg.
“By really almost any measure you look at, the economy is just gradually getting stronger,” Geithner said.
So is the financial system. U.S. banks had net income of $87.5 billion in 2010, the highest since 2007, the Federal Deposit Insurance Corp. said yesterday.
The S&P 500 index has jumped more than 90 percent since March 9, 2009, and corporate bond spreads have narrowed. The extra yield investors demand to own high-risk securities instead of Treasuries narrowed to 4.66 percentage points on Feb. 22, according to Bank of America Merrill Lynch index data.
“The core of the American financial system is in a much stronger position than it was before the crisis,” Geithner said.
The Treasury chief deserves much of the credit, said Douglas Elliott of the Brookings Institution in Washington and a former managing director of JP Morgan Securities Inc.
“The administration handled the crisis quite well and Secretary Geithner played a key role,” he said.
“Geithner has done very well in tackling the difficult problems that confronted the country when he took office, including a battered banking system and an economy in virtual freefall,” said El-Erian, who is also co-chief investment officer of Pimco, which manages the world’s largest bond fund.
“His major challenge now is to articulate and mobilize broad-based support for a longer-term vision,” he said.
A lot of that revolves around the budget.
Obama aims to reduce the deficit by $1.1 trillion over a decade. His budget, his first since Republicans took control of the House of Representatives, includes cuts to energy, transportation, housing and other programs popular with Democrats. Republicans have attacked the budget as inadequate, saying it doesn’t go far enough to address long-term deficits.
“You have to look at things that have a multiyear strategy so that you can phase in the deficit reduction as the economy recovers,” Geithner said, “And you have to make sure you’re giving a lot of care and attention to sustaining the ability to invest in things that matter for the future.”
He is skeptical that Republicans can carry through with promises to cut the deficit more deeply than the administration does while eschewing tax increases and repealing a health-care program that the Congressional Budget Office said will save the government money.
“I don’t think there is a realistic prospect they can do it politically,” he said.
Congress needs to enact a new spending plan by March 4 to avoid a government shutdown, and congressional Republicans and Democrats are preparing competing plans to prevent that outcome.
“Both sides have an interest in working to avoid this, in part because of the risks it would hurt the recovery,” Geithner said.
He sees a chance the administration and Congress can agree this year on a plan to overhaul the corporate tax code.
“There’s a lot of interest in doing it,” Geithner said.
Obama said in his Jan. 25 State of the Union address that the corporate code is riddled with “loopholes” because of the influence of a “parade of lobbyists.” He hasn’t offered details on what changes he’s seeking except to say any reforms shouldn’t result in lost revenue for the government.
Businesses are clamoring for relief from a top 35 percent corporate tax rate that is among the developed world’s highest.
Geithner also put forward this month a series of proposals for attracting private capital back into the $11 trillion mortgage market while shrinking the role played by Fannie Mae and Freddie Mac, the government-sponsored enterprises that have been sustained by U.S. aid since September 2008.
“I’m very encouraged by the reaction so far,” Geithner said, while adding that it will take a couple of years to reach a consensus with Congress.
On the international front, Geithner is trying to reorient the world economy to avoid the imbalances that helped contribute to the financial crisis. At the heart of the effort is his attempt to cajole China into accepting a faster appreciation of its currency.
He said the U.S. has gained backing for its campaign for a stronger yuan, pointing to growing concern in Brazil and India about China’s policies.
“People want to see them move faster,” he said.
China has allowed the yuan to appreciate about 3.8 percent against the U.S. dollar since June, or at a 10 percent annual rate in real terms, Treasury Assistant Secretary Charles Collyns said in a speech this week in San Francisco.
While Geithner’s role in helping settle these issues has grown since his rocky start in the administration, he still jokes that he doesn’t get enough respect.
Told that he was the second policy maker to appear at a Bloomberg Breakfast -- White House chief of staff William Daley was first -- he feigned umbrage.
“I’m so offended that I’m number two,” he said. “You know, the story of my life.”
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