Economic Recovery First

Hoffington Post

Commentary

Treasury Secretary Timothy Geithner belives that the legs of the 'stool' -- the stimulus, the housing rescue, the bank bailouts and tighter financial regulations -- would be enough for an economic recovery to sit on. He also believes that it is justified to rescue AIG from the Credit Default Swap that mires it using taxpayer money.

In a sense, when JP Morgan Chase created the Credit Default Swap time bombs that blew up the financial markets, the governments have no choice but to defuse the situation by backing all the issued insurance, just as it would support the deposit insurance of consumer bank accounts. The only difference here, is that JP Morgan Chase and other investment banks that benefited from the original Credit Default Swap and mortgage derivatives should pay for insurance.

Once the dust is settled from the emergency measures to stabilize the vital signs of the economy, there will be time enough to clarify and to account for the trail of responsibility for this disaster. In the mean time, while the patient is dying on the table, is not the time to fight over the blame.

Excerpts

At a meeting in the Capitol that stretched late into Monday night, Treasury Secretary Timothy Geithner briefed House Democrats on the ongoing efforts to revitalize the economy.

He pleaded for patience, said numerous Democrats in the room, but also ticked off the administration's accomplishments to date. "We're doing in weeks what countries did in years," he said, according to a Democratic aide in the room.

"This will work," the aide paraphrased Geithner as saying of the overall recovery effort. "It will take some time. It will take some patience. But it will work."

Before the briefing, Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) told the Huffington Post that he thought a second stimulus would be necessary. Emerging from the meeting, he said that Geithner didn't agree and that the secretary thought that the legs of the 'stool' -- the stimulus, the housing rescue, the bank bailouts and tighter financial regulations -- would be enough for an economic recovery to sit on.

Earlier in the day, Christina Romer, head of the White House Council of Economic Advisers, expressed a similar sentiment, saying at a speech at the Brookings Institution that she wanted to see if the first stimulus worked before calling for a second.

The meeting was a general briefing to keep House Democrats apprised of White House plans, not for Geithner to announce any new policy. He did not seek any new bailout funds for the banking system, said Majority Leader Steny Hoyer (D-Md.).

Rep. John Spratt (D-S.C.) said that Geithner told the Democrats that the "budget's wound up with the economy" and that Obama intended to use his spending blueprint as a tool of economic recovery.

Geithner was also asked about the ongoing AIG bailout and how he justified giving the insurer taxpayer money that it then turned around and used to pay off the failed bets of major banks. Several members of Congress said that Geithner argued that the payments were justified, but the members said they weren't able to repeat the arguments he made.

"He was talking about how AIG was a mess," said Waxman, "but they really had no choice."