Welcome to bailout heaven

The pick of Timothy F. Geithner, president of the New York Federal Reserve Bank, as head of the Treasury Department does not bode well for those hoping President-elect Obama would be steering a moderate course. He ranked near the bottom of Reason Foundation senior analyst Shikha Dalmia’s list of candidates to fill this post. I’ll let Shikha summarize her take on this pick:

Equally bad would be Timothy Geithner, president of the New York Federal Reserve Bank, a perennial bail-outer who has been involved in the bailouts of Mexico, Indonesia, Korea, Brazil, and Thailand. No surprise then that he was an aggressive proponent of the current bailout – recommending that the Treasury inject direct liquidity into banks by buying preferred stock even before Paulson eventually did this, thus opening the door to all kinds of government meddling. The New York Times reports that Geithner, and his mentor Summers, are fond of quoting Mexican president Ernesto Zedillo, saying since markets overreact, policy makers must overreact too.

The Washington Post seems to agree, as their report on the pick summarizes his views on the economy this way:

A Democrat and a relative unknown outside the world of high finance, Geithner has worked closely with Treasury Secretary Henry M. Paulson Jr. to devise responses to the most critical events of the market turmoil, including the bailouts of the investment bank Bear Stearns and the insurance giant American International Group. Like Paulson, Geithner believes that the Treasury should be given vast powers to develop experimental strategies for responding to the crisis and the flexibility to abandon them if they don’t work.

The only possible bright spot is that Lawrence Summers is going to the White House as a senior economics advisor. Perhaps he will provide a policy check on the exuberance of Obama’s emerging brain trust of young, smart turks who believe they are better at running the economy than the people that live it. It appears they believe the federal government is better at providing accountability than the market as they bailout and nationalize various industries. Markets, afterall are such as harsh task master they would actually force busineses into bankrupcty for bad management and the audacity of misreading market trends. These these observations from the Washington Post were interesting and inisightful:

At 47, he [Guithner] is the same age as Obama and would represent a generational change in the highest levels of Washington economic policymaking, heading a remarkably young team of White House economic advisers tasked with sorting out one of the worst financial messes since the Great Depression.

Obama appears to be modeling his Administration on that of FDR.