An audit of the Federal Reserve Bank would "substantially castrate the Fed so it cannot do what it was set up to do," Rep. Melvin Watt (D., N.C.) said yesterday, in an effort to tamp down a congressional uprising against the Bush/Obama economic team.
This devastating exchange Thursday between Secretary of the Treasury Tim Geithner and Rep. Kevin Brady (R-Texas); along with weeks of close attention to the mismanagement of federal stimulus funds; Rep. Ron Paul's long-lived Fed Audit bill; and last but not least, continuing horrible news on every indicator Geithner cited to Brady (and a few he didn't); have together started a fire that is threatening President Obama's economic brain trust.
The Wall Street Journal gives some color:
At the Joint Economic Committee, a couple of House Republicans called for the resignation of Mr. Geithner, who, as president of the Federal Reserve Bank of New York, played a major role in last fall's moves to prevent the collapse of the financial system. "The public has lost all confidence in your ability to do the job," said Rep. Kevin Brady, Republican of Texas.
Mr. Geithner, in an unusual public display of pique, fired back. "What I can't take responsibility is for the legacy of crises you've bequeathed this country," he told Mr. Brady.
Although several Democrats defended Mr. Geithner at the hearing, some liberal Democrats have been complaining that the Obama administration isn't doing enough to combat unemployment….
"Quite frankly, all the gambling on Wall Street is doing nothing to put people back to work in America and rebuild our economy," said [Rep. Peter DeFazio (D., Ore.), who earlier this week urged Geithner to resign].
One issue that has dogged Mr. Geithner is the rescue of American International Group Inc. last fall…. Mr. Geithner said Thursday that the government lacked powers it needed to handle the collapse of a financial company that wasn't legally organized as a bank. "Coming into AIG we had, basically, duct tape and string," he said…
Mr. Geithner's job status doesn't appear to be in jeopardy and several Democrats leapt to his defense.
I'm not so sure about that last bit. In his congressional hissy fit, Geithner gave the game away: He can't lay this on President Bush because, as Brady pointed out, when Bush presided over the $14 trillion inflation of assets that got us where we are today, Geithner was working the pumps with more eagerness than most .
As I noted the other day, Geithner's actions as President of the Federal Reserve Bank of New York will probably not be deemed sufficient to fire him from his current job. But it is false and stunningly uncouth for Geithner to blame the previous administration for his manifest failure as head of the Treasury.
Geithner v. Brady, on television:
As for Melvin Watt's husbandry metaphor, you may want to unpack the image a little bit. (If you need to be alone, I'm totally cool with that.) When you castrate an animal, you do so to keep it from breeding (or to groom it for soprano roles in Grande Opera). So exactly what action is the Fed performing for the U.S. economy that requires intact male genitals?