If Timothy Geithner steps down as Treasury secretary, it would spotlight an increasingly apparent liability for the Obama administration as it searches for a way out of the economic crisis -- the weakness of its bench on economic and financial services policy, where a number of crucial vacancies loom at a fragile time for the financial system.
While the administration's economic attention has been consumed by the struggle to strike a budget-cutting deal that would lift the debt limit before the economy is further rattled by the threat of a default, critics have been complaining that there is little attention or manpower devoted to other pressing issues. Having to take time and energy away from limited resources to focus on replacing a Treasury secretary would only add to those problems, analysts said Friday.
“It makes matters worse,” said William Longbrake, an executive in residence at the University of Maryland and the former vice chairman of Washington Mutual. “What about the rest of the economics team? There doesn’t seem to be a whole lot there to actually help the president formulate good sound economic policies as well as good sound political strategy. Everywhere I look, the people who have been guiding the president’s economic policy are all either departed or shortly will depart.”
It is well known that Austan Goolsbee, the chairman of the President’s Council of Economic Advisers, is on his way out; Jared Bernstein, Vice President Joe Biden’s top economic adviser, has already left; and Jeffrey Goldstein, the Treasury’s undersecretary for domestic finance, also has announced his exit.
But what has gotten far less attention is that the administration has put little emphasis on new solutions to the painful housing correction, and has almost no permanent financial regulators in charge of implementing all the reforms Congress passed last year that were intended to protect taxpayers from another financial catastrophe like the one that cost so many people their jobs, homes, and retirement savings.
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Michael Barr, the former Treasury assistant secretary for financial institutions, was looked to as a surrogate leader on financial reform and was known as an outspoken advocate for foreclosure mitigation even before he joined the administration. His position has not been replaced since he left last year, and no one in the administration is seen as taking up the same mantle.
There is also the shortage of two governors on the Federal Reserve Board and the lack of permanent heads in place at the Office of the Comptroller of the Currency, Federal Housing Finance Agency, Consumer Financial Protection Bureau, and Federal Housing Administration. Federal Deposit Insurance Corp. Vice Chairman Marty Gruenberg has been named to succeed Sheila Bair as FDIC chief, but his Senate confirmation process has not begun.
In the meantime, the administration is only able to focus fully on one issue at a time, and it is taking its toll on other financial policy matters.
“Everything is falling way behind schedule and I don’t see them picking it up; people are leaving rather than coming,” said Dean Baker, a co-director of the Center for Economic and Policy Research. “It’s a really big problem in the sense that nothing is getting done. The issues don’t go away. It just means that they fester or others take the lead.... For example, you have the mortgage suits, where I guess the state attorneys general are taking the lead; I’m not sure what role the administration has played.”
But Bernstein, Biden’s former adviser, said he thought it was typical for a Treasury secretary’s tenure to be about one term and that the vacancies in the administration should not be considered a major obstacle to implementing financial reform. Delays on financial reform usually occur in Congress, he said, and would be unaffected by the number of people on the president’s economic team.
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