It's ugly, but it's true: when a Washington power player looks set to fall, the capital drools. So Treasury Secretary Timothy Geithner found himself the object of intense interest when he went before the House Ways and Means Committee to testify on Tuesday. It was his first major public appearance since his less than inspiring rollout on Feb. 10 of a half-baked plan to save banks that left Washington and Wall Street whispering that Geithner, 47, wasn't ready for prime time.
But while Washington's public humiliations often hang on mere misdemeanors of a sexual, financial or chemical nature, the economy depends on Geithner's ability to restore confidence, as President Barack Obama argued in a prime-time press conference on Feb. 9. "My instruction to [Geithner] has been, Let's get this right. Let's create a template in which we're restoring market confidence," he said, later adding, "Ultimately, the government cannot substitute for all the private capital that has been withdrawn from the system. We've got to restore confidence so that private capital goes back in." (See 25 people to blame for the financial crisis.)
So how did Geithner do on Tuesday? To judge by the stock market, which dropped 4% in the wake of his Feb. 10 speech and has largely stayed on its downward trajectory since then, he survived. The Dow rallied from a 13-year low just before he began testifying to a modest gain afterward, then finished the day down again, but by just under 40 points and well off its lows. So much for Florida Republican Ginny Brown-Waite's assertion that every time Geithner speaks in public, "the stock market plummets."
For all Washington's conviction that perception is reality, Geithner's fate rests less on how he performs in public than on how his plans fare: the market and most Americans care a lot more about the substance of the Administration's efforts to save the economy than they do about Geithner's thin delivery. Sure, he doesn't seem to fill his suit, and he talks too quickly, and he swallows the ends of his sentences, and he gives the impression of a grad student taking an oral exam, not someone leading the country out of perdition. But he'll be the hero of the Western world if his plan to subsidize the sale of toxic assets leads banks back from the brink.
On that score, of course, the jury is still out. Geithner and the Administration have resisted outright nationalization of the banks because of the cost, complexity and political hazards of doing so. Instead, they are trying to get the market to price the incredibly complicated mortgage-backed assets that are suffocating the economy by paying part of the cost for private investors to buy them off the banks' balance sheets. At the same time, the Federal Reserve, whose chairman, Ben Bernanke, took his own public flogging on Capitol Hill on Tuesday, is unveiling an aggressive plan to stimulate consumer, small-business, auto and college borrowing, an area of the economy that has in large part been frozen since the fall.
Which is not to say that appearances don't matter at all. Geithner was chosen as Treasury Secretary over the rough-edged but more experienced former Treasury chief Larry Summers in part because Geithner was considered a smoother salesman. And Geithner will always be saddled with the hard-to-explain $34,000 tax shortfall that almost cost him the nomination. For now, though, Democrats are defending the Treasury Secretary against the bad reviews. "Every Administration official responding to this economic crisis, especially Treasury Secretary Geithner given his role, is working under the equivalent of an electron microscope that dramatically magnifies everything," says Rep. Jim McDermott, of Washington. "The Secretary's actions will speak much louder than his words and that is the ultimate test of reassurance the American People and Congress will judge him by. In the meantime, let's give the man a chance to lead."
Still, Congress is already unhappy with the vast sums of money the government is plowing into financial sinkholes like Citigroup and AIG that have been deemed too big to fail, and Geithner may have a hard time persuading it to pony up hundreds of billions of dollars more if necessary, as he said on Tuesday it might be. When the Administration rolls out its more detailed bank-bailout plans in the next few weeks, Geithner will have another chance to salvage his reputation as a salesman. But the truth is, if the plans fail on their own, it won't be Geithner's tone of voice or his demeanor that brought him down, no matter what the Washington crowd may say.