I think this story about Tim Geithner and Citigroup falls under the realm of gossip, but it’s pretty important gossip, so let’s take a look at Ron Suskind’s claim:
A new book offering an insider’s account of the White House’s response to the financial crisis says that U.S. Treasury Secretary Tim Geithner ignored an order from President Barack Obama calling for reconstruction of major banks […]
The book states Geithner and the Treasury Department ignored a March 2009 order to consider dissolving banking giant Citigroup while continuing stress tests on banks, which were burdened with toxic mortgage assets.
In the book, Obama does not deny Suskind’s account, but does not reveal what he told Geithner when he found out. “Agitated may be too strong a word,” Suskind quotes Obama as saying. Obama says later in the book that he was trying to be decisive but “the speed with which the bureaucracy could exercise my decision was slower than I wanted.”
Geithner says in the book that he did not recall that Obama was mad at him about the Citigroup decision and rejected allegations contained in White House documents that his department had been slow to enact the president’s plans.
“I don’t slow walk the president on anything,” Geithner told Suskind.
Yves Smith thinks this is a load of crap, but I don’t think we need to engage in speculation here. Say this is true. Say that the President ordered the Treasury Department to consider a dissolution of Citigroup – which was majorly sick at the time – and Treasury blew it off. Now remember that the cabinet secretary responsible for ignoring that direct order is still in the cabinet. This sounds completely impossible to me. Unless the direct order was a minor thing, a CYA plan in case things got much worse at Citi. Obama is saying here that “agitated may be too strong a word” for his reaction to the lack of planning.
So either a) this didn’t happen, b) Obama has no problem with insubordination or c) the consideration of a plan wasn’t such a big deal in the scheme of things. And the fact that Geithner is still there points to (c). In fact, Geithner is still pushing bailout plans, this time in Europe, wanting them to set up a credit facility to leverage private money.
My bigger surprise is that there wasn’t a plan in place ALREADY. Citi and Bank of America were on life support at the time. There was a big public debate about nationalization or the “Swedish solution” or other methods for winding down banks. Obama actually mentioned it on 60 Minutes at the time. Treasury was engaged in faulty stress tests to supposedly see if such a wind-down would be needed. It is said that the Pentagon has plans for attacking Canada. The fact that there wasn’t a plan for winding down Citi under the circumstances is worse than insubordination, it’s incompetence.
The rest of the book, also summarized by the New York Times, sounds a lot like what we heard already, and to be fair, what we hear about practically every White House. There are a lot of competing egos, and this leads to internal rivalries and some manner of dysfunction. It’s your basic Oval Office dish. There’s talk of sexism in meetings, with figures like Anita Dunn being talked over. There’s a significant amount of time devoted to the idea that Larry Summers is kind of an asshole. There’s the tidbit that Rahm Emanuel wasn’t even on the short list for Chief of Staff, and that Pete Rouse, who managed the White House during one of its more productive times (the 2010 lame duck session), could have gotten the job. The President acknowledges that he has lost the narrative plot while pushing individual policy pieces. There’s a claim that propping up and nursing back to health the financial sector was “complicated,” to explain away the problems with it.
I don’t know if any of this hasn’t been covered by several other books. But Oval Office insider portraits are always fun.