During then-President George W. Bush's final weeks in office, Congress authorized spending $700 billion to prop up banks, purportedly to buy these troubled or toxic assets. (As chairman of the New York Fed, the current Treasury secretary actually helped design that package.) But the banks receiving the most money actually reduced lending, the opposite of the intended purpose. More troubling, especially for an administration that promised transparency, the current White House cannot or will not definitively say how the money was spent and who received it.
Not all bankers even wanted the Troubled Asset Relief Program, with some critics arguing that without government intervention, the financial system could have self-corrected. The CEO of Wells Fargo complained that the government forced his bank into the program and that its mandates restrict his bank's ability to raise private funding. "Is this America," said Chairman Richard Kovacevich, "when you do what your government asks you to do and then retroactively you also have additional conditions? If we were not forced to take the TARP money, we would have been able to raise private capital at that time." As for the President's plan to "stress test" banks in order to isolate those worthy of bailout money, Kovacevich called it "asinine."
The President promised to rein in unreasonable executive compensation, but insurance giant AIG -- which received more than $170 billion in bailout money -- plans to pay out $165 million in "guaranteed" bonuses. An outraged public prompted the President to ask his Treasury secretary to again attempt to stop or reduce bonuses that AIG's CEO acknowledged as "distasteful" but defended as legal obligations.
The President's Treasury secretary, who received bipartisan confirmation despite nonpayment of some taxes, seems confused, not unlike a deer caught in the headlights. To make matters worse, the new secretary works as a one-man band. Of the 18 important undersecretary positions, none has been filled, with only three nominations currently under consideration. Two highly regarded undersecretary nominees abruptly withdrew their names, including one who many felt possessed significant expertise necessary to help the Treasury secretary explain and implement the administration's policies.
The failure to staff may be an unintended consequence of the President's executive order restricting the conditions under which former lobbyists can serve in government. The President has granted -- so far -- two dozen waivers to this policy. Yet the head of Britain's civil service, Sir Gus O'Donnell, tried, by phone, to contact key Treasury personnel in preparation for the upcoming G-20 summit. The phones just rang. "There is nobody there," said O'Donnell.
The President's supporters speak of his enormous "popularity." But his sliding favorability numbers put him on par with former President George W. Bush at this point in their initial terms.
Americans, more and more, find themselves saying, "There is nobody there."