They [Geithner's advisers] decided to “let Tim be Tim” and accepted the fact that his strength wasn’t giving a speech in front of a bunch of flags. Rather, they let reporters see him in off-camera, pen-and-pad settings, where he fielded questions with the confidence that his staff saw behind the scenes. He aced an interview with PBS’s Charlie Rose, thriving in a relaxed setting where he could explain issues at length.

Perhaps most important, the staff realized the importance of making sure other parts of the government knew all the nuances of what was being decided. Treasury officials now meet with White House chief of staff Rahm Emanuel three or four times a week, so top officials can coordinate and trade notes about views on Capitol Hill.

Although Obama never lost confidence in one of his earliest Cabinet picks, a turning point for Geithner came during a seven-hour marathon meeting at the White House on March 15. The president’s top aides could see that he had thought through all the options and had thoughtful, authoritative answers to all their questions.

Management of the secretary has no doubt improved, to positive effect. He’s gotten used to the job, he has more help at Treasury, and the initial bungles and miscommunications that characterized his disastrous first weeks have faded as the White House has understood the need for better Treasury PR. If I had to guess, I’d say that these factors account for maybe 15 percent of the recovery in Geithner’s reputation.

The balance? Economic conditions mostly outside of his control. In the first month of his tenure, as crucial policy decisions were being rolled out one after another, the economy was getting worse at an increasing rate. Worst of all, it was doing it in a very visible fashion; no public appearance went without the inclusion of a stock ticker in a bottom corner of the television screen, and in those weeks stocks were always down (usually by a lot). No longer. Certainly, administration actions — including management of Geithner — have contributed to confidence. But with stimulus only beginning to trickle out and the secretary’s toxic asset program still on the drawing board, one has to attribute most of the appearance of green shoots to aggressive monetary policy and the natural progression of the recession. Both of which have redounded considerably, to Geithner’s benefit.

Should markets once more take a nosedive, attention will once again focus on the failures, real and perceived, of the Treasury secretary. Better communication strategies won’t keep the knives from coming out.

Today, The Washington Post today lends a nice glimpse into the reasons why that plan was so vague, reporting that Geithner & Co., after spending weeks crafting one plan, changed course at the last moment after deciding their initial strategy was too expensive and too risky. “There was one problem,” The Post reported. “They didn’t have enough time to work out many details or consult with others before the plan was supposed to be unveiled.”

The sharp course change was one of the key reasons why Geithner’s plan — his first major policy initiative as Treasury secretary — landed with such a thud last Tuesday. Lawmakers, investors and analysts expressed dismay over the lack of specifics. Markets tanked, and fresh doubts arose about the hand now steering the country’s financial policy.

Under the revamped Geithner plan, the Troubled Asset Relief Program would once again merit its name, combining public funds with private investments to rid the banks of their toxic assets and get them lending again. But, according to The Post, there remained too many unknowns last week to unveil their strategy in any detail. For example, federal officials were unsure how much federal funding the plan would require; where the cash would come from; and how the government would lure private investment into toxic securities, many of which are backed by fraudulent mortgages of questionable value.

In the end, Geithner and his colleagues decided that it would be better to take flak for being vague than publicly offer half-formed details that might later have to be revised.

That might prove a prudent course. But it still doesn’t explain why Geithner — who had been been the lead regulator of New York’s banks for the last five years, not to mention one of the central architects of the Bush administration’s Wall Street bailout — didn’t have a clearer idea of a solution, even as recently as last week.

From ABC:

Patterson first began lobbying for Goldman Sachs in 2005, after working as policy director for then-Senate majority leader Tom Daschle. According to publicly filed lobbying disclosure records, he worked on issues related to the banking committee, climate change and carbon trading and immigration reform, among others.

Patterson’s lobbying was first noted by the National Journal magazine.

Patterson is one of over a dozen recent lobbyists in line for important posts in the Obama administration, despite a presidential order severely restricting the role of lobbyists in his administration, the magazine reported.

Steve Ellis, president of Taxpayers for Common Sense, isn’t happy:

“Considering that Goldman was an early and large recipient of our TARP funding, being pulled out of that really does effect his ability to be an effective chief of staff for the treasury secretary.”

If this keeps up, plenty of others aren’t going to be too happy, either. Those new lobbying rules seems well on its way to becoming a distant memory. Where’s the justification for all this? Aren’t there qualified people out there who don’t happen to be former lobbyists?

I guess we’ll probably find out in late-Friday-afternoon press releases, like the one last week that announced an exemption for former Raytheon lobbyist Bill Lynn from the lobbying rule, thereby making his nomination as deputy defense secretary more likely.

As Spencer put it, “change we can believe in!”

From The Times:

Mr. Geithner, departing from prepared remarks, said the nonpayment of payroll taxes in the three years he was at the International Monetary Fund from 2001 to 2004 “were careless mistakes, they were avoidable mistakes. But they were unintentional. I should have been more careful.” He apologized that the committee had to spend so much time on his taxes when so much more serious issues are before it and the country. Disclosure of the tax problems last week caused Mr. Geithner’s confirmation hearing to be delayed a week, past Mr. Obama’s inauguration.

With the banking system in a free fall, lawmakers have little choice. Besides, Republicans like Geithner, and non-payment of taxes probably isn’t the greatest sin, as far as many of them are concerned. Senators from both parties lobbed a few questions at Geithner over the tax problems – he used Turbo Tax, in case you are wondering –  but also said publicly that he’ll be confirmed soon, according The Times.

So soon it will be on to bigger matters for Geithner. Like stabilizing the financial system, stopping foreclosures, getting credit moving again, fixing the housing market’s woes, deciding whether to prop up ailing banks …

New money, as in, additional to the $700 billion already appropriated by Congress to bailout failing Wall Street firms.

From ABC:

Asked if his mortgage plan would be “new money or part of the $700 billion” already appropriated by Congress for the Wall Street bailout, McCain said, “part of the $700 billion, new money, if necessary.”

“Look,” he continued, “in one day they wiped out $1.2 trillion when it dropped 700 points. And I’m not throwing this money around lightly. But if the housing values continue to go down, there’s no floor. There’s no turnaround here. We all know what was the catalyst for this catastrophe. And that was Fannie and Freddie.”

McCain’s plan, announced Tuesday at the presidential debate in Nashville, has come under criticism for putting taxpayers on the hook for bad loans made by banks.

However, The Atlantic’s Marc Ambinder raises the possibility that the plan may already be illegal:

Folks who are much more savvy on the specifics of the Troubled Asset Relief Program (TARP) wonder whether the government’s $700 billion bailout/rescue program expressly prohibits what John McCain now says he wants to do — and that is to have the government buy distressed mortgages at face value from banks and renegotiate their terms with homeowners.

They point me to Section 101e of the law, which requires the Secretary of the Treasury to “take such steps as may be necessary to prevent unjust enrichment of financial institutions participating in a program established under this section”

Here’s the key part…

… “including by preventing the sale of a troubled asset to the Secretary at a higher price than what the seller paid to purchase the asset.” Any loan that is not held by the originator, and the vast majority loans are not, would fall under this provision.”

So — if the bank gave you a 100 dollar loan…. and sold it for 80 bucks last year, and it’s trading at 50 dollars now, the law prohibits the government from buying it at $100 — face value — because that would “unjustly enrich” the entity which purchased the mortgage from the bank.

Under TARP, the government wouldn’t be able to buy it for more than $80… which isn’t face value.

So if they buy it at face value, wouldn’t they violate the law?

If this is the case, it could be back to the economic drawing board for McCain. It’s no secret the financial crisis is killing him in the polls.

If the “William Ayers”-strategy of diverting attention from the nation’s economic woes turns out to be the non-starter that it appears to be, McCain has 25 days and counting to start connecting with voters on the issues that really matter to them — like remaining their homes and being able to retire.

If he can’t do that, he can probably kiss the presidency good-bye.

If that idea sounded a little familiar, MarketWatch pointed out, that’s because the $700-billion rescue package already includes authority for the Treasury Dept. to do just that, if it chooses.

From MarketWatch:

“I know how to do that, my friends,” McCain said. “And it’s my proposal, it’s not Sen. Obama’s proposal, it’s not President Bush’s proposal.”

The problem, of course, is that it is President Bush’s proposal. At least, it’s Treasury Sec. Henry Paulson’s proposal. It’s the heart of the $700 billion plan.

According to Section 110 of the law, the government is going to buy up “troubled assets,” including residential mortgages, and then do everything it can to “minimize foreclosures” by modifying the terms of the loans by reducing interest rates, reducing the principal or “other similar modifications.”

Paulson’s biggest mistakes? Asking for supreme powers and no judicial review. Failing to realize that voters needed to trust the makers of the plan, and that they needed transparency. Arguing against paying market value for toxic assets. All this, Ehrenberg says, marks Paulson as man of the past, rather than the future.

From Ehrenberg:

He has bungled the handling of the bailout worse than an intellectual midget. This is one circumstance where IQ points, hubris and ego served as a barrier to success. He was so convinced of his righteousness and correctness that he didn’t listen. During an election year. In the midst of one of the most severe financial crises this country has ever faced. He simply missed the boat. He didn’t have a read on the pulse of the country. And it cost his bill passing Congress. And perhaps his job as well. …

He reads as a pandering ex-Wall Street executive, a man more concerned with preserving the status quo than helping usher the financial markets into a new, more customer-focused and risk-managed phase. This is a world that can still be profitable and create value for customers, employees and shareholders alike, but perhaps at a lower level and with more stable returns. Not a bad thing. And just maybe a really good thing. But this is not what lies deep within Mr. Paulson’s heart. The days of yesteryear are what he still pines for.

Much of the fallout is focusing on Congress’ role in tanking the bailout. But Paulson’s strategy also will be coming in for a closer look. Especially as he tries to revive the rescue package.

Paulson obviously needs to play the p.r. game a lot better this time around. And maybe understand politics better as well. The question is whether he will.

We’re All Socialists Now

Time to take a step back: A Republican president just sent out his Treasury secretary to announce the federal government will spend “hundreds of billions of dollars” to takeover a not-insignificant chunk of the economy.

From USA Today:

Former White House economist Nouriel Roubini, who forecast the current financial storm two years ago, has a harsher verdict. He says the USA is turning into “the United Socialist State Republic of America.”

Sen. Jim Bunning, R-Ky., describing himself as “outraged” by the Fed’s assertiveness, sounded a similar theme: “The only difference between what the Fed did and what Hugo Chávez is doing in Venezuela is Chávez doesn’t put taxpayer dollars at risk when he takes over companies. He just takes them.”

Marc Ambinder reports free-market conservative think-tankers have been given a gag order:

A source at a prominent right-leaning think tank e-mails:

We … are on strict “no comment” lockdown. We’ve even pulled some analysts of scheduled TV spots and have been declining any new appearances on the issue.

The analysts I work with are supportive of the AIG deal. But there is significant push back from higher ups on the board that don’t like it.

Hence our silence.

Milton Friedman must be spinning in his grave.

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