“Conservatives agree that as point person, you failed,” Rep. Kevin Brady (R-Texas) told the Treasury secretary yesterday during a hearing of the Joint Economic Committee. “Liberals are growing in that consensus as well. Poll after poll shows that the American public has lost confidence in this president’s ability to handle the economy. For the sake of our jobs, will you step down from your post?”

Geithner, of course, didn’t budge, arguing that it was Congress that left the new administration “an economy falling off the cliff.”

“Almost nothing of what you said represents a fair and accurate perception of where this economy is today,” Geithner told Brady.

And on some counts he’s right. Since Geithner’s swearing-in 10 months ago, the stock market has rebounded and the investment-banking industry has flourished. Yet little of that high-altitude recovery has trickled down to middle-class America, where homeowners continue to sink and unemployment is at a 26-year high.

That discrepancy has led some liberal Democrats to go after the White House recovery strategy as well. Earlier in the week, Rep. Peter DeFazio (D-Ore.) blasted Geithner and others on Obama’s economic team for hoarding unspent Wall Street bailout money instead of allowing Congress to tap some of it for infrastructure projects — a plan that would help shift the recovery to Main Street.

“Unfortunately, the president has an adviser from Wall Street, Larry Summers, and an adviser from Wall Street, Timmy Geithner, who don’t like that idea,” DeFazio told MSNBC’s Ed Schultz Wednesday. ”They want to keep the money [because] there may be more needs on Wall Street.”

None of this, of course, should come as any surprise. Geithner headed New York’s Federal Reserve Bank for the five years prior to his appointment atop Treasury, forming entrenched allegiances to Wall Street. So if there’s anything new in these latest episodes, it’s only that Congress is finally discovering where the loyalties of the Treasury secretary actually rest.

A foreclosed home in Winchester, Va. (Jay Mallin/ZUMA Press)

Mortgage giant Fannie Mae’s recent announcement that it will give homeowners facing foreclosure the chance to stay in their properties as renters for as long as a year is the latest aggressive move by the government to help troubled borrowers and tenants avoid being evicted. But as past efforts to stem the foreclosure crisis have already shown, even well-intentioned programs haven’t managed to reach significant numbers of people in peril – meaning any new approach faces a tough road ahead.

Image by: Matt Mahurin

The problem has been particularly widespread surrounding a provision in the law, called the Helping Families Save their Homes Act, that allows for borrowers with Section 8 affordable housing vouchers the option to also stay in their residences when their landlord is in foreclosure. Some tenants who call their state or local housing authorities in Massachusetts and Connecticut after a foreclosure eviction notice are mistakenly told they have to move, noted Judith Liben, a senior housing attorney with the Massachusetts Law Reform Institute, a nonprofit legal services advocacy group. Better training of housing authority staff would help fix the situation, she said.

“Even with well-intentioned policies, there’s a disconnect between a good idea put into law, and what really happens on the street,” Liben said. “We see that disconnect on the ground, all the time.”

Despite anti-foreclosure initiatives by the government and lenders, the housing crisis has continued to worsen. Foreclosure notices totaled a record high of nearly 938,000 in just the third quarter of this year, according to RealtyTrac, an online foreclosure database. The Center for Responsible Lending predicts a total of 9 million foreclosures by 2012. Vacant and abandoned foreclosed properties are adding to neighborhood blight problems. Renters increasingly have become caught as innocent bystanders, evicted often without notice when their landlord faces foreclosure.

The new federal protections are supposed to address that. But in some cases, tenants in foreclosed homes either can’t reach real estate agents in charge of selling the properties to let them know they want to continue renting, or they get incorrect information from agents and think their only option is to move out immediately, said Shelley White, litigation director at New Haven Legal Assistance in Connecticut. In some instances, law firms send misleading letters that imply a financial incentive to move, known as cash for keys, is a renters’ only option, she said.

“We’re definitely seeing a lot of problems with tenants that just get notes from Realtors that say the bank has foreclosed on your property, and it’s time to get out,” Wright said.

The difficulties in outreach to tenants comes as the government continues expanding options and assistance to borrowers and renters dealing with foreclosure. In addition to the new federal law, the Treasury Department plans soon to rollout its plan encouraging more short sales by offering financial incentives to lenders and borrowers. In a short sale, a homeowner sells his home for less than the amount owed on the mortgage, and lenders forgive the remaining loan balance.

Both Fannie and Freddie Mac earlier this year began allowing qualified tenants in foreclosed homes under their control to sign month-to-month leases. Freddie Mac also started offering former owners of foreclosed homes the month-to-month lease option. Last week, Fannie announced its new policy, which significantly expands on the idea, allowing some owners who didn’t qualify for a loan modification and can’t afford their mortgage  the option of staying on in their homes. The owner would voluntarily turn over the property to Fannie in a “deed for lease” transaction, instead of going through a lengthy foreclosure process. The former owners in exchange would be given the option to rent back their homes for at least a year. Unlike in a short sale, their credit is unlikely to take a hit because of the transaction. And even investors may be eligible, meaning they would turn over their properties to Fannie, but their tenants would have the option to remain.

“This is huge,” said Dean Baker, co-director of the Center for Economic and Policy Research, who proposed a similar own to rent idea when the financial crisis first hit two years ago.

Baker would prefer that Fannie’s new policy extend the the rent-back period even further, to five or 10 years. But, overall, Baker said Fannie’s program addresses the problem of growing numbers of vacant properties, and represents a shift to promoting rental policies as a foreclosure solution. “You’re guaranteed a year, and that gives you some stability and a chance to plan ahead,” he said.

He and others also described Fannie’s new program as a big step forward over some efforts currently in place to help renters in foreclosed homes.

Fannie Mae, for example, already gives renters in foreclosed homes the option to continue renting on a month-to-month basis, or to accept a cash for keys offer. According to Fannie’s data, the financial help has been a far more popular option. Since January, it has tallied 3,500 cash for keys agreements, and 300 signed leases. Fannie Mae spokesperson Amy Bonitatibus said the program was set up to offer both choices to renters. It is open to all tenants of Fannie Mae-owned properties, but she had no information on specifically how many tenants had been approached with offers.

The small number of leases signed isn’t really surprising, said Danilo Pelletiere, research director for the National Low Income Housing Coalition. The options to renters were offered post-foreclosure, by which time some tenants may have decided to make other living arrangements. Cash for keys can be a more attractive option than a month to month lease. The new federal tenant protection law also overlapped with Fannie’s program, so some tenants may not have felt a need to sign leases, he said.

Pelletiere and other advocates said they have much higher expectations for Fannie’s new approach for former owners. A deed for lease transaction can happen far more quickly than a foreclosure, and having a longer-term lease will be more attractive to many people. Fannie also has hired a national property management company to handle the new program, while its existing rental initiative for tenants uses local real estate agents and property managers.

“Because of the way it’s designed, it should do a much better job,” Pelletiere said. “That makes it much more likely that we’ll see a national response. It provides a way for Fannie to be proactive and to get to the property earlier. And it costs less than getting someone out of a home and foreclosing on them.”

Alan Mallach, a senior fellow at the National Housing Institute and the Brookings Institution, agreed. “What’s interesting will be to look at how many people this new policy affects,” Mallach said. “I think it will be significant.”

Pelletiere said he also found some encouragement in early results from Freddie Mac’s program earlier this year to rent back properties to former owners of foreclosed homes on a month by month basis. According to Freddie Mac’s figures, almost 12,000 units entered its portfolio of foreclosed homes between April and October. In 70 percent of cases, a borrower is working on a mortgage loan modification, leasing the home back, or accepting cash for keys. In another 27 percent of cases, the property was vacant by the time Freddie Mac took it over. In three to four percent of cases, an owner or renter faced eviction. Of those occupants who signed leases, two-thirds were owner occupants and one-third were tenants. Spokesman Brad German said he had no further breakdown of the numbers.

The long-held belief has been that owners would decline to become renters again, so having more owners than renters sign rental leases is an encouraging sign for Fannie’s new program, Pelletiere said.

Still, he and others noted the government wouldn’t be prompted to move toward a more aggressive rental policy if a greater number of loan modifications were successful. A recent report by the Congressional Oversight Panel for the government’s taxpayer-funded bailout program criticized the progress being made under the administration’s Making Home Affordable program, saying that in a best case scenario it would prevent fewer than half of expected foreclosures.

As foreclosure notices pile up, troubled tenants and borrowers don’t always understand they might be eligible for help, or they don’t know who to contact to apply for programs, or they just give up and leave upon a foreclosure – even in cases where they have new federal laws and programs intended to avoid evictions. To Liben, the Massachusetts housing attorney, one constant of the housing crisis has been that some people “get lost in the shuffle.” She’s waiting to see if that will finally change.

Treasury Secretary Timothy Geithner (WDCpix)

Appearing before a House panel on Thursday, Treasury Secretary Tim Geithner made his best pitch for legislation granting the White House broad new powers to seize Wall Street firms when their collapse might torpedo others in the industry.

It didn’t go so well.

Image by: Matt Mahurin

“Mr. Secretary, I’m not a man that fears this administration or you,” Rep. Paul Kanjorski (D-Pa.) told Geithner. “But I do fear the accumulation of power exercised by someone in the future that can be extraordinary.”

Rep. Brad Sherman (D-Calif.) echoed those concerns, arguing that the bill represents “the most unprecedented transfer of power to the executive branch to make decisions about both spending and taxes in history — all without congressional approval.”

The tone of the comments could foreshadow a tough road ahead, not only for the White House, but for Financial Services Chairman Barney Frank (D-Mass.), who introduced legislation this week that grants the Treasury’s request to broaden the president’s “resolution authority.” The bill is one of the final pieces of the finance-reform puzzle that Frank has been putting together all year. But by conceding most of the administration’s requests, the Massachusetts Democrat — who asked no questions of Geithner Thursday — has riled others on his panel, who want to see more taxpayer protections in the bill.

Frank’s proposal would create an oversight commission to monitor and regulate Wall Street’s investment houses and other non-bank institutions to ensure that they’re on solid footing. Federal regulators could, for example, force companies to increase capital reserves or decrease the amount of debt they’re holding, if the scenario was deemed a threat to topple the firm.

The bill would also empower the White House to swoop in and dismantle failing Wall Street institutions in order to minimize the impact on the finance system as a whole — a strategy modeled on the authority of the Federal Deposit Insurance Corporation to intervene when commercial banks are threatening to fall.

To protect taxpayers, Frank’s bill aims to have failed-company shareholders and creditors cover the cost of the government help. If more money is needed, taxpayers would initially pick up the tab, to be reimbursed later by an after-the-fact tax levied against other large Wall Street institutions that would presumably benefit from the stabilizing effects of the government intervention.

Supporters maintain that the proposal does not empower bailouts at all, but would simply allow the government to manage the deaths of failed companies so they don’t drag down the financial system with them — a kind-of controlled euthanasia designed to protect consumers from the hubris of the finance industry.

“If we do have to step in, it will be very painful for those companies” Frank told MSNBC Thursday. “They will be put out of business. The CEOs will be fired. Shareholders will be wiped out. We are not going to have a situation where people can expect to be bailed out and live happily ever after.”

Geithner, for his part, denied that the proposal authorizes the White House to tap federal coffers at all. Asked by Rep. Maxine Waters (D-Calif.) if the bill grants “the authority to spend the taxpayers’ money to bail them out if you deem that to be a good way of handling that situation,” the Treasury secretary answered with one word: “No.”

Yet the House bill empowers the administration to make loans, buy assets, and invest in failing institutions if regulators determine those steps are required to prevent “serious adverse effects on financial stability or economic conditions in the United States.” To do so, of course, the White House would use taxpayer funds. And no monetary limits are specified.

And while the bill aims to recover the taxpayer dollars within 60 months of the bailout, Sherman notes that the White House would also have the authority to extend that deadline indefinitely.

“It could be 60 years,” he said.

That these bailout protections are limited only to those institutions whose failure is deemed a system-wide threat is another source of criticism on Capitol Hill. Many lawmakers and finance experts contend that that stipulation creates an unfair advantage for big firms over their smaller competitors. For example, they could get capital at lower rates if lenders know they have access to some level of federal lifeline. That dynamic, critics argue, would act to promote “too-big-to-fail” institutions, rather than reining them in.

“Why should the American people have to sit out there and see us creating mammoth organizations that nobody says we have the authority to control or limit, but we have the authority to help them when they get into trouble?” asked Kanjorski.

There are still other concerns. For example, some lawmakers are attacking the proposed bailout tax on large institutions, arguing that it should be collected beforehand as a type of insurance fund, rather than imposed after a competitor goes under.

“No more TARP. No more bailouts,” said Rep. Luis Gutierrez (D-Ill.). “Let them [the companies] create the fund, the systemic risk fund, that will guarantee that the American taxpayer will no longer have to be involved should they cause such a crisis ever again.”

Geithner responded that such a system would encourage even more risky behavior from the largest companies. “If you create a fund in advance, there’s a risk you’re going to create more moral hazard,” Geithner siad. “People will live the expectation where the government will come in and protect them. We don’t want to create that expectation. That’s why we think it’s better to do it after the fact.”

Meanwhile, conservatives and representatives in the finance industry are blasting the notion that solvent companies should be forced to pay to bail out the mistakes of competitors. “Should Ford bear the costs of compensating the taxpayer for what happened to G.M. and Chrysler?” asked Rep. Jeb Hensarling (R-Texas.).

Gutierrez pointed out yet another concern: Placing such broad new powers in the hands of Treasury leaders – who often arrive directly to the job from previous positions of power on Wall Street – creates the impression of the fox guarding the hen house.

“How do we know the next secretary of the Treasury won’t be the former CEO of Goldman Sachs as they have been in the past?” he asked. “They seem to be interwoven, and that’s what the American public sees.

“They see the interconnectedness in terms of their power, their influence and always to their benefit.”

Yet a recent report from the congressional panel charged with overseeing the bailout program reveals that, at least in the program’s initial stages, the returns are nothing to write home about. Indeed, the July 10 assessment found that the 11 small banks that have thus far repurchased their warrants from the Treasury paid just 66 percent of the warrants’ value. (Treasury received the warrants from bailout recipients as collateral to protect taxpayers.)

If similar underpayments were made for all outstanding warrants, the oversight panel warned, taxpayers could lose out on $2.7 billion.

Those figures weren’t lost on some congressional lawmakers, who introduced legislation last week designed to maximize taxpayer profits under the Troubled Asset Relief Program. Sponsored by Rep. Mary Jo Kilroy (D-Ohio), the bill would force the Treasury to sell back all of its warrants through a public auction, rather than through the secret negotiation process currently in place.

“The banks and Treasury are negotiating the repayment of this debt behind closed doors instead of allowing trading in the open market,” Kilroy said in a statement announcing her bill. “We do not know if the current process is producing the benefits we are owed and a market-based approach would remove the secrecy and special interests and maximize the return on the taxpayers’ investment.”

The question that remains, of course, is why isn’t Treasury already doing this?

Commercial and Administrative Law Subcommittee Chairman Steve Cohen (D-Tenn.) (left) speaks at Thursday's hearing on foreclosures. (YouTube: RepCohen)

The Obama administration has all but abandoned it, and the Senate has already voted it down. But a proposal to allow struggling homeowners to escape foreclosure through bankruptcy got a boost Thursday from a small band of House Democrats convinced that voluntary mortgage modifications aren’t alone solving the housing crisis.

They have a point. Despite White House efforts to entice mortgage lenders and servicers to alter the terms of mortgage loans at their own discretion, participation in the program has been meager. As a result, hundreds-of-thousands of homeowners continue to face foreclosure months after the program took effect. That instability in the housing market has, in turn, stifled federal efforts to heal the banks and get them lending prolifically again. In the eyes of some Democratic lawmakers, the combination of trends is evidence enough that Congress needs to return to its bankruptcy proposal to save the homes that the voluntary strategy is not.

Illustration by: Matt Mahurin

“We need to be prepared to act more aggressively to help distressed homeowners,” Rep. Steve Cohen (D-Tenn.), chairman of the House Judiciary Subcommittee on Commercial and Administrative Law, said during a hearing on the topic Thursday. “Evidence suggests that encouraging voluntary modifications alone is, at best, minimally effective in helping financially struggling borrowers stay in their homes. We can and should be prepared to do more.”

On one level, that’s a strange sentiment coming from House Democrats, who already have done more. Indeed, the lower-chamber in March passed legislation empowering bankruptcy judges to reduce, or “cramdown,” mortgage rates and principal balances in order to prevent foreclosures — an avenue available to consumers to save vacation homes, boats and practically any other material asset, but not primary homes.

Yet there’s also no mystery why House Democrats decided to highlight the issue once more: No one else is doing it.

Indeed, while observers on both sides of the debate deemed Senate passage a sure thing, something strange happened last spring. The Obama administration — which had endorsed cramdown in February, arguing that it would provide a vital stick to accompany the financial carrots it was offering lenders — grew silent on the issue. Without a push from the White House — and with enormous opposition coming from the finance industry — the Senate in April killed the proposal, with 12 Democrats voting against the measure.

And the administration’s neutrality on the topic seems to be continuing. Although the Treasury Department was invited to testify at Thursday’s hearing, it declined to send a representative — an episode that Rep. Zoe Lofgren (D-Calif.) deemed “shameful.”

Asked to explain the absence, Treasury spokeswoman Meg Reilly declined. Reilly also declined to weigh in on the Treasury’s current position on cramdown in general.

Not that the White House isn’t aware that it’s current foreclosure-mitigation efforts are coming up short. A few hours after the House hearing, Treasury Secretary Tim Geithner and Housing and Urban Development Secretary Shaun Donovan distributed letters to mortgage servicers urging greater participation in the voluntary modification program.

“Much more progress is needed,” the officials wrote. “We believe there is a general need for servicers to devote substantially more resources to this program for it to fully succeed and achieve the objectives we all share.”

There have been other signals that further efforts are needed to contain the housing crisis. Last week, the administration expanded eligibility for homeowners to refinance troubled mortgages, opening the program to those who owe as much as 125 percent of their home’s value. Previously, eligibility was limited to homeowners underwater only up to 105 percent. The change was acknowledgment that home values in some areas have fallen so precipitously that many homeowners were finding themselves ineligible to refinance under the lower ceiling.

On Capitol Hill, there remains some hope that lawmakers will return to the issue this year. After the Senate voted down the measure in April, cramdown sponsor Sen. Richard Durbin (D-Ill.) vowed to use every opportunity to bring the proposal up again. Durbin’s office said this week that that commitment stands. But with the Senate facing a tough legislative schedule in the months ahead — including plans to overhaul the health care system and tackle climate change — chamber leaders are quickly running out of chances to take up additional measures sure to attract such controversy.

That’s bad news for the nation’s homeowners, who continue to struggle at historic rates. Indeed, more than 321,000 homeowners filed foreclosure paperwork in May, up 18 percent from a year ago, according to RealtyTrac, an online foreclosure database. That one-month tally is more than the 270,000 loan modifications that have been offered in the four months since the Obama plan launched. And with overall unemployment numbers continuing to grow, those foreclosure numbers are expected to rise.

“We are not even at the peak of the crisis,” Alan White, a housing expert at the Valparaiso University School of Law, warned lawmakers Thursday.

In every way, Thursday’s debate rehashed the ideological arguments that swirled around cramdown earlier in the year. Democrats, siding with struggling homeowners, blamed the lenders for doing too little to alter the terms of mortgages to prevent foreclosures. While Republicans, rallying for the banks, argued that homeowners should buck up and accept responsibility for signing on the dotted line.

Rep. Trent Franks (Ariz.), senior Republican on the Judiciary subpanel, said he was “troubled,” “puzzled” and “disturbed” by the Democrats’ attempts to revive the cramdown proposal, which he said “died a deserved death in the Senate.”

“No one mandated borrowers to enter into mortgage contracts,” Franks said. “Is no one to be held accountable in America anymore for entering into a contract?”

Yet cramdown supporters countered that the stabilization of the housing market is not important merely for the benefit of struggling homeowners, but for their neighbors — whose homes lose value with each nearby foreclosure — and for the health of the larger economy as well. Relying on the mortgage industry to volunteer the changes, they argue, is recipe for slower recovery.

“Unless homeowners have leverage to force a favorable result,” said Irwin Trauss, an attorney with Philadelphia Legal Assistance, “lenders will continue to avoid the meaningful modifications that are necessary to keep folks in their homes.”

But then things cooled down. Treasury note yields and mortgage bond yields came down a little to end the week, signaling that maybe markets weren’t tired of government debt after all and maybe the Fed’s efforts to keep interest rates low still had some punch. And a couple of astute economic observers expressed to me in emails that frankly, the fears were overblown to begin with. Interest rates on long-term Treasuries simply do not point toward a nervous market. Yes, yields are up from the ridiculous lows that prevailed during the darkest days of the financial crisis. That’s to be expected; people wanted to be in the safest harbor available back then and were willing to accept basically nothing in return for the ability to hold U.S. government bonds. But by comparison with basically any other point in the past thirty years, things look pretty solid.

Anyway, if you need more convincing that inflation and debt levels aren’t something to be pulling your hair out over right now, take it from an economics Nobelist:

[I]t’s hard to escape the sense that the current inflation fear-mongering is partly political, coming largely from economists who had no problem with deficits caused by tax cuts but suddenly became fiscal scolds when the government started spending money to rescue the economy. And their goal seems to be to bully the Obama administration into abandoning those rescue efforts.

Needless to say, the president should not let himself be bullied. The economy is still in deep trouble and needs continuing help.

Yes, we have a long-run budget problem, and we need to start laying the groundwork for a long-run solution. But when it comes to inflation, the only thing we have to fear is inflation fear itself.

There you have it.

Of the opportunities for tomfoolery available, the one that generated the most hand-wringing was the prospect for self-dealing. It was felt that banks might submit a small portfolio of assets for auction, while also signing up to join a bidding partnership. A bank could then bid up the price of its own assets using the government subsidy as support. This would help the bank in two ways. The government subsidy would allow the bank to overpay for assets and still have the opportunity to enjoy a gain on the portfolio, and the high price established for the loans would extend to all similar assets on the bank’s balance sheet, making it look much stronger financially than it actually is.

Yesterday, The Wall Street Journal reported that banks were basically asking for the explicit ability to do this, as a condition for them to participate in the program at all. This led The New Republic’s Noam Scheiber to ask whether PPIP was actually necessary at all. According to a story in The Journal today, a growing number of people in Washington are concluding that no, it really isn’t.

I am very much inclined to agree. The world has changed quite a bit since the plan was introduced. Markets have risen, making it easier for banks to raise private capital, and the results of the stress test seem to have been broadly accepted. In this climate, many of the healthier banks seem to be able to recapitalize themselves privately. Devoting TARP resources to such banks would be a poor use of increasingly scarce funds — essentially, government handouts to firms that no longer need the help.

Instead, it seems like a better idea to hold those funds in reserve, to be used if the more troubled banks, like Bank of America or Citigroup, cannot find their way out of their messes without additional support. While $100 billion would not be sufficient to shore up the banking system as a whole without a lot of FDIC-facilitated leverage, $100 billion is enough to stabilize one or two large banks. Having come this far in improving faith in the banking system and bolstering confidence in the leadership at the Treasury department, it seems unnecessarily risky to try and move forward with the opaque and uncertain PPIP auctions. Time to consign that particular policy to the scrap heap.

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.

In light of that news, Brown wanted to know whether the White House, which has already given billions of dollars to Chrysler and General Motors to keep them alive, was putting pressure on those companies not to close plants in the United States just to open cheaper ones in China and other developing world nations.

There was a firestorm in this country when we give billions to banks and they paid huge bonuses [but] you haven’t seen anything yet for what’s going to happen if we put billions into auto companies and they shut down plants in this country and open plants in China at a dollar an hour — or less.

Are you pushing back on the auto industry on their restructuring? Is the government representing taxpayers and representing workers and communities pushing back on their including anything like this plan to shut down plants the United States and move them abroad and open production and open plants and produce and sell back here?

You already know you’re not going to like Geithner’s answer. “It’s a difficult balance,” he began…

The president’s objective is to try to make sure that we help facilitate a restructuring that will leave this firm in existence, save it from bankruptcy, allow it to operate over time as a viable company without government support.

That’s what we’re trying to do, and we’re doing exceptional things to try to make that possible. But I do not believe that we can do that and also be involved in making detailed decisions about how they run their business and how they do that. And that’s the balance we’re trying to strike.

Though Geithner declined to mention it aloud, it appears that Brown — indeed, the whole of U.S. manufacturing — will be forced to confront the long-emerging reality that, in a globalized economy, viable companies are those that pay as few salaries as they possibly can in the United States. Even if those companies have been rescued by the same middle-class taxpayers soon to lose their jobs as a result of the shift.

In many ways the debate is simply a reiteration of the age-old tension between management and labor — a tension mitigated by the underlying realization that neither could exist without the other. The difference here is that the symbiotic nature of that relationship ends once its cheaper to export the labor component.

Indeed, Brown recognizes the dynamic, pointing out that GM’s argument is that, in order to save American jobs, it must slash American jobs. Of course, now we’re not talking about the same jobs.

Wall Street bailout, indeed.

Traditionally, leaks to the press come from officials trying to curry favor with journalists, who will treat them favorably in the future. (See Woodward, Bob.) But that’s kind of hard to see as a motive in the case of the relevant economic officials here — possible, or maybe it’s people on the political side of the White House, but it doesn’t feel right.

Alternatively, there’s Yves Smith’s version: these are all trial balloons to see how outsiders will react to different stress reports.

But that just adds to the bad feeling about all this. Even Brad DeLong, who has been relatively sympathetic to the administration here, is disturbed by the idea that regulators are negotiating with the banks about the test results. Now it seems as if the report’s contents may also be dictated by what, based on the response to leaks, the informed public is willing to swallow. (”Would you believe it if we say Citi is fine? OK, what if we say they need $5 billion? Not enough? How about 10?”)

It does make you wonder if the fix is in, even before the results of the stress tests are out.