Lieutenant Island Views : Commentary About Finance, Politics and Baseball

Spitzer for Treasury Secretary? Are You Joking Katrina? | March 25, 2009

Recently Katrina Vanden Heuvel, Editor of the the Nation, has been suggesting that Treasury Secretary Tim Geithner should be replaced by Elliot Spitzer. We know that she and her husband have been his friend since their days at Princeton but her suggestion is an embarrassment. Perhaps she is letting friendship cloud her judgment. Aside from the fact that Spitzer pleaded no contest to several of the crimes (Mann Act violations, illegal currency wire transfers, aiding and abetting prostitution etc.) that he often used to coerce his targets when he was New York Attorney General, he may have been the root cause of AIG’s demise. His actions, which forced out AIG’s long time CEO, Hank Greenberg, led to new management which took the company in the wrong direction. Greenberg’s successors had a difficult time maintaining his earnings record. They went for what they saw as easy money in credit default swaps and other esoteric insurance products. This was a large and real deviation from the way Greenberg ran the company. We all know the rest of the story.

The laws of unintended consequences really can be punishing when you act in a vindictive manner rather than as a result of a deliberate strategy.

As a secondary question, does Katrina expect an easy confirmation for her friend Elliot? Larry Summers was kept away from the Senate confirmation process because he spoke out about the gap between women and men in scientific fields of study. Imagine if he had broken multiple laws to hire $5,000 per hour hookers! At least Elliot paid his taxes.