Why is Obama keeping Geithner?
To be fair, Geithner's image is not as fragile as it was a few months ago. But the simple fact remains that he is proving himself to be neither a great thought leader nor an able manager. Why do I believe his leadership is weak? He faces two big problems -- lack of lending and failed financial institutions -- and his approach to both is a re-heat of the failed policies of his predecessor.
To deal with lack of lending, he has poured more taxpayer money into zombie banks and they've promptly cut lending by 24 percent. And to solve the problem of failed financial institutions, he proposed the Public Private Investment Program (PPIP) to enrich hedge funds with non-recourse government debt so they would buy $1 trillion in toxic waste from failed financial firms.
As I posted, this is the same plan that Hank Paulson proposed to get the initial $700 billion Troubled Asset Relief Program (TARP) money from Congress and then rejected as unworkable. (I've proposed what I think are better solutions to the problems of lack of credit and toxic waste.)
But not only has has Geithner come up with weak ideas, he has also proven himself to be a weak manager. His approach seems to be to get 20 people in a room to discuss problems -- along with meddling from White House staffers such as economic adviser Larry Summers -- and then put decisions about these problems in a long line on the runway. As decisions remain unmade in the queue, nothing happens.
For example? Former General Motors (GM) CEO Rick Wagoner, who was fired in March, is still on the GM payroll because Geithner can't decide whether to pay him a $20 million severance package. And the PPIP that Geithner touted so heavily in February has yet to buy up a single block of toxic sludge because related decisions, such as whether foreign investors can participate, remain unmade.
Some suggest the problem is that Geithner lacks sufficient staff -- and there are clearly problems getting key positions filled. But given Geithner's lack of management ability, if he gets more people on his staff, he'll likely increase the size of the meeting from 20 to 40 people and continue not making the hard calls.
I don't know exactly how Geithner is mismanaging his department, but with so many important decisions on hold, there is no doubt in my mind that there is something badly awry. My hunch is that he is afraid of getting criticized so he consults with everyone and would rather not do anything than get beaten up again for making a mistake.
All this leaves me wondering why Obama keeps Geithner. Surely there is one person out there with better skills in finance, thought leadership and management. Who would you nominate for the job?
Peter Cohan is president ofPeter S. Cohan & Associates. He also teaches management at Babson College. His eighth book isYou Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing.