Bernie Sanders’ beef with Geithner

Economy, Politics, US Politics, World Economy

Bernie Sanders, the self-described socialist from Vermont, was one of the members of the Democratic caucus who voted against the confirmation of Tim Geithner as Treasury Secretary. He has his statement about why he did so up now. It’s short, and has nothing to do with Geithner’s tax problems; Bernie’s criticism is more systemic:

Massive deregulation of the financial services industry has led to the worst financial crisis since the Great Depression.  We need a treasury secretary who will support strong and robust regulation of the financial services sector.  

“Mr. Geithner was at the Fed and the Treasury Department when the deregulatory fervor that got us into this mess ran rampant. He was part of the problem.  I hope he becomes part of the solution, but I could not support his nomination at this time.

Meanwhile, I dug up this link from 1998 that may provide a bit of backstory hinting at the larger ideological disagreements at play. Back then, Bernie was still in the House, and Geithner was Assistant Secretary for International Affairs at Clinton’s Treasury Department. Geithner came to the House to testify in a review of the operations of the International Monetary Fund (IMF). Later on, of course, Geithner would himself move to the IMF. 

Bernie Sanders (Image shared under CC license by the Udall Legacy Bus Tour)

Bernie Sanders (Image shared under CC license by the Udall Legacy Bus Tour)

Sanders was (and I assume still is) a harsh critic of the IMF, as his introduction in the review illustrates, and had a rather contentious exchange with Geithner, in which he accused him of disobeying the law. Why, for one – he asked citing the State Department’s human rights reports on Indonesia – did the US not vote against IMF loans to General Suharto’s Indonesia? Why did it not oppose IMF loans to authoritarian governments that violate human rights and jail labor leaders?

Geithner, patient in the face of Sanders’ rhetorical questions, explained that the criteria for when the US should vote “nay” on IMF loans are based on a different definition of human rights violations than those used in the State Department’s human rights reports. Sanders, in his turn, understandably wasn’t having any of this, and decried how conveniently modified standards allowed the US to assent to loans to what clearly were authoritarian regimes that violated human rights.

Sanders’ criticism was broader, though. Why was the internal decision-making process so intransparent? What’s with the rule that all verbatim records of the IMF’s Executive Board meetings shall be destroyed after a summary is made of the meeting? And didn’t recent IMF measures come down to “large multinational banks that have made billions of dollars investing in Asia [being] essentially bailed out by the middle class of this country”? Haven’t studies shown that developing countries that have had to deal with the IMF only ended up deeper in debt and further in its control?

Are the rich countries, he asked, using the IMF rescue packages to their own advantages? What does it mean in terms of democracy when an outside force, dominated by the US, gets to determine many of the most important policy decisions of small countries? Weren’t the IMF’s criteria of success grotesquely slanted in favour of the interests of banks and creditor countries, at the cost of heftily increased suffering in the countries subjected to IMF policies?

The IMF policy in general that goes [..], we will give you money if you do the following—A, B, and C, often cut back on basic services, open up your economy to foreign investment, and so forth—has it worked, when we know that [..] poverty has increased, health care has deteriorated, unemployment has gone up, wages have gone down in countries that have been subjected to IMF forced austerity programs? [..]

Again, this was all 11 years ago – and the role of the IMF is hardly a major issue in Geithner’s current appointment. But the debate they had back then may illustrate why there’s no love lost between Sanders and a man like Geithner – and just how large some of the ideological gaps are within the Democratic caucus. A big tent indeed!

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