Analysis: Geithner scores points, faces more risks (AP)

WASHINGTON – The White House says it does not live or die by the ups and downs of the stock market. But others do. And on Monday, that was good for Timothy Geithner..

With credit markets frozen, a public in high dudgeon and a Congress on a populist crusade, President Barack Obama's Treasury secretary needed a bit of an uptick. He got it Monday when the Dow Jones industrial average shot up nearly 500 points after he unveiled his private-public partnership to help relieve banks of the toxic assets that have plunged the financial system into its crisis..

But Geithner still has lots to prove — to financial markets, to Congress and to Americans seething over executive bonuses and diminished 401k retirement accounts..

Unpaid back taxes cost him votes in the Senate during his confirmation. Bonuses for executives at embattled American International Group Inc. drew Republican calls for his resignation. And the Wall Street that proved so friendly on Monday could just as easily turn on him as it did last month when his broad outlines for a rescue plan landed with a thud..

No stranger to tough times, Geithner this week faces yet another test of his short Cabinet tenure..

The multitasking Geithner is not only rolling out a new relief plan for banks, he's also juggling an overhaul of the regulatory regime for the financial sector, facing a couple of potentially contentious hearings before Congress, and planning the agenda for the April 2 summit of top foreign leaders in London..

So far, so good..

"He fed the beast enough details to keep the beast happy — today, today," said Robert Litan, senior fellow for economic studies at the Brookings Institution, emphasizing the fickle nature of the stock market. "It's a very hungry beast and it's a very forgetful beast.".

Last month, Obama in a televised news conference promised Geithner would unveil details of a banking rescue. When Geithner offered only a sketch of a plan in a badly reviewed speech, the markets tanked..

This time, Geithner easily spelled out details of the plan off-camera to a roomful of reporters at Treasury and granted an interview to CNBC. Then Obama placed his own stamp on the plan, making brief televised remarks at the White House with Geithner and Federal Reserve Chairman Ben Bernanke at his side..

"This is one more element that is going to be absolutely critical in getting credit flowing again," Obama said. "It's not going to happen overnight. There's still great fragility in the financial systems. But we think that we are moving in the right direction.".

The rescue plan might still need a good sales pitch. The Dow's surge notwithstanding, Geithner and the administration are facing an ideological attack from the left and the right. Rep. Eric Cantor of Virginia, the second-ranking Republican leader in the House, called the plan "fundamentally flawed.".

"In it's current form, Secretary Geithner's plan is a shell game that hides the true cost of the program from the taxpayers that will be asked to pay for it," Cantor said..

And liberal economist Paul Krugman, whose views as a columnist for The New York Times influence opinion in Congress, said the plan was "more than disappointing" in his Monday column. "In fact," he added, "it fills me with a sense of despair." He called for the government to take temporary control of insolvent banks. "That's what Sweden did in the early 1990s," he wrote..

The Obama administration has not hidden its disdain for Krugman's criticisms, and Geithner made his clear on Monday. "We are the United States of America," he said tartly. "We are not Sweden.".

Moreover, Congress's attempts to rein in compensation for companies that receive financial aid has made some private investors wary of entering into a partnership with the federal government. Geithner will be walking that tight rope on Tuesday when he testifies before the House Financial Services Committee..

The hearing is billed as an examination of the $165 million in bonus payments made last week to employees of AIG's Financial Products division. The House last week overwhelmingly approved legislation setting a 90 percent tax on bonuses for employees of firms that receive financial aid. Over the weekend, Obama's economic team warned of possible dangers with such a targeted tax measure. Geithner, doubtless, will be asked to explain..

Sitting with Geithner at the witness table will be Bernanke and William Dudley, president and CEO of the Federal Reserve Bank of New York. The Fed, a source of AIG's federal assistance, was aware of the bonuses and concluded they were legally binding..

On Thursday, Geithner will testify before the House Financial Services Committee again, this time to unveil the administration's proposed overhaul to financial sector regulations. The administration and Congress and working on a series of fronts, including increased oversight and controls of previously unregulated markets such as hedge and private equity funds. Lawmakers and the administration also have embraced the idea of an overarching regulator, such as the Fed, that would oversee financial firms that could pose risks to the entire banking system..

Risk has become the by-word of the current financial crisis. As Geithner emphasized Monday, too much risk caused it, too little risk is perpetuating it..

And for Geithner, the risks don't seem to end..

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EDITOR'S NOTE — Jim Kuhnhenn covers economics and politics for The Associated Press.

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