(CNSNews.com) – President-elect Barack Obama’s nominee for Treasury secretary was an advocate for corporate bailouts, working out loans for Bear Sterns and insurance giant AIG, even before the approval of the $700 billion rescue package that he will be charged with administering if confirmed for the job. He also supports expanding the authority of the Federal Reserve over the economy.  
 
Timothy F. Geithner, Obama’s nominee and the current president of the Federal Reserve Bank of New York, was the architect of the $29 billion Bear Stearns bailout, according to Conde Naste Portfolio, a move that drew fire from both Democrats and Republicans.
 
“We judged that a sudden, disorderly failure of Bear would have brought with it unpredictable but severe consequences for the functioning of the broader financial system and the broader economy,” Geithner told the Senate Banking, Housing and Urban Affairs Committee in April, “with lower equity prices, further downward pressure on home values, and less access to credit for companies and households.”
 
Even former Federal Reserve Chairman Paul Volcker, who was an Obama economic advisor during the campaign, was critical of the Fed’s move regarding Bear Sterns in a widely reported speech earlier this year to the Economic Club of New York.
 
Volcker said the Fed’s actions “extend to the very edge of its lawful and implied powers, transcending certain long-embedded central banking principles and practices.”
 
Geithner, as president of the most influential Fed bank, also played a key advisory role in the $40 billion bailout of the American Insurance Group (AIG), according to The New York Post.
 
“Obama might as well have renominated Hank Paulson again,” said John Berlau, director of the center for entrepreneurship at the Competitive Enterprise Institute (CEI), a free market think tank. “This is not change, but it is going to be more of the same from the second term of the Bush administration.”
 
Berlau was referring to Paulson, who orchestrated the controversial $700 billion Troubled Assets Relief Program (TARP), which passed Congress and was signed by President Bush early last month.
 
Opponents of TARP could cast a skeptical eye on Geithner during Senate confirmation.
 
“I am glad that President-elect Obama has rolled out his economic team and would encourage them not to take this administration’s bait by coming to the rescue of the U.S. automakers without making them take the painful steps necessary to ensure their viability, which probably includes Chapter 11 bankruptcy, reorganization and consolidation,” Sen. Bob Corker (R-Tenn.) said in a statement to CNSNews.com. 
 
“Unfortunately, the Bush administration has made it clear they are willing to throw money at any problem as long as future generations are left paying it back,” he added.
 
Berlau warned that the situation will not improve with Geithner.
 
“It’s going to be more bailouts,” Berlau told CNSNews.com. “Obama already wants to bailout the unionized auto industry. This is a signal: We ain’t seen nothing yet.”
 
Berlau believes both Republicans and Democrats in the Senate who find corporate welfare objectionable should oppose the Geithner nomination, which will be debated before the Senate Finance Committee.
 
“Tim Geithner has the expertise and the qualifications to meet the seriousness of this moment, and the experience in tough times, like the Asian financial crisis, to build an economic recovery team that will get the results Americans need,” Finance Committee Chairman Sen. Max Baucus (D-Mont.) said in a statement.
 
Sen. Olympia Snowe (R-Maine), who sits on the committee, took a more wait-and-see approach but was not critical.
 
“The next secretary of the Treasury, in conjunction with President-elect Obama’s entire economic team, must work quickly and effectively along with Congress to leave no stone unturned in identifying viable solutions to the economic crisis,” Snowe said in a statement.
 
“As a senior member of the Senate Finance Committee, I will carefully review Mr. Geithner’s record and his proposals to administer the Troubled Asset Relief Program, stem the tide of home foreclosures, and restore economic growth and job creation,” she added.
 
Unlike some of his predecessors, Geithner is not a former corporate executive, politician or academic. Rather, he is a career civil servant, who started at the Treasury Department in 1988.
 
During the Clinton administration, Geithner was promoted to undersecretary for International Affairs at Treasury. He became the president of the New York Fed in 2003.
 
Geithner’s public policy proposals will no doubt be a key part of the confirmation hearing before the Finance Committee. His advocacy for a more expansive role for the Federal Reserve, in a June 8, 2008 op-ed in the Financial Times, also may be of concern in the confirmation hearings.
 
He called for greater oversight and reforms in the financial industry and added, “the Federal Reserve should play a central role in such a framework, working closely with supervisors in the U.S. and other countries.
 
“At present, the Fed has broad responsibility for financial stability not matched by direct authority and consequences of the actions we have taken in this crisis make it more important that we close the gap,” Geithner added.
 
During testimony before the House Financial Services Committee on July 24, Geithner said the Federal Reserve and the federal government must be proactive to help rescue the ailing economy.
 
“The most important imperative is to build a financial system that is more robust to very bad outcomes and more resilient to shocks,” Geithner told the House panel.
 
“This means a system in which the major institutions are less vulnerable to shocks; a system that is less vulnerable to margin spirals and a generalized pull-back in liquidity and funding; and a system that is more able to withstand the effects of failure of a major financial institution,” he added.