WASHINGTON - U.S. Treasury Secretary Timothy Geithner heads for a summit of world leaders this week having strengthened his president's hand by rolling out key pieces of a U.S. financial rescue plan.
Barely three weeks ago, there were calls on Capitol Hill for Geithner's resignation.
Lawmakers were angry at his failure to block bailed-out insurer AIG from giving huge bonuses to executives and for offering only a sketchy plan for ridding banks of bad assets, creating a sense of drift in the world's biggest economy.
Since then, the Treasury has detailed a plan for public-private funds to soak up as much as $1 trillion of bad loans and assets and announced proposals to rewrite the rules of finance.
In addition, the administration has a $787-billion stimulus program in place, made up of tax cuts and new spending.
Geithner and President Barack Obama hope they can use those measures as evidence of decisive U.S. action as they press other G20 countries to come up with more aggressive spending too.
The Treasury secretary has acquitted himself quite well in an extraordinarily difficult time, said Allen Sinai, chief economist for Decision Economics Inc in New York.
The point is that he goes to London in full standing as one of the major leaders of a global effort to deal with recession and advocate the necessity for regulatory reform of financial markets, Sinai said.
EYES ON GEITHNER'S PLAN
Geithner's public profile will be low in London but the Treasury Department said he will be emphasizing the need to move aggressively to not only boost recovery but also make swift regulatory reforms to limit future systemic risk.
Some European governments, notably Germany, are reluctant to launch new spending programs and the British hosts are playing down hopes for such pledges.
Some leaders attending Thursday's summit may be skeptical about Geithner's plan to get toxic assets off banks' books.
What is missing to date is an explanation of why this asset-disposal plan will work, because what is to make it work? said Raghuram Rajan, former chief economist for the International Monetary Fund.
Under Geithner's plan, public-private investment funds will bid to buy bad assets from banks but some economists have questioned whether the banks will want to sell at low prices.
There may be buyers for some of these assets in the public-private funds, but what is going to make banks sell and, if they do it at a discount, how big a capital hole will be left in the banking system? Rajan said.
Marco Annunziata, the London-based chief economist at Unicredit bank, said the world's leaders as well as financial markets would be awaiting signs that Geithner's Public-Private Investment Program will work.
I think the PPIP will live or die by the success of the first transactions, Annunziata said.
If it looks like the plan can start to get toxic assets off banks balance sheets and establish at least partially credible prices, Geithner will likely be remembered as the man who pulled off the impossible task of solving the crisis. If the first transactions flop, the prospects for Geithner and for the global economy are grim.
(Additional reporting by Brian Love in Paris; Editing by Andrea Ricci)