I think Obama may be looking for a stimulus and jobs deal with Congress in the wrong places. While parts of the jobs bill may be passed, time is being lost and the continuing acrimony is making the economy weaker. The Tea Party is attempting to bring down both Obama and establishment Republicans with a no compromise strategy aimed at killing confidence and destroying the rest of an already weak economy. Obama's strategy to either get cooperation from Congress or run against a "do nothing" Congress may work, but it is not the best strategy.

The essence of the economic crisis is a banking crisis. The essence of the banking crisis is housing and mortgage finance. The answer to the economic crisis is to fix housing--both in terms of working through excess inventory and foreclosures, and to allow a broad spectrum of homeowners to refinance their current mortgages to lower rates. Geithner's policies have done little to address housing. Hamp and Harp have been ineffective because of bank resistance and self defeating regulations.

Most people assume Geithner is already a Republican, so why change. A foundational problem with Geithner is that he is ineffective, both as a spokesperson and a visionary. But the second reason to replace him is to effect an actual Grand Bargain which has a much greater hope of solving housing and mortgage finance than a Grand Bargain which continually stumbles upon the frozen positions of all the political adversaries. Nominating and approving a Republican in the context of a Grand Bargain on housing would give cover to establishment Republicans and force the hand of the Tea Partiers. It would give Obama an actual bi-partisan agreement.

More importantly, a Grand Bargain in housing gores the least oxen. Solving the housing and mortgage problem is more of a political exercise than an exercise in spending more tax payer money and increasing deficits.

Mortgage Refinance should be the key to any Grand Bargain in housing. To be effective, a refinance program needs to be large. Not 2.5 million borrowers but 25 million borrowers. Regardless of the self made obstacles our country has at the moment to mortgage refinance, the fact that the population at large is unable to refinance to lower rates is a national disgrace. It needs to be changed, regardless of whose sacred cows are involved.

The focal point of the Grand Bargain must be the FHFA, the conservator for the GSE's. How ludicrous can it be to have an island government trying to tank the banking industry with large and unspecified penalties while at the same time resisting GSE mortgage refinance in the name of forcing mortgage refinance "back to the private sector". Ed DeMarco, head of the FHFA may be the most principled man in America today. But he and the mission of FHFA as currently defined are the  biggest impediments to a housing solution.

Of course the Republican Congress will resist redefining the FHFA mission if it would help the economy and help Obama. That is why Congress's hand must be forced with the replacement of Geithner with one of their "own".

Part and parcel of the Grand Bargain must be an agreement of what to do with the suits having been brought against the banks by FHFA. How can you get the cooperation of banks in a huge refinance program while holding them hostage to a long and uncertain legal battle? I by no means think the banks should be let off the hook. But the FHFA suit is not directed toward the global grievances against banks and their practices, but just a part of it. Let's settle the FHFA's part so that the FHFA can enter into partnerships with banks to implement broad scale mortgage refinance.

The issue of proper evaluation of bank assets once the extent of underwater loans is made clear, as well as valuing the great slug of second liens related to the primary mortgage are essential adjuncts to a Grand Bargain. The mortgage problem is contained largely in the top 4 banks, whose financial statements are oblique and which the market has already assumed are covering up a world of hurt. The market is saying the problem is known. So why continue to impede a refinance problem that is fixable by continuing  to cover up the true value of mortgages and seconds.

A significant part of the mortgage and second lien evaluation conundrum is logic rather than numbers. If the borrowers can refinance to a lower rate, lower payments, aren't both the primary and the seconds stronger in total than they would be without the refinance? Then aren't the balance sheets stronger in the long run. Right now the obscurity of bank balance sheets are depressing bank valuations.

I think DeMarco, in some of his public statements, is crying out for help. He has said he's doing what he feels his mission commands him to do but then adds that if the Congress changes his mission that's a different matter. And the broad question of what is in the "common good" must be asked. Are we risking the entire GDP by throwing up obstacles to mortgage refinance in the service of making good on a promise to return $150 Billion of loans to tax payers? That doesn't make sense.

Geithner simply does not have what it takes in confidence-building or specific strategies related to the underlying housing and mortgage finance problems to remain in his job. Most of the mortgage issues which were the reason for our financial crisis in the first instance still exist and are inhibiting housing and economic solutions today. The President should fire Geithner, nominate someone whom the Republicans can support. Obama should hold in the balance a Grand Bargain which would address the real self made disaster--the current impasse between the FHFA and a large and beneficial mortgage refinance program. That impasse can be eliminated by Congress. It is well past time to fix the housing mess. Mortgage Refinance is the place to start. But not by small thinking. By thinking large, and beyond the timid mind of a financial engineer like Tim Geithner, we have a chance to get this economy moving again.