Picking on Geithner

The nut graf of the NYT’s massive Geithner article today is classic Gretchen Morgenson:

An examination of Mr. Geithner’s five years as president of the New York Fed, an era of unbridled and ultimately disastrous risk-taking by the financial industry, shows that he forged unusually close relationships with executives of Wall Street’s giant financial institutions.

Um, it’s the job of president of the New York Fed to be close to Wall Street. But more to the point, this kind of adversarial reporting, based largely on the results of a Freedom of Information Act request, has been instrumental in maximizing the hermeticism and paranoia of Treasury when it comes to relationships with Wall Street. Most worryingly, the perceived toxicity of anybody with Wall Street ties has made it much too difficult to hire senior Treasury staff. And while I don’t believe for a minute that Wall Streeters have any monopoly on solutions to today’s problems, I think it’s very silly to cut them out of the discussions altogether.

To be clear, I have no problem with the NYT’s FOIA request, or with the Fed with revealing Geithner’s diary. But just as UK intelligence “sexed up” a dossier on WMDs in Iraq, I think the NYT here is trying to squeeze altogether far too much scandal out of the inherently unremarkable fact that the president of the NY Fed met regularly with senior bankers. Indeed, as both Justin and Ryan have pointed out, the story could easily have been spun entirely the other way, as showing that Geithner was consistently (if insufficiently) ahead of the curve in terms of financial-sector regulation.

In short, there is no shortage of very good reasons why Tim Geithner should feel embattled right now. So let’s not add a bunch of bad reasons to the list — doing so does no good, and possibly a significant degree of harm.

Comments

[Kirribilli ...:]

Geuthner is and has been a total tool of the banking industry. That's all he cares about. He buys into the axiom that Wall Street must thrive for Main Street to survive. Others don't.

Apr 28 08:13 AM

[dcb:]

Since the head of the NY fed is decided by wall street and serves only as long as wall street wants them there it is safe to assume that having the treasury sec the formet head of the NY fed is like having wall street choose the treasury. Having see the results of these relationships isn't it time to change course. when you have the worst financial crisis since the great depression and appoint the players from the system that caused the crisis there is something very wrong.

Apr 28 09:07 AM

[anarchist:]

Kirribilli I agree for the most part. I have no inside knowledge of why Obama picked Geithner and Summers to continue in his administration where they left off in Bush's but I was sickened by the fact he did so. Geithner and Summer like most of these investment bank gurus have big egos so I think geithner wants TARP not to fail but we saw before the inauguration what their plan was to solve the financial crises and it wasn't working. I have to wonder if Paul Volker advised Obama to bring these characters into his administration ( I doubt it) as major players or if Obama was listening to Volker at all.


On Apr 28 08:13 AM Kirribilli Capital wrote:

> Geuthner is and has been a total tool of the banking industry. That's
> all he cares about. He buys into the axiom that Wall Street must
> thrive for Main Street to survive. Others don't.

Apr 28 10:17 AM

[Steve W fro...:]

The real question is not if the Treasury Secretary is "close" to wall Street or not, it is rather, what is the quality of his character?
Probably the greatest treasury Secretary of the last 150 years was JP Morgan. He WAS wall street but he had character and that, in the end, was what counted.
The whole question of ties to wall street is a false one. It is just another way to say "rich people are bad" and is one of the great problems with our age and one of the false choices deliberately set up by the left. Do not be distracted by this straw man of the left. We need men and women of character in positions of power. With that quality, ties to wall street are just fine..

Apr 28 10:19 AM

[Big Al45:]

That's exactly the problem. Geithner hasn't demonstrated that he has any character. His testimony before Congress and has been evasive and dishonest.

He got this job because of his Daddy's connections and Goldman Sach's political contributions.



On Apr 28 10:19 AM Steve W from Ford wrote:

> The real question is not if the Treasury Secretary is "close" to
> wall Street or not, it is rather, what is the quality of his character?
>
> Probably the greatest treasury Secretary of the last 150 years was JP Morgan. He WAS wall street but he had character and that, in the end, was what counted.

Apr 28 10:38 AM

[Gregman2:]

The Economist went easy on Geithner (and mentioned Felix again).
Geithner's definitely not an easy read--on the one hand he seems vague and obscure at times. Other times, he's brilliant. Is he the right man for the job right now? Not sure.

Apr 28 11:42 AM

[infp:]

I had incorrectly assumed that the New York Fed was a regulator of Wall Street, after reading Morgenson's article, now I know better. This may be old news to you but to me it was another frightening example of Wall Street lacking any meaningful government regulation. I also think that it is absurd to suggest that Wall Streeters have been the victims of discrimination and somehow lack input in Washington. The last time I looked, virtually all the financial decision makers in Washington are Wall Streeters (including Geithner) and that is the real problem.

Apr 28 11:54 AM

[John Slater:]

The most remarkable aspect of the Times story is the disclosure that Geithner pushed for a complete federal guarantee of the unsecured debt of the banks. As we have said previously at mergers.com/toughtimes.../, the real issue of the whole bailout is why the Treasury has decided to bail out the bondholders of the banks rather than demand that they participate in the recapitalization of the banks. The current message appears to be "invest in bonds of companies that actually make or do something tangible (e.g. the auto companies for all their faults) and you're going to get shafted; invest in the bonds of the major banks and you're fully protected. What does that say for capital allocation going forward? Makes it sort of hard to bet on America's industrial resurgence.

Apr 28 12:27 PM

[Moon Kil Woong:]

When the head of FDIC said that banks were engaged in regulatory arbitrage they meant everyone wanted to headquarter in NY where Geithner sat asleep at the wheel and oblivious to the financial fraud around him. In bed was not the word for how he managed the NY Fed. Maybe thew term intwined or part and parcel with Wall Street fits better.

Apr 28 12:32 PM

[Kem Cho:]

Geithner has 100% support of Obama. Obama takes us for for fools. He sure does not walk the talk.

Apr 28 12:52 PM

[Yodaorange:]

"Geithner hasn't demonstrated that he has any character. His testimony before Congress and has been evasive and dishonest. "

It seems that there are only two choices on the job that Geithner has done:

a) He is lacking in character.
b) He is lacking in competence.

Hard to tell from a distance which one is the dominant choice? The end results are the same. Consistent lack of foresight and understanding of what the problems will be, aka "There is no housing bubble, the problem is well contained, etc."

There is a consistency in Geithner's late responses. Put the taxpayers on the hook for the bad judgments that Wall Street has made.

After reading Gretchen's article, does anyone really believe that Geithner has the taxpayer’s interest as top priority above Wall Street interests?

Geithner is saying to himself: I have a tough choice to make. Get a free meal at the Four Season's in New York with Wall Street CEO's or stand in line with the common folk at McDonalds. Pretty clear which path he has taken.

Apr 29 11:05 AM