Geithner's Phone Calls: The Issue Is Access

By James Kwak

Yesterday Simon pointed out the AP story highlighting Tim Geithner’s many contacts with a few key Wall Street executives — primarily Jamie Dimon, Lloyd Blankfein, Vikram Pandit, and Richard Parsons — while leading the government’s rescue efforts as Treasury secretary. It’s certainly useful for the nation’s top economic official to talk to people in the banking industry, and it’s also useful for him to talk to banks that are being bailed out by the government. But the AP story did come up with a few important distinctions. Geithner talked to these Wall Street executives more than the key people in Congress — Barney Frank and Christopher Dodd — that he needs to pass his regulatory reform plan. And he talked to them much more than to, say, Bank of America, which is equally big and equally in debt to the government. So to be clear, Geithner is talking to these people more than dictated by the requirements of his job (or he’s not talking to Ken Lewis enough).

Still, you could say, what’s wrong with that? Can’t Tim Geithner talk to whomever he wants to talk to?

Of course he can, in a legal sense, and no one is saying he is doing anything illegal. All the evidence is that Geithner is a man of unassailable integrity, and a modest, courteous guy to boot.

But as the lobbyists have known for decades, the key to political power in the United States is access. Under-the-table bribes are relatively rare. The revolving door (government officials taking lucrative jobs at the companies they used to oversee) is important, but of little use when it comes to the very top people. Paul O’Neill, John Snow, and Henry Paulson were already easily rich enough to overlook such temptations (although Snow did leave Treasury to become chairman of Cerberus); Geithner may not be a mega-millionaire, but he already turned down his shot at being CEO of Citigroup (C) in 2007.

Instead, if you want to sway some of the top people in government, the most important thing is to talk to them. All of us are influenced by the information and opinions that we are exposed to. Many people have a tendency to agree with either the first person or the the last person they spoke to on a particular issue, regardless of what other information they take in. (Where Geithner falls on that spectrum I have no idea.) This is why lobbyists make so much money; they sell access.

If, in the midst of a financial crisis, you get a disproportionate share of your advice from a few select Wall Street veterans with enormous personal interests in your decisions, you will be swayed a certain way. This is particularly worrying if you have spent the last several years even more deeply steeped in that circle, because you will be getting information and ideas that are confirming your prior beliefs. It is also worrying if, as was the case this past year, you do not have the time for detailed fact-finding or empirical studies, and instead you have to make important decisions based purely on logic and conjecture. Instead, you (and the public) would be better served going out of your way to talk to people who do not share your prior perspective and are likely to disagree with you. Now, the Obama administration is nowhere near as bad as the Bush administration, which disdained talking to its critics; this administration has reached out to its intellectual opponents, for example in the famous White House dinner with Krugman and Stiglitz. But one dinner does not balance eighty phone calls.

There’s nothing scandalous about the fact that Tim Geithner talks to the CEOs of Goldman (GS), JPMorgan (JPM), and Citi a lot. It’s just a fact. It’s a fact that demonstrates the deep linkages between the thinking inside Treasury and the thinking on Wall Street (and yes, I know Citi and JPMorgan are in Midtown). It’s also one reason I have little interest in conspiracy theories — who needs a conspiracy when you have a sympathetic ear in the Treasury Department that you can get access to regularly? As we’ve said before, the key factor throughout this financial crisis has been political power. And if that power is composed of the power of ideas and the power of relationships, so much the better.

Comments

[questioner5000:]

Access/Schmaccess! It's not like Geithner is going to follow his tenure in washington DC with a job on Wall Street, right?

So, he talks to JPM about a sweetheart deal for Bear Stearns, but not BAC/Barclays about saving Lehman. Big deal!

So then he speaks with his pal at Goldman Sachs, and promotes actions on behalf of AIG, that, "surprisingly", benefit GS more than any other institution.

And then he calls JPM about a sweetheart deal for Washington Mutual, but slams BAC around, treating it as a wayward child, (as if the country [and his friends at GS], had nothing at stake in the BAC "rescue" of Merrill Lynch), before finally arranging a "rescue package" for BAC that mimicked the rescue package previously for Citi, even though the root causes of the two banks' respective problems were quite different.

Oh, what the hell! Tomorrow we'll probably hear that Geithner and Ken Lewis have been jointly awarded the Nobel Prize for Economics!

Oct 09 12:08 PM

[Michael Clark:]

Very funny. Yes, the Nobel Prize.... I guess we always gave it more credit than it deserved anyway.


On Oct 09 12:08 PM questioner5000 wrote:

> Access/Schmaccess! It's not like Geithner is going to follow his
> tenure in washington DC with a job on Wall Street, right?
>
> So, he talks to JPM about a sweetheart deal for Bear Stearns, but
> not BAC/Barclays about saving Lehman. Big deal!
>
> So then he speaks with his pal at Goldman Sachs, and promotes actions
> on behalf of AIG, that, "surprisingly", benefit GS more than any
> other institution.
>
> And then he calls JPM about a sweetheart deal for Washington Mutual,
> but slams BAC around, treating it as a wayward child, (as if the
> country [and his friends at GS], had nothing at stake in the BAC
> "rescue" of Merrill Lynch), before finally arranging a "rescue package"
> for BAC that mimicked the rescue package previously for Citi, even
> though the root causes of the two banks' respective problems were
> quite different.
>
> Oh, what the hell! Tomorrow we'll probably hear that Geithner and
> Ken Lewis have been jointly awarded the Nobel Prize for Economics!

Oct 09 12:25 PM

[questioner5000:]

Oh, I forgot! When Wachovia needed "rescuing", who got the call and the sweetheart deal - - Wells Fargo? No, the call, and the offer of the sweetheart deal went to BFF/Speed-dial pal CITIBANK !!! (That deal was only offset by Wells' agreement to take it up the ....... creek, without a paddle!)

Like I said, "access, schmaccess"!


On Oct 09 12:08 PM questioner5000 wrote:

> Access/Schmaccess! It's not like Geithner is going to follow his
> tenure in washington DC with a job on Wall Street, right?
>
> So, he talks to JPM about a sweetheart deal for Bear Stearns, but
> not BAC/Barclays about saving Lehman. Big deal!
>
> So then he speaks with his pal at Goldman Sachs, and promotes actions
> on behalf of AIG, that, "surprisingly", benefit GS more than any
> other institution.
>
> And then he calls JPM about a sweetheart deal for Washington Mutual,
> but slams BAC around, treating it as a wayward child, (as if the
> country [and his friends at GS], had nothing at stake in the BAC
> "rescue" of Merrill Lynch), before finally arranging a "rescue package"
> for BAC that mimicked the rescue package previously for Citi, even
> though the root causes of the two banks' respective problems were
> quite different.
>
> Oh, what the hell! Tomorrow we'll probably hear that Geithner and
> Ken Lewis have been jointly awarded the Nobel Prize for Economics!

Oct 09 01:47 PM

[Jiva Coolit:]

Your statement "All the evidence is that Geithner is a man of unassailable integrity, and a modest, courteous guy to boot" is incredulous. Ray Charles could see that.

Geithner is an arrogant, finger jabbing, supercilious tax cheat who could be better utilized running a numbers game in Chicago.
Just a view.
Jiva Coolit

Oct 10 10:04 AM

[User 371972:]

James, you should read the interview in WSJ of the CEO of GS by Holman Jenkins and the forthcoming "bonuses" of a firm "too big to fail." Then compare to the following ( courtesy of Tradermark) also in todays SA:
"I honestly just feel sad when I think about what is being done and how the masses don't care or don't understand. Yesterday there were rumors that the government was handing out $3000 checks in Detroit; in fact it was a $15M program (application process) to help people facing foreclosure and the like... there was a stampede of 50,000 people for 3,500 slots. This country is a mess. When it all comes to a head is unknowable, but I become more distressed on our long-run future by the day.

The lure of federal cash assistance for needy Detroit families sparked pandemonium Wednesday at Cobo Center, as hundreds of city residents pushed, jostled and trampled others in a rush to apply for the aid.
In a scene that spoke volumes about the despair of one of the nation's poorest cities, about 50,000 Detroiters descended on downtown to pick up 5,000 applications in hopes of enrolling in a federal program that pays a few hundred to a few thousand dollars to low-income residents to help pay rent and utilities.
Wednesday's line stretched for blocks and before the process could be completed at least six people were taken away by ambulance, 150 police were called to the scene and the city stopped distributing applications before noon.
The mayhem seemed to reflect the desperation of a city in which one in three lives in poverty and 28.7 percent are unemployed. Others said it was exacerbated by rumors the government was literally handing out cash.
Walt Williams, 51, arrived at Cobo before sunrise to get a good spot for the 10 a.m. opening of the doors. "This morning, I seen the curtain pulled back on the misery," a bewildered Williams said. "People fighting over a line; people threatening to shoot each other -- is this what we've come to?"
These scenes are akin to the ones when American helicopters drop food and aid on refugee camps or victims of typhoons in some far off poor country"

Blankfein is going to be paying "big bonuses" and having a good year while main street suffers, all courtesy of the Treasury and Fed (an of course the American Taxpayer). If Blankfein doesn't get it, rest assured Geitner likely does not get it either.

Oct 10 01:55 PM

[Econ 101:]

Giethner - Integrity my Arse! Hes a tax cheat and a Goldman Sachs shill pure and simple.

Java Coolit, you are too nice to the man.

Oct 10 10:05 PM