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 (NYSE: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 (NYSE:GS), JPMorgan (NYSE: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.