Tim Geithner = Owned, Bought & Paid For By Wall Street; A Damning Indictment

http://www.nytimes.com/2009/04/27/business/27geithner.html?_r=1&hp




Geithner Forged Close Ties to Finance Club
By JO BECKER and GRETCHEN MORGENSON


Treasury Secretary Timothy F. Geithner in February 2007, when he was president of the New York Federal Reserve Board. In that role, he built unusually close relationships with Wall Street executives.

Last June, with a financial hurricane gathering force, Treasury Secretary Henry M. Paulson Jr. convened the nation’s economic stewards for a brainstorming session. What emergency powers might the government want at its disposal to confront the crisis? he asked.

Timothy F. Geithner, who as president of the New York Federal Reserve Bank oversaw many of the nation’s most powerful financial institutions, stunned the group with the audacity of his answer. He proposed asking Congress to give the president broad power to guarantee all the debt in the banking system, according to two participants, including Michele Davis, then an assistant Treasury secretary.




The proposal quickly died amid protests that it was politically untenable because it could put taxpayers on the hook for trillions of dollars.

“People thought, ‘Wow, that’s kind of out there,’ ” said John C. Dugan, the comptroller of the currency, who heard about the idea afterward. Mr. Geithner says, “I don’t remember a serious discussion on that proposal then.”

But in the 10 months since then, the government has in many ways embraced his blue-sky prescription. Step by step, through an array of new programs, the Federal Reserve and Treasury have assumed an unprecedented role in the banking system, using unprecedented amounts of taxpayer money, to try to save the nation’s financiers from their own mistakes.

And more often than not, Mr. Geithner has been a leading architect of those bailouts, the activist at the head of the pack. He was the federal regulator most willing to “push the envelope,” said H. Rodgin Cohen, a prominent Wall Street lawyer who spoke frequently with Mr. Geithner.

Today, Mr. Geithner is Treasury secretary, and as he seeks to rebuild the nation’s fractured financial system with more taxpayer assistance and a regulatory overhaul, he finds himself a locus of discontent.

Even as banks complain that the government has attached too many intrusive strings to its financial assistance, a range of critics — lawmakers, economists and even former Federal Reserve colleagues — say that the bailout Mr. Geithner has played such a central role in fashioning is overly generous to the financial industry at taxpayer expense.

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.

His actions, as a regulator and later a bailout king, often aligned with the industry’s interests and desires, according to interviews with financiers, regulators and analysts and a review of Federal Reserve records.

In a pair of recent interviews and an exchange of e-mail messages, Mr. Geithner defended his record, saying that from very early on, he was “a consistently dark voice about the potential risks ahead, and a principal source of initiatives designed to make the system stronger” before the markets started to collapse.

Mr. Geithner said his actions in the bailout were motivated solely by a desire to help businesses and consumers. But in a financial crisis, he added, “the government has to take risk, and we are going to be doing things which ultimately — in order to get the credit flowing again — are going to benefit the institutions that are at the core of the problem.”

The New York Fed is, by custom and design, clubby and opaque. It is charged with curbing banks’ risky impulses, yet its president is selected by and reports to a board dominated by the chief executives of some of those same banks. Traditionally, the New York Fed president’s intelligence-gathering role has involved routine consultation with financiers, though Mr. Geithner’s recent predecessors generally did not meet with them unless senior aides were also present, according to the bank’s former general counsel.

By those standards, Mr. Geithner’s reliance on bankers, hedge fund managers and others to assess the market’s health — and provide guidance once it faltered — stood out.

His calendars from 2007 and 2008 show that those interactions were a mix of the professional and the private.

He ate lunch with senior executives from Citigroup, Goldman Sachs and Morgan Stanley at the Four Seasons restaurant or in their corporate dining rooms. He attended casual dinners at the homes of executives like Jamie Dimon, a member of the New York Fed board and the chief of JPMorgan Chase.

Mr. Geithner was particularly close to executives of Citigroup, the largest bank under his supervision. Robert E. Rubin, a senior Citi executive and a former Treasury secretary, was Mr. Geithner’s mentor from his years in the Clinton administration, and the two kept in close touch in New York.

Mr. Geithner met frequently with Sanford I. Weill, one of Citi’s largest individual shareholders and its former chairman, serving on the board of a charity Mr. Weill led. As the bank was entering a financial tailspin, Mr. Weill approached Mr. Geithner about taking over as Citi’s chief executive.

But for all his ties to Citi, Mr. Geithner repeatedly missed or overlooked signs that the bank — along with the rest of the financial system — was falling apart. When he did spot trouble, analysts say, his responses were too measured, or too late.

In 2005, for instance, Mr. Geithner raised questions about how well Wall Street was tracking its trading of complex financial products known as derivatives, yet he pressed reforms only at the margins. Problems with the risky and opaque derivatives market later amplified the economic crisis.

As late as 2007, Mr. Geithner advocated measures that government studies said would have allowed banks to lower their reserves. When the crisis hit, banks were vulnerable because their financial cushion was too thin to protect against large losses.

In fashioning the bailout, his drive to use taxpayer money to backstop faltering firms overrode concerns that such a strategy would encourage more risk-taking in the future. In one bailout instance, Mr. Geithner fought a proposal to levy fees on banks that would help protect taxpayers against losses.

The bailout has left the Fed holding a vast portfolio of troubled securities. To manage them, Mr. Geithner gave three no-bid contracts to BlackRock, an asset-management firm with deep ties to the New York Fed.

To Joseph E. Stiglitz, a Nobel-winning economist at Columbia and a critic of the bailout, Mr. Geithner’s actions suggest that he came to share Wall Street’s regulatory philosophy and world view.

“I don’t think that Tim Geithner was motivated by anything other than concern to get the financial system working again,” Mr. Stiglitz said. “But I think that mindsets can be shaped by people you associate with, and you come to think that what’s good for Wall Street is good for America.”

In this case, he added, that “led to a bailout that was designed to try to get a lot of money to Wall Street, to share the largesse with other market participants, but that had deeply obvious flaws in that it put at risk the American taxpayer unnecessarily.”

But Ben S. Bernanke, the chairman of the Federal Reserve, said in an interview that Mr. Geithner’s Wall Street relationships made him “invaluable” as they worked together to steer the country through crisis.

“He spoke frequently to many, many different players and kept his finger on the pulse of the situation,” Mr. Bernanke said. “He was the point person for me in many cases and with many individual firms so that we were prepared for any kind of emergency.”

-CONTINUED-

 

He was the president of the NY Fed and you wanted him not to meet with NY largest banks?lol

 

Last June, with a financial hurricane gathering force, Treasury Secretary Henry M. Paulson Jr. convened the nation’s economic stewards for a brainstorming session. What emergency powers might the government want at its disposal to confront the crisis? he asked.

Timothy F. Geithner, who as president of the New York Federal Reserve Bank oversaw many of the nation’s most powerful financial institutions, stunned the group with the audacity of his answer. He proposed asking Congress to give the president broad power to guarantee all the debt in the banking system, according to two participants, including Michele Davis, then an assistant Treasury secretary.

The proposal quickly died amid protests that it was politically untenable because it could put taxpayers on the hook for trillions of dollars.

“People thought, ‘Wow, that’s kind of out there,’ ” said John C. Dugan, the comptroller of the currency, who heard about the idea afterward. Mr. Geithner says, “I don’t remember a serious discussion on that proposal then.”

But in the 10 months since then, the government has in many ways embraced his blue-sky prescription. Step by step, through an array of new programs, the Federal Reserve and Treasury have assumed an unprecedented role in the banking system, using unprecedented amounts of taxpayer money, to try to save the nation’s financiers from their own mistakes.

And more often than not, Mr. Geithner has been a leading architect of those bailouts, the activist at the head of the pack. He was the federal regulator most willing to “push the envelope,” said H. Rodgin Cohen, a prominent Wall Street lawyer who spoke frequently with Mr. Geithner.


Who's interest is this guy protecting? Who does he work for, allegedly?

 

Reader Comments:

April 27, 2009 7:57 am

Link
Bravo!

Not to get too personal but Geithner is yet another tool of the financial oligarchs who have captured not just the regulatory bodies, but the entire political apparatus as well. He is Hank Paulson with more hair and less personal wealth.

Does that sound crazy? OK, then look at campaign donations over time by the FIRE industries (Finance Insurance Real Estate) it went from $50 million in 1990 to almost $500 million in 2008. That included $38MM to Obama, $28MM to McCain, $20MM to Clinton, $6MM to Dodd.

Then ask yourself, why was GM's CEO fired, but the CEO's of Bank of America, Citibank and AIG are chugging along and collecting bonuses? Why are we guaranteeing the bets the speculators at Goldman Sachs placed in the casino known as AIG? Is it because they 'own' the treasury department? Or was it the $980,000 they gave Obama?

Go to opensecrets.org and see how your government has sold itself to the highest bidder. Read former IMF chief economist Simon Johnson's blog, he details how we're being sold out. Watch former S&L investigator Bill Black's appearance on Bill Moyer where he says the root of this crisis was systemic fraud within the banking industry.

— AS, Chicago
Recommend Recommended by 26 Readers

 

The two party system by advertising....lobbyists....

Must be done away with....

 

I am just as impressed with his lack of long hard working days. We kept hearing about how hard these guys worked but I never saw that by his schedule. Geithner arrived in his office around 8:00 every morning as was out before 5:00. He did get a frequent free meal out of it later on. I figure the dinners were a way of sticking expensive eats on the tax payers as a "business expense".

So now that we see this schedule we come to learn that Geithner didn't work hard. We learned previously that James Cayne would rather play bridge that earn his keep. So did any of these top executives really earn their keep?

 

For sure.

 

I suppose his job is to keep the financial system intact. He doesn't work for the taxpayer, per se, that is the job of Congress

 

In the Sweden banking crisis which your hero Roubini frequently mentions, the government guaranteed all banking liabilities

 

Back in the old days when investors made mistakes they took the lumps,,now when they make mistakes the taxpayers take the lumps,,,odd