Former Treasury Secretary Timothy Geithner May 19 used his first Washington, DC public appearance following his resignation to defend his decision making and that of the rest of the Obama administration.
Geithner, launching his memoir Stress Test, responded to a question from the DC-based magazine Politico on why he and his Obama colleagues seemed to treat bankers better than homeowners after the 2008 economic collapse during the last months of the Bush presidency.
"This was a classic financial panic," Geithner recalled of the new administration's bailout responses after Obama's election in 2008. "You are in the cockpit and the plane's on fire. Are you going to negotiate conditions, or try to land the plane safely?"
My analysis of Geithner and his colleagues in Presidential Puppetry: Obama, Romney and Their Masters is that they served as water-carriers for Wall Street's oligarchs.
But this is Geithner's turn at bat to make his case, including with his 580-page new memoir, subtitled, Reflections on Financial Crises.
The scene was the inaugural "Playbook" luncheon hosted by Politico Chief White House Correspondent Mike Allen and Chief Economic Correspondent Ben White. The locale was the Hamilton, a restaurant complex just a stone's throw from Geithner's former headquarters at the Treasury Department, which nearly adjoins the White House.
Timothy Franz Geithner, who turns 52 in August, was the nation's 75th Treasury secretary from 2009 to 2013. Previously, he had been president and CEO of the Federal Reserve Bank of New York from 2003 to 2009. He is now president and managing director at Warburg Pincus, a Wall Street private equity firm that boasts of $45 billion in investments since its founding in 1966 from a merger.
Geithner comes from a well-connected family with his mother's roots extending back to the Mayflower landing.
His family also had ties to the Ford Motor Company and Ford Foundation, as well as a little-known tie to the Obama family: His father, Ford Foundation Asia Director Peter Geithner, supervised for a time Ann Dunham, Obama's mother, while she was a grantee for a Ford Foundation micro-finance program in Indonesia.
Geithner mentions "the odd family coincidence" in his memoir as something he and the president discussed in passing during their first meeting in October 2008 to discuss the financial crisis, amid rumors that Geithner might be a prospective Treasury nominee. Geither treats the matter in one sentence as a minor curiosity.
He thus leaves unspoken any deeper disclosures behind this previously little-reported relationship. That is like many other chapters of the Dunham-Obama family story, obscured by lost or secreted official records, following the upheavals occurring in Indonesia and nearby South Asian regions during the years following the West-inspired 1960s coup against Indonesia Prime Minister Sukarno.
In much the same manner, Geithner responded to his Politico questioners. The material seemed to cover a lot of ground in a free-flowing discussion, but some topics are simply not on anyone's agenda.
Allen and White, the moderators from Politico, peppered Geithner with questions about the controversies of his tenure, including the aforementioned decision to extend bailout money to financial institutions while permitting some, such as American International Group (AIG), to provide large bonuses to executives.
Geithner responded that he bears "scars" from the experiences but that the public was well-served by the decisions. "The scale of the problem was massive compared to the tools we had," he said.
He praised Obama, as well as such contemporaries as Federal Reserve Board Chairman Ben Bernanke and former Clinton Treasury Secretary Larry Summers, who ran Obama's National Economic Council.
Geithner wrote engagingly about his childhood, much of it spent overseas, and his early years meandering his way to career success via Dartmouth, graduate school at Johns Hopkins and an early job as an Asia analyst for three years at Kissinger Associates, the global consulting company led by former Nixon Secretary of State Henry Kissinger, a longtime ally of the Rockefeller interests.
Geithner noted that he worked periodically as a kitchen-helper and bar-tender during his school years, and his wife supported him in grad school with her work for Common Cause. The subtle point is that his success grew from a routine path of middle class upward striving common to Washington, including his stint for 13 years beginning in 1988 as a career employee in the Treasury Department. Treasury Secretaries Robert Rubin and Larry Summers advanced him to high positions.
As one overview in a New York Times column May 18, Princeton University economics professor Paul Krugman wrote:
Much of Mr. Geithner’s book is devoted to a defense of the U.S. financial bailout, which he sees as a huge success story — which it was, if financial confidence is viewed as an end in itself. Credit markets, which seized up after Lehman fell, mostly returned to normal during Mr. Geithner’s first year in office. Stock indexes rebounded, and have hit new records. Even subprime-backed securities — the infamous “toxic waste” that was poisoning the financial system — eventually regained a significant part of their value.
Thanks to this financial recovery, bailing out Wall Street didn’t even end up costing a lot of taxpayer money: resurgent banks were able to repay their loans, and the government was able to sell its equity stakes at a profit.
But where is the rebound in the real economy? Where are the jobs? Saving Wall Street, it seems, wasn’t nearly enough. Why? Geithner was in the seat when the balloon went up. He could have done worse, and could have done better.
Krugman's critique is from the establishment left, and is excerpted further below along with reviews. From the right, a Wall Street Journal reviewer James Freeman harshly criticizes Geithner as New York Fed president for rescuing Bear Stearns in 2008 with a taxpayer bailout.
Regardless of the story Mr. Geithner is telling now, there remains the question of why exactly America couldn't survive without a firm like Bear Stearns, which held no taxpayer-insured deposits....One of the themes in "Stress Test" is Mr. Geithner's difficulty in understanding the health of large financial firms. He admits that he didn't see the mortgage crisis coming and didn't grasp the severity of the problems after it appeared. He didn't require that the banks he was overseeing raise more capital because his staff's analysis couldn't foresee a downturn as bad as the one that occurred.
None of this is particularly surprising in a man who, at the time he became president of the New York Fed, had never worked in finance or in any type of business—unless one counts a short stint in Henry Kissinger's consulting shop. At Dartmouth, Mr. Geithner "took just one economics class and found it especially dreary."
These critiques, including one in USA Today by longtime Washington Post columnist John Berry, only begin to cover the vast ground of the topic.
But even Geithner's book, written as a fellow for the Council on Foreign Relations, does not seem intended to illuminate fully the topics, but instead to commemorate his service with just enough controversy to create news coverage. A sample of those disputes is excerpted below also. Most are personality and politics-oriented disputes of little lasting importance.
Not surprisingly, the neglected questions pertain to the insider connections behind the various career and company advancements. The Wall Street Journal reviewer mocks Geithner's credentials, for example, but does not argue why he advanced so far except via a vague implication that Geithner, a Republican early in his career, advanced because of connections to high-level Democrats in the Clinton administration.
We cannot attempt to answer all questions here. That's what books are for, although not Geither's.
As a hint, however, Geithner has been an attendee of the Bilderberg Group, but does not write about it. Similarly, he writes extensively about AIG and a little bit about its "feisty" chairman, Maurice "Hank" Greenberg. But the term CIA nowhere appears in reference to AIG, a reputed longtime ally for the agency, or indeed anywhere in Stress Test.
In sum, this is a tale for those who want to know what people are talking about in a few East Coast elite circles, not what is important -- or imprudent -- for the country to discuss.
Related News Coverage
At left, President Obama and Vice President Biden swear in Geithner in 2009 as the latter's wife, Carole, looks on.
New York Times, Springtime for Bankers, Paul Krugman, May 18, 2014. By any normal standard, economic policy since the onset of the financial crisis has been a dismal failure. It’s true that we avoided a full replay of the Great Depression. But employment has taken more than six years to claw its way back to pre-crisis levels — years when we should have been adding millions of jobs just to keep up with a rising population. Long-term unemployment is still almost three times as high as it was in 2007; young people, often burdened by college debt, face a highly uncertain future. Now Timothy Geithner, who was Treasury secretary for four of those six years, has published a book, Stress Test, about his experiences. And basically, he thinks he did a heckuva job. He’s not unique in his self-approbation. Policy makers in Europe, where employment has barely recovered at all and a number of countries are in fact experiencing Depression-level distress, have even less to boast about. Yet they too are patting themselves on the back. How can people feel good about track records that are objectively so bad? Partly it’s the normal human tendency to make excuses, to argue that you did the best you could under the circumstances. And Mr. Geithner can indeed blame much though not all of what went wrong on scorched-earth Republican obstructionism. But there’s also something else going on. In both Europe and America, economic policy has to a large extent been governed by the implicit slogan “Save the bankers, save the world” — that is, restore confidence in the financial system and prosperity will follow. And government actions have indeed restored financial confidence. Unfortunately, we’re still waiting for the promised prosperity.
Wall Street Journal, Book Review: ‘Stress Test’ by Timothy Geithner, James Freeman, May 11, 2014. In 2008, Mr. Geithner was president of the Federal Reserve Bank of New York, and the first big test of his thinking was the March rescue of the investment house Bear Stearns. The firm, which was heavily exposed to subprime mortgages, had been planning to file for bankruptcy protection, and its regulators at the Securities and Exchange Commission were prepared to protect customer brokerage accounts. This was standard practice when securities firms failed. But Mr. Geithner intervened to give the firm short-term liquidity and arranged a sale to J.P. Morgan, a move that put U.S. taxpayers on the hook for some of Bear's risky mortgage paper. And so the taxpayer safety net was stretched to cover not just commercial banks but Wall Street investment houses as well. In "Stress Test," Mr. Geithner argues that, though he understood that Bear "was not that big—only the 17th largest U.S. financial institution at the time" — its failure could have been catastrophic because "there were too many other firms that looked like Bear in terms of their leverage" and had similar exposure to devastating housing losses....
USA Today, Geithner 'Stress Test' Book Review, John M. Berry, May 14, 2014. John M. Berry covered the economy for 40 years, including 25 at the Washington Post. Currently he writes for The International Economy magazine. The title of former Treasury secretary Timothy Geithner's new book, Stress Test, a fascinating memoir about life in the maelstrom of the financial crisis, has multiple meanings: stress on the U.S. economy, stress on the democratic political process and the excruciating pressure on Geithner and his family. For nine years, first as president of the New York Federal Reserve Bank beginning in late 2003, when he was only 42, and then as Treasury secretary though President Obama's first term, Geithner had a key role in keeping the country's financial system afloat. In fact, Geithner was chosen to head the New York Fed precisely because of his involvement as a more junior Treasury official in dealing with financial crises in Japan, Mexico, Russia and several Asian and South American nations during the George H. W. Bush and Clinton administrations. Nevertheless, the crisis that began in 2007 was unprecedented in many ways, and Geithner and other policymakers — including Fed Chairman Ben Bernanke, his predecessor at Treasury, Henry Paulson, and other officials in the Obama administration — were uncertain what was happening and what their responses should be.
Huffington Post, Geithner Accused Of Lying In New Tell-All Book, Mark Gongloff, May 12, 2014. Tim Geithner did not exactly become America's Sweetheart during his tenure as our financial-crisis Treasury secretary. And his new memoir isn't winning him many more friends. In fact, two people discussed in Geithner's new book, Stress Test, out on Monday, say Geithner is lying about them: conservative Harvard economist Glenn Hubbard, a former Mitt Romney adviser and massive weasel in the film "Inside Job," and Neil Barofsky, former head of the watchdog agency that kept an eye on the government's bank bailout. "Mr. Geithner stands by his accounts in Stress Test," Geithner spokeswoman Jenni LeCompte wrote in an email to the Huffington Post. Hubbard told Politico that a passage in Geithner's book, in which Hubbard is quoted as saying "of course we have to raise taxes" in order to balance the federal budget, is a big lie. “Geithner is making it up,” Hubbard told Politico. “It’s pretty simple. It’s not true."
Politico, Geithner's 'Stress Test,' Mike Allen, May 12, 2014. Juicy Bits from Stress Test:
- “As the crisis was winding down, I suggested to my adviser Jake Siewert that Treasury ought to put out a long white paper explaining the rationale behind all our controversial decisions. He grinned and said: ‘Sounds great. Why don’t you give it a shot?’” (p. 18)
- DARTMOUTH UNDERGRAD: “I was a registered Republican then, but without much conviction. I had no passion for politics. … I did develop a strong aversion to the strident conservative Republican political movement that was spreading across college campuses … After the Dartmouth Review, the intellectual center of the movement, published a McCarthy-style list of gay students on campus [from “membership and correspondence files of the Gay Student Alliance,” per a 1981 N.Y. Times article], I ran into a Review writer named Dinesh D’Souza at a coffee shop and asked him how it felt to be such a dick.” (p. 30)
- CONFIRMATION CONTROVERSY over unpaid payroll taxes from his time at IMF: “‘You’re going to be fine,’ Rahm [Emanuel, the first chief of staff, said during the transition]. ‘They just want to cut you and make you bleed.’ … I was embarrassed by the public debate about whether I was both venal and incompetent or merely incompetent.” (p. 270, 273)
Catching Our Attention on other Justice, Media & Integrity Issues
Wall Street Journal, U.N. Considers Reopening Probe into 1961 Crash that Killed Dag Hammarskjöld, Joe Lauria, May 18, 2014. New Evidence of Possible Foul Play Has Emerged. The United Nations is considering reopening its investigation into the mysterious 1961 plane crash that killed then-U.N. chief Dag Hammarskjöld after new evidence of possible foul play emerged. The U.N. General Assembly put the case back on its agenda in March at the recommendation of Secretary-General Ban Ki-moon after more than half a century of speculation that the Swedish diplomat's plane was either sabotaged or shot down. Ban's recommendation came after a report by the independent Hammarskjöld commission, formed in 2012 with the participation of South African jurist Richard Goldstone. The report in September raised the possibility the National Security Agency and other U.S. intelligence agencies have a tape-recorded radio communication by a mercenary pilot who allegedly carried out an aerial attack on the secretary-general's plane. Hammarskjöld, shown in a file photo, was on his way to Northern Rhodesia—now Zambia—when his Swedish DC-6 airliner plunged into a forest nine miles from the airport in the city of Ndola just past midnight on September 18, 1961.
Washington Post, U.S. to charge Chinese hackers with espionage, Ellen Nakashima, May 19, 2014. The Justice Department is expected to charge members of the Chinese military with economic cyber-espionage, U.S. officials said, marking the first time such charges are being leveled against a foreign country.