“I don’t think that Tim Geithner was motivated by anything other than concern to get the financial system working again. 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 . . . [This] 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.”

-Joseph E. Stiglitz, Nobel-winning economist at Columbia

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There is a huge, 5,000 word, front page article in the NYT today on Treasury Secretary Timothy F. Geithner. The article on the former president of the New York Federal Reserve Bank is your required reading today.

You may note that many of the media’s most knowledgeable banking experts are not quoted in the piece;  (Though a few of them will be discussing the foibles of our banking system at our TBP conference in June)

Now for a little inside baseball stuff:   I cannot say for sure, but I have a sneaking feeling that several analysts were the ones who helped build the case against Geithner.  Note the extensive usage of the former NY Fed Prez’ schedule in the online version of the article.

I also have to point out the Stiglitz quote above.  The assumption referenced by the Columbia Prof and Nobel winner, is that the unusually close relationship between Geithner when he was NY Fed President and the C-level execs of Wall Street’s giant financial institutions has put him in the mindset of Wall Street, and not the taxpayers. That was my very same argument about Larry Summers earlier this month.

This is a huge piece, one that I imagine was over 3 months in the making. It appears to have been painstakingly assembled. One would hazard a guess that a few smart banking analysts would be helpful to any writer who was putting together such missive as to the foibles of the Tres Secy.

Go read it . . . !


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Previously:
Larry Summers: Wrong Man for the Job (April 4, 2009)

http://www.ritholtz.com/blog/2009/04/summers/

Stiglitz: Blame Summers (April 17th, 2009)

http://www.ritholtz.com/blog/2009/04/stiglitz-blame-summers/

Sources:
Geithner Forged Close Ties to Finance Club
JO BECKER and GRETCHEN MORGENSON
NYT, April 26, 2009

http://www.nytimes.com/2009/04/27/business/27geithner.html

Geithner’s Calendar at the New York Fed

http://documents.nytimes.com/geithner-schedule-new-york-fed#p=1http://www.nytimes.com/2009/04/27/business/27geithner.html

Geithner Calendar PDF

http://graphics8.nytimes.com/packages/images/nytint/docs/geithner-schedule-new-york-fed/original.pdf

Category: Bailouts, Markets, Politics

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

26 Responses to “Inside Baseball: New York Times on Tres Secy Geithner”

  1. Stuart says:

    If Geithner is half as smart as many people attest, he has to be aware he is being maneuvered to fall on his own sword. Watch the strain between himself and Summers become palpable. No question he is owned by the industry. Lets see how good a chess player he really is with the admin.

  2. yes, goes way beyond any sense of, mere, “cohort effect”, and past quaint notions of ‘regulatory capture’.
    ~~
    “Cohort effects are important to resource dependency theorists when these groups affect structures of influence in organizations (Pfeffer, 1992). Large, new cohort groups create training dependencies of experienced employees. As they gain experience and compete for managerial positions, the politics of resource control become even more important. Finally, the values of particular cohorts can also affect the organizational culture as they reach higher levels of influence and mentorship.”
    http://faculty.babson.edu/krollag/org_site/encyclop/cohort_effect.html
    “”Bruce Baugh explains:
    All of this leads to the point where the regulatory agency may bristle and grr for the popular press, but its day-to-day business is strongly congruent with the interests of its subjects. At this point the regulatory agency has been captured, and once it happens, it’s proved nearly impossible to fix. Any effort to abolish the agency and start over will be met with cries that someone wants to do away with any government oversight of the issue. Even mild efforts at changing the agency’s composition or mission will get the same treatment, ..”
    http://econlog.econlib.org/GQE/gqe217.html

    ol’ TTT is a bad Actor– if it wasn’t for his SAG-card– in Billy’s Day, he wouldn’t even be hawking peanuts at The Globe..

  3. “fall on his own sword”

    Exactly. When this all blows up, as inevitably it will (CRE, as Zero Hedge recently noted, is the other shoe about to drop), Geithner will be the fall guy.

    The real problem, though, isn’t individuals like Geithner. It is the entire system, which is grounded upon the notion of securitizing income streams in support of ever-increasing consumption and asset prices. When those income streams falter, the system fails. It has already happened in housing, as the reality of over-extended consumers, whose income streams have not increased in real terms since the seventies, took on more and more debt until the slightest hiccup in income destroyed them. Next will be CRE.

    Propping up this fallaciously-grounded system will destroy us.

  4. tCA says:

    While Whalen and Rosner provide the technical credibility to take on Timmy, Stiglitz provides the political credibility as someone who is solidly left of center in addition to his credible brain power.

    My question to the group is who would be an acceptable Treasury Sec. from outside Wall St?

    Is there someone who has the technical ability to understand the big picture who can check there biases at the door? For a guy like Buffett, he could be thought of an outsider on one hand, but someone with massive bets that hinge on decisions coming from Treasury on the other hand. What about an academic like a Stiglitz or Mankiw? I’m looking for names of people who have the best likelihood of putting our nation before their own regard to their pocketbook and legacy (read: Hank “protecting my wallet and my former I-bank’s reputation” Paulson).

  5. slappy says:

    I’m surprised Whalen didn’t get a credit on the by-line. Reads right out of his ongoing vendetta vs. Geithner.

    Just think of the articles they could have written on McCain’s Treasury Sec’y, Phil Gramm. Whalen would have been his biggest defender, probably.

    Did Whalen have issues with Paulson and O’Neill’s connections to industry?

    ~~~

    BR: I don’t know — but he and his family were big Obama supporters during the election.

  6. Transor Z says:

    Baseball is actually not a bad analogy to the various Fed Reserve presidents. The Commissioner of MLB is selected by owners.

    Watched the rebroadcast of Friday’s Bill Moyers with Simon Johnson and Michael Perino last night. Perino spoke at length about Pecora’s devastating investigation into Wall Street financiers in the early 30s.

    It’s time for a street smart genius with tremendous clarity of thought and subpoena power to start publicly cross examining key individuals, whether to expose individual wrongdoing or profound systemic flaws — the kind of things that get exposed by demanding direct answers to simple intelligent questions.

    Geithner getting appointed and approved as Secretary of Treasury despite not paying his taxes for several years is still a powerful statement of everything that is wrong with finance in this era.

  7. m111ark says:

    Read Carroll Quigley, W. Cleon Skousen…then consider what may actually be happening. It’s all just part of the plan.

  8. slappy,

    O’Neill came from Alcoa, an Industrial, not a Financial.

    and to tCA’s Q: ” I’m looking for names of people who have the best likelihood of putting our nation before their own regard to their pocketbook..”

    I’d go with Paul O’Neill–it was his Truthtelling, and abiding by it, that got him ‘dismissed’..

    “Every company parrots the same phrase: “Our most important asset is our people.” Real leaders know how to prove it, said U.S. Secretary of the Treasury Paul H. O’Neill, who spoke to students at HBS recently…”
    http://hbswk.hbs.edu/archive/3159.html

  9. leftback says:

    I had Geithner tagged as a sacrifice from Day 1. He knew where the bodies were buried and that’s why he got the job. He will depart after the next market collapse/bailout.

    The CRE collapse is so interesting. We all know it is coming but the IYR keeps going up. Remarkable.

    OT: All is not well in glossy print media fantasy land. More journos will be turning to the blogosphere:

    http://www.marketwatch.com/news/story/Conde-Nast-closing-Portfolio-magazine/story.aspx?guid=%7B6F88EBA3%2DBA5A%2D4273%2D89E9%2D687BB0F6A7E1%7D

  10. Mannwich says:

    I read this article last night (and posted it here) when it came out. Very detailed but it’s not at all suprising, although it’s great to see the MSM jump on this. Maybe it will gain some traction.

  11. Mannwich says:

    @leftback: As everyone here knows, I’ve been getting hammered on SRS, but I view that as a lottery ticket. It’s going to explode again to the upside at some point. The question is when?

  12. vaughn says:

    “It’s time… for a street smart genius with … subpoena power to start publicly cross examining key individuals, whether to expose individual wrongdoing or profound systemic flaws”

    Not yet. Not quite enough blood in quite enough $treets. My god, this country NEEDS a reset.
    When we can get .gov nominees who’ve faithfully paid their taxes BEFORE nomination
    you will know we have “healed”. pfffft

  13. Want a name? Paul Volcker.

    Yes, he’s old, and that’s a great deal of his attraction, IMO. He has experience, having weathered the dollar crisis and massive inflation of the late 70′s, early 80′s.

    And he has wisdom that only comes with age. He recently remarked that he never thought he’d see the day when the Federal Reserve Bank filled its balance sheet with any manner of collateral, or that he’d see it printing dollars just because.

    We don’t need more too-clever-by-half financiers. They were the ones that got us here. We need sober adults that will view with a skepticism borne from experience every idea whose underlying premise is “that things are different this time”.

  14. Mannwich says:

    I think Volcker would be great. He’s shown real courage and leadership qualities during a tough time before and he doesn’t have any future ambitions as someone who’s in the latter years of his life. If we’re looking for someone who would probably have the courage to do the right thing in the face of enormous pressures to cave to the status quo, he’s probably the guy.

  15. clawback says:

    Unlike BR, I don’t know Chris Whalen personally, but why is his campaign against Geithner a ” vendetta”? If I had Whalen’s smarts and credentials, I would be pretty critical of Geithner as well. (I AM critical of Geithner.) Whalen has said himself that his criticisms of Geithner are motivated by a desire to protect taxpayers from further robbery. I have no reason not to believe him. Wouldn’t most of you guys be on CNBC criticizing Geithner if you could get the airtime? I imagine BR would as well.

    Long way of saying: Chris Whalen for Sec. of the Treasury. Hands down.

  16. VennData says:

    When you miss the importance of the large American financial system to American hegemony, you miss the Big Picture. Bush, Paulson, Geithner, Obama, Volker, Summers, etc. don’t miss it. That’s why we have this process in place. Geithner is the Norman Schwarzkopf of this skirmish. Whalen, Kudlow, Whitney etc. are seeking attention, the Maxine Watters, if you will.

  17. clawback says:

    VennData,

    American “hegemony” is not equivalent to American power. Yes, I’m aware that if China skips out on the Treasury auctions (because Sec. Whalen restructured Citi) then American “hegemony” (read empire) would end. Sounds good to me.

  18. zot23 says:

    The question isn’t whether the G man is being manuevered to the slaughter stall or not, that’s a given IMHO. The more interesting question is who are the banks/street grooming to take his place? It’s a great scam:

    * G wants to bail out banks and instill regulations afterward.
    * You let him bail out the banks, then he takes the fall pre-regulation.
    * The next occupant must smell daisy fresh but be 110% against more regulation.
    * You win (until the mobs reinvent the guillotine.)

    So who is the next lackey?

  19. slappy says:

    @Clawback

    My issue with Whalen’s continual tirades against Geithner is that they are based on things like his answer to a question Whalen put to him in a forum in 2005, etc. about Basel II, which to him is irrefutable proof of the guy’s ignorance of anything and everything banking-related. As some of you point out, Geithner may be a patsy here, but I give the guy a fair amount of credit for dealing with what he’s had to deal with at the time, without the benefit of hindsight. I don’t see that he’s had much of a choice in how things have transpired.

    The idea that his appointment schedule showing luches with Shittygroup execs is somehow a damning indictment is just silly. Sandy Weill and Jamie Dimon hired him, basically. That’s the way the NY Fed president is hired. Is he supposed to not have any dealings with the members of his board of directors and the major financial institutions? Don’t hate the player, hate the game, as they say.

    @Mark

    O’Neill and Snow both came from the industrial side, of course, Alcoa and CSX. Look how well they did in their tenures as Treasury Secretaries. They sat around for most of Bush’s first and second terms while the banking system doused itself with gasoline. They thought it would be just dandy to hand Wall St. billions in fees from Social Security taxes. Wonder how that woulda worked out.

    My sense is that this short of Geithner is a very crowded trade, and we might get a squeeze here at some point.

  20. km4 says:

    What’s good for GM is good for the country right … oh wait that was in 1960′s when America was the economic and manufacturing superpower….now we just mainly produce bullshit financial ponzi schemes and pass the bill to the American taxpayers….most Americans had better get a new dream and fast !

  21. clawback says:

    @slappy

    I don’t know that the Basel II incident is “proof” of Turbo’s total ignorance, but if Whalen was made suspicious by it, I’d say his suspicions have proven correct. Also, I think most of us understand the FRBNY chief’s role, but there’s so much evidence of personal relationships clouding or guiding policy every step of the way. Many of these lunches and breakfasts were one-on-one meetings, not meetings in which other people from the NY Fed were there. Then there’s the very personal relationships with Weil and Rubin (the latter much talked about). By all means, let’s hate the game, but when your country’s future is at stake, the “player” is going to have to be replaced with someone who’s on our team (like Whalen).

    Also, maybe this is just a fundamentally different view of politics, but I don’t think you get extra credit for trying really hard to fix problems you helped cause — just because you work for the government. Re “hindsight” and what he’s had to deal with, I would remind you that many of us were saying the same things back then that we’re saying now. Not everyone in this country went bailout crazy. And even the ones that did were offering suggestions that protected the taxpayer. Geithner has done just the opposite. Screw the taxpayer at every turn — for his own good, because there were no other options. Geithner, of course, thinks he’s done some fine, brave things in the last 18 months. I’ve gotta call BS on that.

  22. slappy says:

    @clawback “Geithner, of course, thinks he’s done some fine, brave things in the last 18 months. I’ve gotta call BS on that.”

    I’m glad you can read the guy’s mind. I’ve gotta call BS on THAT.

    I was unaware that the FRBNY president was required to be a social pariah.

  23. Thatguy says:

    There’s a whole lot of ground between social pariah and the bankers’ back pocket. Ground that previous FRBNY presidents seemed to find spacious enough to live in comfortably. Quit with the false dichotomies.

  24. slappy,

    if you can’t tell the difference between O’Neill and Snow, it says enough, all by itself.

  25. slappy says:

    I’m glad you guys have it all figured out. I sure wish you all worked at Treasury, since we’d all be in clover if you did.

  26. DoctoRx says:

    Volcker as a placeholder. But Summers would have to go as well. Carter only brought in Volcker after the US had been forced to issue bonds not denominated in USD and the money-printing had gotten truly wild and crazy.

    Geithner is the bad penny. Everything he’s been associated w has been a disaster. His tax fiddling is of a piece w the powers who have moved him up the chain.

    To set things right w Big Finance vs the people’s interest, BHO would have to renounce the Establishment that made him. Will he/can he/does he want to?