wastrelism profiled, cronyism exposed, the evil personified, and a tax-cheat to boot
maybe time to add to the srs trade, by and by, before time to say bye bye
because we are led by no one, or by a nobody, but to the slaughter, so that others may benefit, very few others, call them the sponsors
portfolio.com
The Reeducation of Tim Geithner
by Gary Weiss May 2009 Issue
Growing up is hard to do—especially in public. After his disastrous start, the Treasury secretary is scrambling to learn on the job. But how long can we afford to wait?
In his worst moments, when the camera lights are ¬burning and the doubt, the contempt, in the Capitol Hill hearing rooms become palpable, Tim Geithner has a look in his eye—at once wary and alarmed, even as he speaks quickly, sometimes interrupting, sometimes repeating his talking points. It has become a look that he owns. It is his. It has made him famous in all the wrong ways. The Geithner Look.
Perhaps it’s the policy he is expounding—enough of an embrace of free markets and a disavowal of nationalization to alienate critics of Wall Street, but enough of a move toward “socialism” to infuriate the right. Perhaps Tim Geithner will be the Harry Truman of his generation, unappreciated by his contemporaries, awkward in public, but judged by history to have cured the nation’s economic ills and, in comic-book fashion, defeated the media bullies who kicked sand in his face. Perhaps all he needs is some TV coaching and a better haircut.
But just as this is no ordinary economic crisis, for Geithner this has been no ordinary public-relations challenge. He has gone into overdrive to counter all the atrocious press he initially received. After his disastrous public debut as Treasury secretary on February 10—when a speech billed as providing details of the bank bailout proved, at best, a broad outline—Geithner began learning to say the right things, to push back against the populist mob. He won immediate plaudits for a late-March appearance on Meet the Press. His announcement of a new financial regulatory framework caused the Dow Jones industrial average to jump nearly 500 points. And he wasn’t the bull’s-eye of the negative response to the restructuring plans for General Motors Corp. and Chrysler LLC, even though he oversaw the auto task force that created them.
When criticism was at a fever pitch, though, the constant undertone was one of surprise, even betrayal. It was unnerving that the most powerful domestic policy official in the Obama administration did not have anything approaching charisma, sometimes seemed to lack a sufficient grasp of finance, and at times came across as a soulless, unimaginative technocrat who seemed to be in thrall to the big banks. The whispers continue: Is Tim Geithner nothing more than Henry Paulson Lite, a creature of Wall Street but without the Goldman-Sachs-CEO financial chops?
That’s the central question that goes to the heart of Geithner’s recovery plan and its credibility. To answer it, you need an understanding of where he’s coming from. When I interviewed Geithner a year ago for a profile for this magazine, the longtime bureaucrat had been, thanks to his role as president of the New York Federal Reserve Board, present at every major meeting that dealt with the exploding crisis but was still largely unknown outside the world of finance. I found him to be insightful, intense, in command—not unfocused and scripted, as he so often seems now. He did not have the “eyes of a shoplifter”—to quote one of the less flattering reviews of his February speech—but rather a straight-in-the-eye gaze that would have satisfied John Wayne. He was considered by many to be the star of the Bear Stearns rescue, the man who saved Wall Street, but he was very clearly a man of Wall Street, with an array of advisers who spanned the length and breadth of the financial-services industry. Even though it was his moment in the limelight, he was still the protégé—and decidedly not the equal—of powerful members of the establishment.
At the time, some of the nation’s most prominent figures in government and finance—former Federal Reserve chairmen Paul Volcker and Alan Greenspan, as well as John Thain, then CEO of Merrill Lynch, and former New York Fed chief Gerald Corrigan—were only too happy to share fond anecdotes about this youthful public official on the rise.
When I approached them again for this article, to get a word in defense of their beleaguered friend, the reaction was far different. Greenspan was “working against a series of his own deadlines and sends his regrets,” a spokesperson told me. Volcker was “not granting interviews.” Corrigan also declined to comment on Geithner. “It’s just a little bit early in his tenure,” said a spokesperson. But Geithner would have an uphill battle against his critics even if every white male over 60 in Washington were to vouch for him. To succeed, Geithner must make the transition from loyal subordinate and hardworking bureaucrat to the imaginative, inspiring leader the times demand.
Some will never be convinced. Chris Whalen is editor of the newsletter Institutional Risk Analyst and a longtime Fed watcher. He is no fan of the Treasury secretary, believing that Geithner lacks a financial background and is in the pocket of Wall Street bankers. Whalen’s doubts began to build three years ago.
Whalen was in the audience when ¬Geithner, then president of the New York Fed, spoke at a conference on credit risk at New York University’s Stern School of Business in mid-2006. Geithner was still an ordinary bureaucrat, albeit one who had made an astonishing climb up the ladder of government service, rising through Treasury posts and the International Monetary Fund, encouraged and nurtured by elders like Henry Kissinger, his first employer after leaving Johns Hopkins; Corrigan, lately of Goldman Sachs; Pete Peterson of the Blackstone Group, who had recruited Geithner to the Fed; Lawrence Summers and Robert Rubin, two Clinton-era Treasury secretaries; and Volcker and Greenspan. These mentors were always available at the other end of the phone line, sometimes for several calls a day. But none of them were there at the conference at NYU. Geithner was the only guest onstage.
In the Q&A session that followed ¬Geithner’s speech, Whalen asked a question about a topic that remains pertinent today—the 2004 Basel II accords, which set new global bank-capital standards. Whalen pointed out that one of the objectives of Basel II “was to actually grind the particular risk exposures”—that is, to require lenders to compute the probability of their borrowers’ defaulting on loans. “But banks said, ‘Oh, no, this is too expensive. You can’t do that.’ It didn’t fit with the quant, credit-derivative worldview,” Whalen said. It didn’t happen.
“I said, ‘Tim, isn’t this backsliding?’?”
Geithner fixed Whalen with a vacant gaze and simply moved to another questioner, mumbling that he wasn’t prepared to answer the question.
Whalen was stunned. “It seemed to me that he had no idea what I was talking about,” he recalls. As for the look: “Think Bambi looking into the headlights on an 18-wheeler.”
There is something deeply disturbing about a Treasury secretary showing flop sweat in the middle of the worst economic crisis since Herbert Hoover was president. “Some people rise to the occasion, and some don’t,” says Peter Cohan, a management consultant and the author of You Can’t Order Change. “You really want somebody who’s confident, realistic, and coming up with better ideas and seeing the ideas work.”
For Geithner to fully revamp his image, he will have to break free of some personal history. The Geithner I profiled last year was very much a product of bureaucracy, a man who, as I described at the time, was born with a briefcase tucked under his arm. He hasn’t misplaced it.
For example, Geithner’s early public comments on the bailouts emphasized how immense, difficult, and complicated the crisis is. That’s certainly true. But how much reminding do we need? As former General Electric CEO Jack Welch wrote in his BusinessWeek column (without mentioning Geithner by name), the Obama administration broke a fundamental rule of leadership. “Your people know perfectly well how complicated the situation is,” Welch said. “They don’t need or want you to tell them. They need and want you to do your job by finding the solution, explaining it, and energizing everyone to execute it successfully.” Welch decried what he described as “CYA management”—cover-your-ass management—emphasizing the risk of failure in order to protect oneself.
Geithner’s many years in the bureaucracy have shaped him in other, less than flattering ways. Bill Seidman, former chairman of the Federal Deposit Insurance Corp., considers the Treasury secretary to be “a smart guy but a certified bureaucrat.” He speaks from firsthand experience. It was the late 1990s, Lawrence Summers was Treasury secretary, and Geithner, as the undersecretary for international affairs, was his loyal deputy. Summers gave a speech on Japan’s troubled banking system, a subject that Seidman, who then worked for Morgan Stanley, knew intimately from his frequent visits to the country. “It was essentially not relevant,” Seidman says of Summers’ speech. It showed “a lack of familiarity with what’s going on there.” Seidman, never a shrinking violet, said as much at the time when a reporter asked him in Japan for a comment—at which point he ran afoul of Geithner. According to Seidman, Geithner called him and said, “You’re a disloyal American. You can’t make statements like that on foreign soil about a secretary of the Treasury.”
Seidman, who was awarded the Bronze Star for his service in the U.S. Navy during World War II, wasn’t accustomed to having his loyalty questioned, certainly not by someone approximately 40 years his junior. “I said, ‘Where does it say that in the Constitution?’?” Seidman tells me.
That episode provides a peek into Geithner’s character and offers up clues to his behavior during the current crisis. Seidman hadn’t been confronted by ¬Geithner, the precocious junior official of his early years, or Geithner, the brilliant problem grasper he was reported to be as he matured at Treasury. Instead, he encountered Geithner, the government cog, who apparently served his mentor Summers with such unquestioning fealty that he was willing to upbraid a well-reputed private citizen for an offhand remark.
Seidman says he bears Geithner no ill will, but he has no illusions about what he witnessed. Geithner, he says, “was doing what his boss wanted, I assume. Everybody is a product of what they’ve done. I have high respect for bureaucrats, but that doesn’t mean they’re going to have the leadership quality needed when they get to be something like secretary of the Treasury—particularly now.”
Viewed through the lens of his bureaucratic background, Geithner’s behavior since coming to the Treasury—tentative, sometimes hesitant, always hedging with his comments, lacking in boldness and imagination—seems not only logical but inevitable.
Geithner’s scrupulous care not to promise too much, so as not to be seen as failing if the economic plan falls through, is not merely a reflection of “No Drama Obama.” It’s also a reflection of Geithner’s mind-set. “He’s been in bureaucracy all his life,” Seidman says, “and that’s the way they operate. You don’t get rewarded much for being right, but you take a hell of a beating if you’re wrong.” Still, one man’s bureaucrat is another man’s dedicated, lifelong servant of the commonweal, and that, presumably, is the Geithner who, one assumes, aced his interviews with President Obama.
The conventional wisdom when Obama selected Geithner for Treasury secretary was that even though he was firmly entrenched in the status quo, he was a good choice—“hardworking and smart,” as former comptroller of the currency Eugene Ludwig says. The euphoria was such that even a serious tax problem—Geithner’s never-satisfactorily-explained failure to pay self-employment taxes for four years—didn’t derail his nomination. So when he laid an egg as Obama’s economic point man, there was something approaching fury in the media and blogosphere. “It’s a tough job, so you’re going to take some heat,” Seidman says.
It would be wrong to blame all of ¬Geithner’s problems on a lack of speechifying talent. The substance of his bailout plan would have drawn grief even if a man with the stature of Warren Buffett had presented it, and his handling of the AIG bonuses scandal showed a tin ear to public sentiment. After a spasm of populist outrage, President Obama instructed Geithner to do everything he legally could to stop the bonuses. Geithner, the policy wonk, simply may not have the raw political instincts that the job requires to keep a restive public happy.
Even so, his constituency of one, the president, is firmly behind him (at last look). Geithner has been seeking to reclaim the narrative by writing an op-ed for the Wall Street Journal and granting a few carefully stage-managed interviews—so stage-managed, in fact, that a public-relations aide openly scribbled out talking points to Geithner in front of a National Public Radio producer during an interview at his office.
No matter how well rehearsed, Geithner strains to exude the confidence that comes with knowledge and experience. It’s old news to people familiar with ¬Geithner that he is not an economist and has no private-sector experience in finance, in contrast to pretty much every other Treasury secretary in recent years. For his critics, that says it all. “He may not be that comfortable with the subject matter,” Change author Cohan says. “I think that, in general, people who are good at math are more comfortable with talking about finance and thinking about financial policy and strategies. I think that if you’re going to come up with better strategies and better ideas, you need to have someone who’s a strategist, who understands how to come up with better policies.” Cohan says he’ll be “very surprised if Geithner comes up with any really new, insightful ideas on how to solve the financial problems.”
The question now—you might call it the $100 trillion question—is whether Geithner can shake off his bureaucratic past. He declined to be interviewed for this article, but a spokesperson emailed a statement saying that the Treasury secretary “has moved quickly and decisively. This crisis was years in the making, and it will take time to solve, but he is committed to doing whatever it takes to stabilize our financial system and repair our economy.”
To be fair, Geithner is in the hot seat, and most anyone in it would be toasted. “I don’t think the issue of leadership in a crisis can be reduced to a personality contest,” says Ludwig, now CEO of Promontory Interfinancial Network. Ludwig himself was at one time considered a candidate for the Treasury post. “We’re in too serious a situation to focus on the sideshow of personalities,” he says. He believes that it’s simply too soon to decide whether Geithner is doing a good job. “Let’s give him a chance,” he says.
Another person who tilts in that general direction is Michael Granoff, CEO of Pomona Capital, who is close to the Obama administration and was on the Treasury transition team during the Bush-Clinton handoff in 1992. “There are ways in which being Treasury secretary is like being president,” he says. “You get credit for good things that maybe you weren’t entirely responsible for, and you get blamed for bad things that you are also not necessarily responsible for. If you’re Treasury secretary and you’re the face of the economy, the same thing happens.”
Granoff argues that it’s not fair to blame Geithner for failing to respond unequivocally to an economic crisis that has no simple solution. “I think that people are in some ways projecting the fact that everybody’s uncomfortable—because nobody really knows the answer—onto an individual, which happens to be him,” he says. From this perspective, Geithner seems vague not because he’s adrift but because the crisis is so complex and murky. “The clarity that some people would like about what’s happening and about our answer to it is, in some ways, something that we just don’t have right now,” Granoff says.
Considering Geithner’s history of leaning on advisers and mentors, one can find a guide to his future actions not just in the John Thains and Gerald Corrigans he relied on at the New York Fed but also the people surrounding him in the Obama administration. Since Obama became president, the center of gravity at Treasury has shifted to policymakers from the Hamilton Project, a little-known think tank under the wing of the Brookings Institution that promotes growth-oriented economic policies. The group was founded in 2006 by its then director, Peter Orszag, who now heads the Office of Management and Budget. Other members of the group’s advisory board include Geithner’s old boss Robert Rubin, lately of Citigroup, and former deputy Treasury secretary Roger Altman, who presided at one of Geithner’s rare public appearances, a March 25 event at the Council on Foreign Relations. Alice Rivlin, founding director of the Congressional Budget Office, is also a member.
With such talent surrounding him, and with the administration beginning to fill all those vacant desks at Treasury, it’s more than remotely possible that ¬Geithner will turn out to be more of a Truman than a Paulson Lite. But for that to happen, he’ll need fresh ideas and a wider circle of acquaintances—and old habits die hard. In early March, as the hellish tornado of criticism was touching down, Geithner was reportedly spotted having lunch at the Four Seasons restaurant in Manhattan with his mentor Pete Peterson. One can only imagine what the two men talked about, but the scene at the end of the 1972 movie The Candidate comes to mind. Having reached the pinnacle of government service, climbing about as high as one can without actually being elected by anybody, Tim Geithner may now be asking, “What do I do now?” |
