Category Archives: A little about Giethner
This is from the New York Times. It is an older article but there is so much in here that 20/20 hindsight can show us, it leaves me speechless on how much corruption there is in our financial sector.
Timothy F. Geithner
Updated: July 1, 2011
Timothy F. Geithner is the secretary of the Treasury. Mr. Geithner’s previous posts as president and chief executive of the Federal Reserve Bank of New York put him at the heart of the global economic crisis as it unfolded in 2008.
After taking office in January 2009, Mr. Geithner played a central role in developing the Obama administration’s policies on stemming foreclosures and stabilizing the banking system. In both areas he has favored a market-oriented, public-private approach. But at least initially, his policies received mixed reviews from financiers, politicians and the public. Together with stumbles over the presentation of his ideas and over the handling of bonuses paid by A.I.G., the insurance giant that essentially became a ward of the federal government, Mr. Geithner repeatedly found himself on the defensive.
He sought to steer a middle course between demands by liberals that the government take over banks they saw as essentially insolvent, and by conservatives angry over the $700 billion financial bailout passed under President George W. Bush. With the Federal Reserve, he pushed for “stress tests” that were tougher than those given to European banks, but moved quickly to shore up Citigroup and the Bank of America with billions in of aid that came with no strings attached.
As the nation’s big banks returned to profitability in 2009 — from the brink of death the year before — Mr. Geithner drew praise from the financial markets. And he gradually became one of Mr. Obama’s closest and most trusted counselors, attending his daily briefings and coordinating the White House’s strategy on crucial issues like financial reform and pressuring China on its currency.
Mr. Geithner’s influence within the administration grew as other senior advisers left, including some with whom he had clashed. By the summer of 2011, he was perhaps now at the peak of his power, urging along the president’s gradual embrace of deficit reduction and heading the administration’s focus on foreign trade as an opportunity to accelerate growth at home.
Equally important is the credibility he enjoys on Wall Street, where he worked as president of the Federal Reserve Bank of New York before joining the Obama administration. Mr. Geithner is seen as deeply knowledgeable about the intricacies of modern finance and protective of the system’s health.
In late June, Mr. Geithner denied rumors that he was preparing to leave office. Administration officials said that he would remain at least while the struggle with Republicans over lifting the federal debt limit played out. In May, Mr. Geithner told Congress that the Treasury could juggle the nation’s interest payments only until Aug. 2.
Born on Aug. 18, 1961, in New York, Mr. Geithner was raised in the United States, Asia and Africa — his father worked in government as an international development official before working at the Ford Foundation. A graduate of Dartmouth College and Johns Hopkins, where he received a master’s degree in international economics and East Asian studies, Mr. Geithner joined the Treasury Department as a career staff official in 1988.
There he rose from a lower-level civil servant at the department at the end of Ronald Reagan’s presidency to under secretary for international affairs under President Bill Clinton, then was a director of the International Monetary Fund before becoming president of the New York Fed in late 2003.
As the credit crisis erupted in 2007, Mr. Geithner found himself at the center of the effort to coordinate a response, the junior partner with then Treasury Secretary Henry M. Paulson Jr. and Ben S. Bernanke, chairman of the Federal Reserve. Together, they scrambled to save Bear Stearns, American International Group and Citigroup, while letting Lehman Brothers fail.
When news leaked in November 2008 that President-elect Obama had chosen Mr. Geithner to be his Treasury secretary stocks jumped 300 points. But a confirmation process that initially looked straightforward was dogged by the revelation that he had failed to pay tens of thousands of dollars in federal taxes when he was a senior official at the International Monetary Fund. He also faced questions about the immigration status of a former household employee.
The flap was a major embarrassment for the man chosen to lead the department that oversees the Internal Revenue Service. Members of the Senate by and large, however, accepted his explanation that the mistake was common among I.M.F. employees, and several made clear they regarded him as an indispensible man. He took office on Jan. 26, 2009.
The Rescue Plan
When it came to fashioning the Obama administration’s plan to bail out the nation’s banks Mr. Geithner found himself pitted in a spirited internal debate against some of the president’s top political hands. However, he largely prevailed in opposing tougher conditions on financial institutions that were sought by presidential aides, including David Axelrod, a senior adviser to the president.
On Feb. 10, 2009, Mr. Geither gave an overview of the plan’s rough outlines. It called for the creation of a joint Treasury and Federal Reserve program, at a cost of $250 billion to $500 billion, to encourage investors to acquire soured mortgage-related assets from banks.
A second component of the plan proposed to broadly expand, to $500 billion to $1 trillion, an existing $200 billion program run by the Federal Reserve to try to unfreeze the market for commercial, student, auto and credit card loans. A third component involved a review of the capital levels of all banks, including projections of future losses, to determine how much additional capital each bank should receive. The capital injections would come out of the remaining $350 billion in the Troubled Asset Relief Program, or TARP.
However, both Wall Street and Congressional lawmakers criticized the plan, saying it was too vague and lacked significant details. On the day of its release, the Dow Jones industrial average plunged nearly 5 percent, reflecting widespread disappointment in its substance and sketchiness.
In mid-March 2009, Mr. Geithner came under fire with questions about why he did not know sooner about the American International Group’s bonuses of $165 million to hundreds of employees, including the same people who had helped drive the company and the economy into distress.
The bonuses stirred intense public outrage, and critics began questioning Mr. Geithner’s credibility as the administration’s point man on the economy, an essential commodity if he is to help restore consumer confidence.
His once-heralded credentials with Wall Street had already been marred by the reaction to his bank rescue program, even as his perceived closeness to financiers and unease with populist politics left Main Street skeptical. He was even lampooned on “Saturday Night Live.”
Public-Private Investment and Regulatory Reform
In March 2009, Mr. Geithner laid out a detailed version of his rescue plan, which had as its centerpiece an attempt to draw private investors into partnership with a new federal entity that could eventually buy up to $1 trillion in troubled assets that are weighing down banks and clogging up the credit markets. Initially, a new Public-Private Investment Program would provide financing for $500 billion in purchasing power to buy those troubled or toxic assets — which the government refers to more diplomatically as legacy assets — with the potential of expanding later to as much as $1 trillion. The reaction was widely positive, giving Mr. Geithner a much-needed boost.
Mr. Geithner vowed that the administration would impose tougher regulations on the freewheeling market for derivatives like credit-default swaps, which insure investors from losses on bond defaults. He told lawmakers that the plan would require that all “standardized” instruments be traded on a regulated exchange or through a central clearinghouse. Participants would have to disclose more information about their transactions, and they would have to meet strict new capital requirements.
But the Treasury secretary shed no new light on how the government would define “standardized” instruments. The Treasury secretary said he wanted to leave many of the details to the actual regulators, rather than spell them out in legislation, warning that an overly specific law could give market participants opportunities to evade the rules.
Financial regulators went to Congress to object to major portions of President Obama’s plan to overhaul financial industry rules. The dissident regulators — senior officials at the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency — told the Senate banking committee that the new consumer protection agency the president proposes to transfer some of their authority to would never be as effective as they have been.
But instead of modifying or withdrawing the plan, Mr. Geithner warned the regulators that they are partly responsible for the economic crisis and that their public objections play into the hands of industry groups that seek to kill the plan.
In November 2009, Senator Christopher J. Dodd, chairman of the Senate banking committee, proposed a financial overhaul that included consolidating bank regulators, creating a consumer financial protection agency and imposing new restraints on exotic financial instruments and credit rating agencies.
The widely unpopular $700 billion bailout program remained in place until October 2010 to help troubled community banks, small businesses and troubled homeowners and to respond in case of another financial crisis. Mr. Geithner cited continuing weaknesses in the financial system and the economy to justify extending the program.
In 2009 the Congressional Oversight Panel concluded in a year-end report that, despite flaws and lingering problems, the TARP program could be “credited with stopping an economic panic.” However the independent panel again criticized the Treasury Department under Secretary Geithner for “failure to articulate clear goals or to provide specific measures of success for the program.”
The Congressional Budget Office has estimated that taxpayers will lose $25 billion on the rescue of banks, other financial institutions and automakers that came in at the peak of the crisis. In January 2011, Mr. Geithner said that the bailout would end up costing taxpayers less than Congressional analysts had estimated, though he did not provide another estimate.
Since the peak of the financial crisis, Mr. Geithner has spoken often on relations between the U.S. and China, arguing that China should reduce the government’s control of the economy, lower barriers to imports from the United States, crack down on the pilfering of American technology and stop holding down the value of its currency. He has outlined two main objectives: expanding opportunities for American companies to sell to the Chinese, and shifting the emphasis in China from exports to domestic consumption and investment as the basis for the nation’s growth.
In 2010 Mr. Geithner became President Obama’s point man in opposing the extension of the Bush-era tax cuts for the wealthy after their Dec. 31 expiration, citing the projected $700 billion, 10-year cost of the tax cuts, and nonpartisan analyses that they do not stimulate the economy. President Obama eventually settled on a compromise package that extended the lowered rates for two years while extending jobless benefits for the long-term unemployed.