Geithner anecdote of the day

By Felix Salmon
April 22, 2009

Gary Weiss thinks this story, from Bill Seidman, says a lot about Tim Geithner, and I do too:

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…

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.

It’s true that Geithner is a bureaucrat to his toenails — Weiss’s phrase is that he “was born with a briefcase tucked under his arm”. He’s excellent at navigating labyrinthine institutions, be they Treasury or the IMF, and at mastering a brief given to him by a superior. Would Geithner have upbraided Seidner had a less thin-skinned Treasury secretary been in place? I doubt it. And I’m sure that Geithner felt free to disagree with Summers privately — Summers loves participating in internal debate. It wasn’t the substance of Seidman’s dissent that Geithner had a problem with, just the fact that Summers was undoubtedly upset about it.

I remember Geithner when he was at the IMF, selling the sovereign-bankruptcy policies of his then-superior Anne Krueger, and not giving the slightest hint that he might disagree with them (despite the fact that I’m pretty sure he personally thought they were nonsense). In other words, Geithner is a good and loyal deputy — in ways which might leave him a bit lost for direction when he himself is the man in charge.

I part ways with Weiss’s profile here, however:

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.”

I think that Geithner is comfortable with the subject matter: he’s always been excellent when it comes to being on top of his brief. He just doesn’t know what to do with the subject matter once he masters it, since there’s no one giving him clear direction. So he hedges, in that way he has, instilling zero confidence in the market.
It’s not Geithner’s job to “come up with really new, insightful ideas on how to solve financial problems”. But it is Geithner’s job to source those ideas elsewhere, to pick the best ones, and to implement them. Does he have the self-confidence to be able to determine which ideas are the best, and then to stick to them through lots of criticism? He hasn’t shown it yet, but he must.

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