Picking on Geithner

By Felix Salmon
April 27, 2009

The nut graf of the NYT’s massive Geithner article today is classic Gretchen Morgenson:

An examination of Mr. Geithner’s five years as president of the New York Fed, an era of unbridled and ultimately disastrous risk-taking by the financial industry, shows that he forged unusually close relationships with executives of Wall Street’s giant financial institutions.

Um, it’s the job of president of the New York Fed to be close to Wall Street. But more to the point, this kind of adversarial reporting, based largely on the results of a Freedom of Information Act request, has been instrumental in maximizing the hermeticism and paranoia of Treasury when it comes to relationships with Wall Street. Most worryingly, the perceived toxicity of anybody with Wall Street ties has made it much too difficult to hire senior Treasury staff. And while I don’t believe for a minute that Wall Streeters have any monopoly on solutions to today’s problems, I think it’s very silly to cut them out of the discussions altogether.

To be clear, I have no problem with the NYT’s FOIA request, or with the Fed with revealing Geithner’s diary. But just as UK intelligence “sexed up” a dossier on WMDs in Iraq, I think the NYT here is trying to squeeze altogether far too much scandal out of the inherently unremarkable fact that the president of the NY Fed met regularly with senior bankers. Indeed, as both Justin and Ryan have pointed out, the story could easily have been spun entirely the other way, as showing that Geithner was consistently (if insufficiently) ahead of the curve in terms of financial-sector regulation.

In short, there is no shortage of very good reasons why Tim Geithner should feel embattled right now. So let’s not add a bunch of bad reasons to the list — doing so does no good, and possibly a significant degree of harm.

7 comments

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I found the NYT article very useful. He clearly mentioned that people prior to Geithner NEVER needed such kind of pally-ness, so there should be no reason for this man – esp. if you are in a Govt. position with so much power. Why not just go the conventional way ?
And if he was sooo ahead of curve, why did we get into this mess. If he was real smart because he has so much access to Wall Street, why did he always bend rules in their favor ? Forget about past, even as recently as AIG, he was the one who removed the wording for bonus payment. And it was not discovered until Dodd was beaten down to death, then only he revealed. I think even without this article, any sane person can clearly see how partial Geithner is. For every thing, he does not have a good reason but scary comparisions – that if we dont do this, then it will be even worse, but he can never explain how is the present action going to help.. I am sad that you are unable to see things from common people’s perspective.

Posted by Gggup | Report as abusive

Next thing they’ll be saying is that Obama spent his entire time in the Senate cavorting with Senators… WHO CAN PASS OR NOT PASS HIS BUDGET!

Moderates of the world, unite.

Posted by VennData | Report as abusive

Yawn. The problem is, it’s NOT Geithner’s job to be pals with these guys. It’s his job to regulate the industry that it serves the interests of America as a whole.

The problem is, Geithner sure does want to guarantee bank debt. He just doesn’t want to constrain their behavior in any meaningful way.

If you think that’s great, go Geithner! Those who don’t have a right to express concern. After all, he’s spending our money in great gobs, along with Bernanke. So far, the people that has most benefited are NOT the ones who will be paying it back.

Posted by Tim Connor | Report as abusive

“Um, it’s the job of president of the New York Fed to be close to Wall Street.” since when?

By looking at Tim Geitner’s schedule, now I believe that Geitner’s statement that he did not know what was going on at the Fed (AIG).

There is a reason that so many people think he has been incompetent. I do not see any reason that he is capable or competent in doing anything. If he wanted to cheat, do not get caught. If he wanted to pay AIG bonuses, do not get caught. During Aisan crisis, what did he do so well?

Some are relaxed about him because market went up. Banks have enough capital? Does Geitner know what “Stress Testing” means” He is creating bubbles by manipulating. Creating bubbles, that was exact cause of problem we are having now.

THIS IS AMERICA. WE DO NOT NEED A PERSON WITH CONSISTENT INCOMPETENCY TO GOVERN DURING THIS CRITICAL PERIOD.

Posted by Chris Papalado | Report as abusive

still haven’t figured the Washington version of the “buddy system” out?
Pick up a copy of Atlas Shrugged…

Posted by Fred | Report as abusive

It sounded like a number of the meetings were “dinners” at the homes of people he regulated. These sound more like social events than business meetings. The charge against Geithner and all of these guys is cronyism, or to put it the Wilhem B. way, cognitive regulatory capture. I think Morgenstern’s reporting supports the cronyism charge and I think the extent of the social connections is deeply troubling.

Posted by maynardGkeynes | Report as abusive

Morgenson had to write the story that way. The main thrust of the article was for Rahm Emanuel to become aware that placing Tim Geithner in charge of the Treasury Department was like giving Al Capone the keys to all the banks in Chicago.

Posted by Hartley Lord | Report as abusive