GEITHNER’S REAL BOSSES KEEP CALLING
WALL STREET’S MOST INFLUENTIAL CEOs HAVE OBAMA’S TREASURY SECRETARY ON SPEED DIAL, AND IT PAYS.
by ROBERT SCHEER
from HUSTLER Magazine – January 2010
Then Timothy Geithner headed the Federal Reserve Bank of New York, he was very good at mealtime, particularly with the Wall Street fat cats he was supposed to be governing. The details of his endless private dining with the likes of Sanford Weill, Robert Rubin and other big bankers responsible for the economic meltdown only came out after President Obama named him Treasury Secretary—and in response to a Freedom of Information lawsuit.
“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,” the New York Times reported. “His actions, as a regulator and later a bailout king, often aligned with the industry’s interests and desires, according to interviews with financiers, regulators and analysts and a review of Federal Reserve records.”
You would have thought that the embarrassing disclosures of how tight this guy was with the banking bandits would have led him to change his social habits—and it has: Instead of private dining encounters, he now schmoozes the bankers during incessant phone calls. Of course, we only learned this when the Wall Street Journal and other news organizations forced the information public through another FOIA lawsuit.
Under the headline “Wall Street on Geithner’s Speed Dial,” the WSJ reported that “Geithner has kept frequent contact with an exclusive group of Wall Street executives since taking the helm at Treasury, speaking most often with top officials from Goldman Sachs Group Inc., J.P. Morgan Chase Co., CitiGroup Inc. and BlackRock Inc.” And, in fact, he logged far more time talking with Lloyd Blankfein, the CEO of Sachs, than he did with Barney Frank and Chris Dodd, the two leaders of Congress to whom he was supposed to be reporting.
The bigger concern is not the frequency of Geithner’s calls, however, but which end of the call is setting the tone. Representative Brad Sherman (D-California), who has been pushing for tougher regulation of financial institutions, complained: “I don’t mind that he’s talking to Wall Street. The problem is that he appears to be listening.”
Blankfein’s Goldman Sachs bears as much responsibility for the banking meltdown as any other firm and was one of the main beneficiaries of the government’s subsequent heaving of trillions into the gullets of culpable financial institutions that had gambled themselves to the brink of bankruptcy.
Remember, it was former Goldman head Robert Rubin who, as treasury secretary in the Clinton Administration, had pushed through the radical deregulation that allowed Wall Street to spin out of control. And it was another Goldman honcho, Henry Paulson, who served as treasury secretary to George W. Bush and ignored the ballooning problem, then led the government bailout that saved the very companies, like Goldman, that deserved to fail.
Thanks to Paulson, Goldman was allowed to reconstitute itself as a commercial bank and therefore became eligible for $10 billion in TARP bailout funds, as well as massive additional support from the Treasury Department and the Federal Reserve. But the daisy chain doesn’t end there.
After leaving the government, Rubin became a top leader of Citigroup, a company allowed to grow too big to fail by the deregulation he had pushed through. He made over $100 million looking the other way while Citigroup sank close to the point of oblivion. It was prevented from total collapse when Geithner, a Rubin protégé in the Treasury Department who had become New York Fed chairman thanks to Rubin’s influence—joined Paulson in bailing out Citigroup. The bank was given $45 billion outright and a federal guarantee for $300 billion of its toxic assets.
Treasury Secretary Geithner, who took office in January 2009, had frequent phone conversations with the leaders of Citigroup, which might be acceptable if he had gained some concessions on its part. Instead, Citigroup was actively lobbying against any serious efforts to rein in this and other highflying banks. Even though we taxpayers are supposed to own 34% of Citigroup, there is no evidence that this has translated into making the bank’s policies more transparent or accountable.
In contrast, Geithner did not care to hear from the executives of the auto companies that were being saved, at far lower cost, from disaster. As the Wall Street Journal reported, “Mr. Geithner appears to have had no contact with officials at General Motors Co. and just one call with a Chrysler Group LLC official.” Apparently the grittier types in Detroit don’t rate solicitous calls from Wall Street CEOs’ obedient lackey, Obama appointee Timothy Geithner.
Before serving 30 years as a columnist for the Los Angeles Times, Robert Scheer spent the late 1960s as Vietnam correspondent, managing editor and editor in chief of Ramparts magazine. Now editor of TruthDig.com, Scheer has written such hard-hitting books as The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America and his latest, The Great American Stick-Up: Greedy Bankers and the Politicians Who Love Them.
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