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Geithner, as Member and Overseer, Forged Ties to Finance

Published: April 26, 2009 COMMENTS (39)

Last June, with a financial hurricane gathering force, Treasury Secretary SIGN IN TO E-MAIL

Henry M. Paulson Jr. convened the nation’s economic stewards for a PRINT

brainstorming session. What emergency powers might the government want SINGLE PAGE

at its disposal to confront the crisis? he asked. REPRINTS

Enlarge This Image Timothy F. Geithner, who as president of
the New York Federal Reserve Bank
oversaw many of the nation’s most
powerful financial institutions, stunned
the group with the audacity of his answer.
He proposed asking Congress to give the
president broad power to guarantee all the debt in the banking
system, according to two participants, including Michele Davis,
Librado Romero/The New York Times
Treasury Secretary Timothy F. then an assistant Treasury secretary.
Geithner in in his Manhattan office in
February 2007, when he was
president of the New York Federal The proposal quickly died amid protests that it was politically
Reserve Board.
untenable because it could put taxpayers on the hook for
trillions of dollars.
“People thought, ‘Wow, that’s kind of out there,’ ” said John C.
Dugan, the comptroller of the currency, who heard about the
idea afterward. Mr. Geithner says, “I don’t remember a serious
discussion on that proposal then.”

But in the 10 months since then, the government has in many

Document File: Geithner’s ways embraced his blue-sky prescription. Step by step, through
Calendar at the New York Fed an array of new programs, the Federal Reserve and Treasury
An examination of Timothy F. have assumed an unprecedented role in the banking system,
Geithner’s schedules from his using unprecedented amounts of taxpayer money, to try to save
time as president of the New the nation’s financiers from their own mistakes.
York Fed offers a rich account of
the people and forces that And more often than not, Mr. Geithner has been a leading
shaped his thinking and action. architect of those bailouts, the activist at the head of the pack. 09-04-27 15:04:42

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Geithner, as Member and Overseer, Forged Ties to Finance Club - Page 2

Share Observations on He was the federal regulator most willing to “push the
Geithner’s Calendar envelope,” said H. Rodgin Cohen, a prominent Wall Street
The Times is inviting readers to
lawyer who spoke frequently with Mr. Geithner.
comb through the calendars and
add remarks. Today, Mr. Geithner is Treasury secretary, and as he seeks to
rebuild the nation’s fractured financial system with more
taxpayer assistance and a regulatory overhaul, he finds himself a
locus of discontent.

Even as banks complain that the government has attached too

many intrusive strings to its financial assistance, a range of
critics — lawmakers, economists and even former Federal
Mr. Geithner’s World Reserve colleagues — say that the bailout Mr. Geithner has
played such a central role in fashioning is overly generous to the
Enlarge This Image
financial industry at taxpayer expense.

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.

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
Doug Mills/The New York Times
Reserve records.
PIONEER Since the financial crisis
broke, Mr. Geithner has been the
federal regulator most willing to “push In a pair of recent interviews and an exchange of e-mail
the envelope” to look for answers, said
H. Rodgin Cohen, a prominent Wall messages, Mr. Geithner defended his record, saying that from
Street lawyer.
very early on, he was “a consistently dark voice about the
potential risks ahead, and a principal source of initiatives
Readers' Comments
designed to make the system stronger” before the markets
Share your thoughts on this started to collapse.
Post a Comment » Mr. Geithner said his actions in the bailout were motivated
Read All Comments (39) »
solely by a desire to help businesses and consumers. But in a
financial crisis, he added, “the government has to take risk, and we are going to be doing things
which ultimately — in order to get the credit flowing again — are going to benefit the institutions
that are at the core of the problem.”

The New York Fed is, by custom and design, clubby and opaque. It is charged with curbing
banks’ risky impulses, yet its president is selected by and reports to a board dominated by the
chief executives of some of those same banks. Traditionally, the New York Fed president’s
intelligence-gathering role has involved routine consultation with financiers, though Mr.
Geithner’s recent predecessors generally did not meet with them unless senior aides were also
present, according to the bank’s former general counsel.

By those standards, Mr. Geithner’s reliance on bankers, hedge fund managers and others to
assess the market’s health — and provide guidance once it faltered — stood out.

His calendars from 2007 and 2008 show that those interactions were a mix of the professional and
the private.

He ate lunch with senior executives from Citigroup, Goldman Sachs and Morgan Stanley at the
Four Seasons restaurant or in their corporate dining rooms. He attended casual dinners at the
homes of executives like Jamie Dimon, a member of the New York Fed board and the chief of
JPMorgan Chase. 09-04-27 15:04:42

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Geithner, as Member and Overseer, Forged Ties to Finance Club - Page 3

Mr. Geithner was particularly close to executives of Citigroup, the largest bank under his
supervision. Robert E. Rubin, a senior Citi executive and a former Treasury secretary, was Mr.
Geithner’s mentor from his years in the Clinton administration, and the two kept in close touch in
New York.

Mr. Geithner met frequently with Sanford I. Weill, one of Citi’s largest individual shareholders
and its former chairman, serving on the board of a charity Mr. Weill led. As the bank was
entering a financial tailspin, Mr. Weill approached Mr. Geithner about taking over as Citi’s chief

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