Geithner served as the point man in the talks that led to the Federal Reserve's loan of $29 billion to assist J.P. Morgan Chase & Co. in its buyout of the assets of Bear Sterns. Whether or not the Fed did the right thing is reflected in the title of Weiss' profile of Geithner, "The Man Who Saved (or Got Suckered by) Wall Street."
That profile and profiles in other publications depict Geithner as extraordinary well-connected. His informal group of advisers includes E. Gerald Corrigan, a managing director of Goldman Sachs and a former New York Fed president; Treasury Secretary Henry Paulson; John Thain, the CEO of Merrill Lynch; and Paul Volcker, the former Fed chairman; and Peter Peterson, the former U.S. secretary of commerce.
Let's look at Geithner's Peter Peterson connection a little closer.
Peter Peterson was Chairman of the Council on Foreign Relations until retiring on June 30, 2007, after being named chairman emeritus. He is the Senior Chairman of the private equity firm, the Blackstone Group. In 2008, Peterson was ranked 149th on the "Forbes 400 Richest Americans" with a net worth of $2.8 Billion.
Investment banker Roger Altman left his position as a managing director of Shearson Lehman Brothers to join Peterson at Blackstone in 1987. In 1992, Altman left Blackstone to join the Clinton Administration as Deputy Treasury Secretary. After leaving politics, Altman founded investment banking and private equity firm, Evercore Partners.
A. James Memmott continued:
James "Jamie" L. Dimon, the CEO and chairman of J.P. Morgan Chase, is a Geithner ally and a member of the board of the New York Fed. This connection has raised some eyebrows, for it meant that in solving the Bear Stearns mess Geithner approved a $29 billion loan to a company run by a member of his board. But Geithner argued that J.P. Morgan met the Fed's criteria, as it was "a sound institution" that could pay back the money. Bear Stearns did not meet this test."
In March, Geithner was questioned by Congresswoman Maxine Waters about the appearance of conflict of interest by Goldman Sachs insiders:
"I am just asking the questions," Waters said, "because the talk is...that this small group of decision makers at the center of it is Goldman Sachs and that's what's causing a lot of the distrust, because people are thinking or believing that Goldman Sachs, because of the connections, have had a lot to do with the decisions that are being made."
During that questioning, Geithner denied that Goldman Sachs played a role in the failure of Lehman Brothers, apparently forgetting that the decision to let them fail came out of meetings of regulators and bankers led by Hank Paulson.
Geithner also retorted: "I think it's deeply unfair to the people who are part of these decisions to suggest that they were making judgments that in their view were not in the best interest of the American people." Someone in the audience, please find a transcript of William Poole's interview last week, email it to Geithner, and remind him about the difference between the fiduciary responsibility of a private firm and the responsibility of the US Government.
Goldman Sachs alumni do seem to hold a disproportionate number of top Government and Federal Reserve positions and positions with exceptional Government access, a fact noticed by the New York Times as well. Neel Kashkari, Reuben Jeffrey, Dan Jester, Steve Shafran, Edward C. Forst, Robert K. Steel, Stephen Friedman, Lloyd Blankfein, William Dudley, E. Gerald Corrigan, Gary Gensler, Mark Patterson, Josh Bolton, AIG's Liddy, are all Goldman Sachs alumni.
Neel Kashkari, who runs TARP, was a Vice President at Goldman Sachs in San Francisco. In July 2006, he was appointed "special assistant" to the US Treasury Secretary by Treasury Secretary Hank Paulson. In Summer, 2008, he was appointed assistant secretary for international economics. On October 6, 2008, Paulson promoted Kashkari to interim head of the new Office of Financial Stability. Overseen by the treasury secretary, he was in charge of creating and implementing the United States government's $700 billion financial stabilization program
Reuben Jeffrey, worked for Goldman Sachs from 1983-1997, was Managing Partner of Goldman Sachs's European Financial Institutions Group, London, 1992, and Managing Partner of the Goldman Sachs, Paris, 1997. In 2008, he was appointed interim chief investment officer in the $700 billion financial rescue plan. Jeffrey is currently the Under Secretary of State for economic affairs, advises the Secretary of State on international economic policy, and he is the State Department's Coordinator for International Energy Affairs.
Do you suppose it would have helped a high rolling investment banking house such as Goldman Sachs to know in advance precisely where $700 billion was going? Tsk, tsk, Geithner would say. How deeply unfair it would be to the people who are part of these decisions to suggest that they would tell anyone in advance what they were planning. That would be selfish and not in the best interest of the American people.