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Why Does the Media Ignore Timothy Geithner's Disastrous Leadership of the NY Fed?

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Geithner is not a financial expert, but that was no bar to making him the head of the NY Fed or Treasury.  The bankers and their political allies put the Geithners of the world in positions of increasing power not despite their weaknesses and failures but because of their willingness to aid the bankers even when doing so will betray their office.  Geithner "has been a public servant" as long as one recalls that in this world this means being made a millionaire to lead a mostly private bank (the NY Fed), owned and run by and for the big banks, into its worst supervisory failures in its history at the (massive) expense of the public -- which the bankers and the NYT term as being a "servant" of the "public."  Ryan Grim has a nice piece emphasizing that Geithner, as Treasury Secretary, issued the insipid regulation that was weakened to the point that it would please the private equity industry.

Geithner was a Republican who switched to an independent as a fig leaf to ease Obama's appointment of him as Treasury Secretary, but firms like Warburg Pincus care little about party.  They largely backed Obama in 2008 and largely backed Mitt Romney in 2012.  What they want from Geithner, as even the NYT admits, is someone who excites wealthy foreign investors about the prospect of using his political connections on their behalf.

But something else intrigued me as soon as I heard that Geithner was cashing in at Warburg Pincus -- I remembered that I had debated a former leader of that firm about Geithner. (Details are here, here, here and here.)  "Bo" Cutter was enraged that folks like me were criticizing Treasury Secretary Geithner and Obama's decision to promote him.

Warburg Pincus has had Geithner's back for at least four years.  The revolving door is powered by reciprocity, and Geithner had had Wall Street's back for a decade.  Transparency International decries corruption through crude bribes in developing nations, but the "perfectly legal" corruption of "advanced" nations like the U.S. differs largely in mode.  Warburg Pincus was patient, but its leadership also recognized that it is never too early to begin sucking up to those in power, particularly if others are criticizing a senior government official for being too subservient to the elite bankers.

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William K Black , J.D., Ph.D. is Associate Professor of Law and Economics at the University of Missouri-Kansas City. Bill Black has testified before the Senate Agricultural Committee on the regulation of financial derivatives and House (more...)

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