AFTERLIVES NOVEMBER 17, 2013
Three years ago, while interviewing him for a magazine profile, I asked Tim Geithner if the economy would be better off with a smaller financial sector. “I don’t have any enthusiasm … for trying to shrink the relative importance of the financial system in our economy as a test of reform, because we have to think about the fact that we operate in the broader world,” Geithner responded. “It’s the same thing for Microsoft or anything else. We want U.S. firms to benefit from that.” Basically, Geithner was arguing that finance is as central to the country’s global economic power as Silicon Valley or car manufacturing.
Well, it turns out this wasn’t just idle talk. Geithner will be walking the walk beginning March 1, when he goes to work as president and managing director of the private equity firm Warburg Pincus. According to The Wall Street Journal, Geithner’s job will consist of “mapping the firm's strategy and management, investor relations and … matters related to the firm's investments.”
Ever since it became clear that Geithner would not be sticking around as Treasury Secretary during Barack Obama’s second term, there has been a persistent, if low-grade, chatter suggesting he might prolong his 25-year hiatus from the private sector—maybe by accepting a job running a large, prestigious NGO or university. (Geithner last worked at a for-profit concern just out of grad school in the late 1980s, serving as a researcher at Kissinger Associates.)
Geithner himself has encouraged this speculation at times, wearing his long, continuous tenure in public service as a badge of honor. At a weekend retreat for House Democrats in early 2009, Geithner, who was dogged by an apocryphal tour at Goldman Sachs, blurted out unprompted that, “I never worked for Goldman. I never worked on Wall Street. I don’t come from money.” After leaving the administration early this year, he conducted a series of unpaid seminars at top universities to help academics and students better understand the response to the financial crisis.
Obviously Geithner’s new career path doesn’t quite jibe with this noble self-image. But it’s a safe bet that, in Geithner’s mind, it’s hardly as tacky as it looks to the uninitiated.
Geithner has always had reservations about taking a job at the kind of large financial firm he regulated as president of the New York Fed between 2003 and 2008, and which he interacted with daily as Treasury Secretary. In November of 2007, Sandy Weill, the former chairman of Citigroup, approached Geithner about the possibility of leading the struggling megabank. Geithner was tempted, but dismissed the idea partly because he worried about the conflict it would present. In a similar vein, Geithner has often expressed contempt for ex-bureaucrats who accept cushy private sector sinecures with minimal demands on their intellect. He’s been especially harsh toward those who serve their new employers by trading on their relationships with government officials.
The beauty of the Warburg Pincus job is that Geithner can tell himself he hasn’t abandoned any of these principles. Private equity firms are loosely regulated entities, and Geithner probably wasn’t in a position to benefit or hurt the firm directly. According to the media coverage of Geithner’s new gig, he’s likely to have a relatively hefty portfolio as these things go. "When they approached me, they clearly wanted me to play a substantive role in helping them manage the firm," he told the Journal. “[Warburg is] culturally very compatible with what I was looking for."
The reality, of course, is quite a bit different. In the same way that Geithner’s defense of the entire financial sector crumbles when you apply a bit of pressure (unlike Wall Street, Silicon Valley and Detroit aren’t a constant threat to vaporize the economy), his personal rules for private-sector fulfillment look a bit suspect in practice. While Geithner may have never directly controlled the fate of Warburg Pincus, it is nonetheless a highly-leveraged financial entity that benefited massively from the system-wide bailout Geithner engineered in 2008 and 2009. These benefits were far out of proportion to what the average non-financial firm received, to say nothing of the average taxpayer.
And while Geithner may take comfort in his new employers’ assurances about his meaningful role at the firm, it’s hard to believe someone like Geithner, with no investment or private-sector experience, would be worth the millions he will surely earn each year if he didn’t also turn heads at the highest levels of government. (Title aside, Geithner’s job sounds like the gig his illustrious predecessor and mentor, Bob Rubin, secured for himself at Citigroup, where the entire rationale was head-turning.) A handful of private equity honchos told The Times they assumed Geithner would serve as a “a prominent name who would help Warburg Pincus open doors on the fund-raising side, especially with foreign investors like sovereign wealth funds.” Indeed, while private-equity executives love to talk about their industry as though it were the purest form of meritocracy, it’s long given off the stench of “access capitalism,” wherein former government officials land lucrative deals by virtue of their insider knowledge.
All of which is to say, the next phase of Geithner’s career sounds a lot like what preceded it. Geithner has never been a crass operator. There’s always been some semblance of a code discernible in his calculations. It’s just that, when you finally unearth the moral distinctions he has in mind, they’re so fine that even a smart outsider would struggle to identify them. They don’t testify to his purity so much as his obliviousness: Anyone who thinks such distinctions get him off the hook must be of touch.
Let’s be clear what’s going on here: Geithner’s choice of post-government career isn’t shameful—there are plenty of upstanding, well-intentioned people who work in finance. And it’s obviously perfectly legal. What it is, to be blunt, is corrosive. There are any number of organizations that could benefit from Geithner’s managerial talents and A-list Rolodex. If you didn’t know how the world worked, you’d have no reason to assume that a large, profitable financial firm had a special claim on these assets.
But, of course, we all do know how the world works. It’s hard to come up with a senior economic official who didn’t cash out in the financial sector shortly after leaving government. Every time another one does, it every-so-slightly reinforces our conviction that the game really is rigged. Geithner, with his unusually prominent role and his pretensions to lifelong service, has reinforced that conviction a bit more than most.
Noam Scheiber is a senior editor at The New Republic. Follow @noamscheiber