The Stash

Explaining Geithner's Call Log

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Simon Johnson raises a fair question in response to this AP scoop about the bankers Tim Geithner was in touch with early in the Obama administration. Here's the AP:

The calendars, obtained by the AP under the Freedom of Information Act, offer a behind-the-scenes glimpse at the continued influence of three companies -- Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc. ...

In the first seven months of Geithner's tenure, his calendars reflect at least 80 contacts with Blankfein [of Goldman], Dimon [of JP Morgan], Citigroup Chairman Richard Parsons or Citigroup CEO Vikram Pandit. ...

Treasury has a huge financial stake in North Carolina-based Bank of America Corp., but CEO Ken Lewis appears on Geithner's calendars only three times. Morgan Stanley CEO John Mack also appears three times.

And here's Johnson:

The list of phone calls is not the largest banks, because some of the biggest are hardly represented (e.g., Wells Fargo), it’s not the most troubled banks (e.g., Bank of America had little contact), and it’s not even investment banker-types who were central to the most stressed markets (Morgan Stanley was not in the inner loop). And small and medium-sized banks (and others) always bristle at the suggestion that their interests are in alignment with those of, say, Goldman Sachs.

Geithner’s phone calls were primarily to and from people he knew well already--who had cultivated a relationship with him over the years, shared nonprofit board memberships, and participated in the same social activities. These are close professional colleagues and in some cases, presumably, friends.

Now it's hardly surprising that, in a crisis, you'd end up talkng a lot to knowledgeable people with whom you already had relationships. But Johnson is right that you have to worry about the subtle influence they exert on a policymaker, even if they're not explicitly doing any special pleading. (I mulled over the issue in the context of Geithner's predecessor here.)

On the other hand, as Felix Salmon points out, it's not as though Geithner didn't try to get in touch with some of these other executives. Like John Mack. Take this scene from Andrew Ross Sorkin's forthcoming book (via Salmon):

Mack was on the phone with Mitsubishi’s chief executive, Nobuo Kuroyanagi, and a translator trying to nail down the letter of intent. His assistant interrupted him, whispering, “Tim Geithner is on the phonehe has to talk to you.”

Cupping the receiver, Mack said, “Tell him I can’t speak now. I’ll call him back.”

Five minutes later, Paulson called. “I can’t. I’m on with the Japanese. I’ll call him when I’m off,” he told his assistant.

Two minutes later, Geithner was back on the line. “He says he has to talk to you and it’s important,” Mack’s assistant reported helplessly.

Mack was minutes away from reaching an agreement. He looked at Ji-Yeun Lee, who was standing in his office helping with the deal, and told her, “Cover your ears.”

“Tell him to get fucked,” Mack said of Geithner. “I’m trying to save my firm.”

I'd guess the rapport between Geithner and Ken Lewis may not have been so great either, given that Lewis felt the government had basically forced Merrill Lynch on his company, and Geithner was part of that government team.  

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