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Timmy's Telephone Travesty
Brian Snyder / Reuters
New revelations about Tim Geithner’s phone records show an appallingly small Wall Street circle. With a probe likely, Simon Johnson says the Treasury secretary needs a bailout—from Larry Summers.
Treasury Secretary Tim Geithner faces a major public-relations problem. His phone records and broader calendar, obtained by the Associated Press, indicate that most of his contacts with the financial sector in the first seven months of this year were in fact with just three mega-banks: Goldman Sachs, Citigroup, and J.P. Morgan Chase.
While such skewed access to a top policymaker would raise eyebrows at any time, this disclosure is particularly difficult for Geithner. He is known to have deep contacts with a small number of banks, partly from his time at the New York Fed (as reported by The New York Times in April) and partly from his mentor, Robert Rubin, formerly of Goldman and Citi.
Geithner himself has confronted this issue directly before, and always insists that his policies are intended to help the entire financial system and thus the whole economy. “I've been in public service all my life…” he told PBS in May. “And I would never do anything and be part of any policy that's designed to benefit some piece of our financial system. The only thing that we care about and the only obligation I have is try to make sure this financial system is doing a better job of meeting the needs of businesses and families across the country."
Such statements are hard to square with the fact that, in the height of the crisis, he actually talked primarily with only three big banks—not even representative of the entire field of large banks (e.g., Wells Fargo and Bank of America), let alone the small and medium-size banking sector that is now getting hammered.
In addition, while there are ordinarily many safeguards around officials’ private sector contacts, none of these function effectively during a financial crisis. For example, Henry Paulson, Jr., the previous Treasury secretary, was initially scrupulous about keeping his distance from Goldman Sachs, but as soon as the crisis broke in September 2008, he immediately obtained a waiver allowing him to talk early and often with his former employer.
In any crisis, policymakers need to get information direct from the markets and to understand fast-moving developments. But precisely because the exact issues are hard to comprehend and even basic facts are open to many interpretations, it’s an incredible advantage for any banker to have near exclusive access to a top official decision maker—they can shape world view at the very top (including in the Oval Office) and skew any rescue efforts massively in their own favor.
Presumably, there will now be a great deal of scrutiny—including congressional subpoenas—regarding actions of the Big Three that had the inside track to Secretary Geithner. Investigators will likely focus on follow-on phone calls and emails from the respective CEOs to managers of their trading desks and other people responsible for moving money around. Did any of these banks or individuals benefit in any measurable way (e.g., in terms of their stock price or the perceived risk of bankruptcy) from specific pieces of information gleaned or general tone inferred in exchanges with the secretary?
John Talks Joe
Lloyd Grove is editor at large for The Daily Beast. He is also a frequent contributor to New York magazine and was a contributing editor for Condé Nast Portfolio. He wrote a gossip column for the New York Daily News from 2003 to 2006. Prior to that, he wrote the Reliable Source column for the Washington Post, where he spent 23 years covering politics, the media, and other subjects.
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Jacob Bernstein is a senior reporter at The Daily Beast. Previously, he was a features writer at WWD and W Magazine. He has also written for New York magazine, Paper, and The Huffington Post.
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Jeff Madrick is a contributor to the New York Review of Books and a former economics columnist for the New York Times. He is editor of Challenge Magazine, visiting professor of humanities at Cooper Union, and senior fellow at the New School's Schwartz Center for Economic Policy Analysis. He is the author of Taking America, The End of Affluence (Random House) and The Case for Big Government.
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Simon Johnson is a professor at MIT’s Sloan School of Management, and a senior fellow at the Peterson Institute for International Economics.
Geithner's got to go. I'm disappointed that he was put there in the first place.
Awww, Embers, if only it were so easily fixed.
Take out Henry Paulson, they give us Geithner, take out Geithner, they will give us another.
This deal is rigged from the inside out, from the upside down, this symbiotic relationship between Goldman & Spincters, and the Treasury has now become structural, and integral to the very survival of the United States Government.
Stripped of the veils and curtains, the three ostensible branches of Government, are all subservient to this fourth "invisible" branch, which actually runs the show.
Does anyone honestly think that the NSI, the FBI, or the White House, under auspices of the Patriot Act, cannot, or even has not listened in, and taped the shenanigans between Lloyd, Jamie, Larry and Timmy-boy?
Or should that be Lloyd, Larry, & Moe, duh which way did he go?
One final question for you, the gentle reader: Would our National Security be better served with warrantless wiretaps executed against a small-timer who buys cosmetics and maybe cross-dresses with fancy fingernail polish, or by having our ever-vigilant watchdogs listen to the deals being cut by these big boys?
uhh, hockey-jockey, wouldn't that be the NSA?
Yes, Bot, and thank you for the correction.
Sometimes all the acronyms get confusing,
CIA, FBI, NSA, IRS, NASA, NCAA, NAACP,
NRA, IRA, PLO, UPS, ICR,...,,
hockey, you are always stirring the pile, and I watch the flies as they play musical chairs during your songs. Sometimes you are full of it, yourself, but I think this time you may have touched into something true.
We have a legislature that passes the laws, an executive branch to enforce the laws, and the judicial branch to rule on the constitutionality. But nobody seems to be in a position to monitor the pork, that brings home the bacon.
And Goldman brings home the bacon every time!
Why was Lehman Brothers ( NOT ) "Too Big to Fail," yet Goldman ( WAS ) "Too Big to Fail ?"
Could it be Lehman was a direct rival to Goldman, who had a relationship with Geithner ?
Seems like the whole economic system is " Fixed ? "
Lehman was allowed to fail because it was the second bank about to do so, but JP Morgan Chase wasn't willing to bail them out like it did for Bear Sterns. No doubt that these companies try to craft policy that would be favorable to them, like any smart structural entrepreneur, but they are not a 4th branch of government. The press is supposed to be the 4th branch, but they're just more interested in chasing butterflies.
hocky, in his famous book, "The Wall Street Jungle", Richard Ney had an opening story about how when Lucky Luciano, the famous Mobster, was being deported to Italy, someone brought him down to the floor of The New York Stock Exchange. When they explained to Lucky the role of the Specialists and how one became a Specialist, Lucky Luciano replied," A funny thing came over me. I suddenly realized I'd joined the wrong mob."
I agree. He has been a weakling from day one. He's been like a deer caught in the headlights. He's like a schoolboy who doesn't know what to do. I can't believe that he was President of the New York Federal Reserve Bank. That position must not take much in the way of brainpower.I felt that he should not have been appointed. He made announcements and then never delivered. He said he had a plan to end our economic plans; it was announced on a Tuesday...only problem was that it was just mindless rhetoric that did not include a plan. He needs to resign.The sooner the better. But as another writer concluded, Paulsen, Geighner, they resign and we'll just get another one equally as bad. Our nation depended on him and he dealt with only his three favorite banks where his chums hang out. This is a disgrace to him, to the Office of the Treasury, to Obama and is just another politician who has put self and buddies first and told us Americans to go fly a kite, screw off, or whatever you want to call it.
Peter Geithner, Timothy's Dad, was instrumental in Ford Foundation Grants to Sydney (Dunham,Obama) Soetoro (deceased) for Indonesian studies. Ms. Soetoro's son is Barry Soetoro (AKN Barack Hussein Obama). So, there is only (1) degree of separation between Geithner and Obama. Geithner is going "nowhere!" His appointment was a well-laid plan. Astounding, isn't it?
Tempest in a teacup Mr Johnson. Not much of a revelation that the people at the top actually talk to each other. You do us no service by pointing at reality and screeching that it must not be.
The people at the top do talk and therein lies the problem.
The government should not be meddling in business.
The temptation for the "people at the top" is to screw the "people on the bottom". (And it don't feel too good right now).
That's right. The government shouldn't be doing things like requiring major banks to keep appropriate amounts of reserve capital.
BRING ON THE ROARING 20'S. That decade sure ended well...
Because the Gilded Ages work so well for us?
Seems the government is more involved with the meddling of small business than large international (untouchable) corporations.
This is the problem. And corporations have no rights they have not stolen from actual living people. The advent of corporate person-hood is highhandedly the WORST thing that the US government has ever given to the rest of the world, (while organized religion is the worst thing the world ever gave to us back in the early days).
[The government should not be meddling in business. ]
The laws that the government enforces make business possible.
Geithner's a tool. Horrible pick. Get rid of him. Summers and Paulson too.
??? Get rid of Paulson?
Honestly, who else would you want advice from? Ken Lewis? Hush now, Simon J. He picked the smartest three.
three what?
Three Amigos.
All the Goldman Sachs creeps need to go:
Geitner, Summers.-out!! This type of crony-capitalism is going to lead to a worse melt-down later on.
Agreed.
What's all this incredulity!!??? It's hardly unusual for someone to check in with his bosses several times a day. George Patton
Exactly. What do they think all the town hall noise and tea partyies have been about, anyway?
Opportunities for libertarians to show off their arts and crafts skills?
"No Bob, that Hitler mustache is far too bushy!"
The town hall noise and the tea parties? They've been about really old fucks who already have a single-payer, government-run system that works incredibly well for them and they're afraid, no terrified (thanks to shameless Republican propaganda), that any attempt to let anyone else have the same sort of single-payer benefits they enjoy will adversely affect them.
I've got mine, they're saying, and screw the rest of you.
Patton you sir are hilarious.
I am still unsure of whether I believed in the bank bailout. how much effect it would have had to let these sleezy investment banks crumble, the monumental task of going through their books and figuring out how to deal with the thousands of customers these companies had.
I am also unsure of how to take the fact that Geitner has spoken with the heads of these mafia families more times than I have my wife. However, I think before we jump to conclusions, we should consider the fact that whether one approved of the bail outs or not, the government gave these thieves a huge chunk of change. One would assume that when you lend someone this much money you are going to call them from time to time ( or many more ) to check up on them, probably direct them and find out when they planned on repaying the loan etc. At this level, we are in territory quite a bit above the company credit manager.
In no way am I giving Geitner a pass, but the money has been spent so I am willing to give him a little sprinkling of " benefit of the doubt ".
The cat is out of the bag now, so let's see. If it turns out he was kissing ass and making sweet deals then throw him in jail, where these bank owners should have been long ago, and throw away the key. if it does go that route, Geitner does look like someone who is not ready to be gang raped in the prison showers and could very well sing like a bird and take down these snakes in one fell swoop.
Fact: The slippery folks at Goldman Sachs perpetrated an outrageous scam on the American taxpayers. Question: Is anyone gonna do anything about it?
In the days before the bailout there is no doubt that many in Washington were talking with the leaders on Wall Street in a effort to figure out a way to help avoid the banking melt down without intervention. Obviously is did not work but it was not for lack of trying on all parts. These guys could be out on the private sector making a ton of money. My question is the economy better today than one year ago?
Tim says is he only does things to protect the entire financial system, but behind the public statements is the REALITY that to him it is the Wall Street oligarchs who he is actually protecting. In China the bailout money was used to give the working citizens discounts and grants to BUY products that the various manufacturing sectors needed to sell to keep these same workers working. They turned their economy around by their policies that help all their citizens. Over here the Fed and Treasury was only looking out for the very few that control everything in our economy. The bailout money only allowed these oligarches to continue to line their own pockets at the expense of everyone else. Now that they have destroyed the Dollar as the worlds reserve currency taking care of the oligarch, Main Street will be facing huge inflation and the days of America as the lone superpower is drawing to a close. Before long the need to fund our deficient will require the disassembling of our military bases all over the world. China, Russia, and the oil producing countries will likely buy SDR bonds from the IMF instead of our Treasury Bonds and budget cuts will be required all over our country to keep the various levels of government going. I always believed the oligarchs would only milk the economy of everything they could get, but would not kill the cow. Now I believe the cow has been slaughtered and the resources to keep going in the same direction of the past have run dry. America will continue to be transformed into a third world country and like Great Britain our place as a former world power will not be accepted by many but it is coming and maybe faster than anyone could have ever believed possible. Obama just happened to be the next in line as this unfolded, but he actually is no different from Bush or Clinton. The same FED and the same group of oligarchs control the country no matter the political party, only the side social issues like abortion or gay rights and gun control separate the two. parties.
OR
the devaluing of the dollar means that we owe less than we borrowed which means we can pay off our debt sooner WHILE our goods become cheaper to consumers in other countires thus driving up demand and creating jobs.
I love it... We see the corruption... Nobody does anything about it. And then people wonder why Americans are against big government? Public options by the government? Please give me the public option so the Healthcare Geitner can talk to the CEO of Pfizer, Merck, Wellpoint etc...
aackc1, I see now we are on health care please explain the corruption as if there were not lobbyist in helping their clients on this issue everyday but so what the whole healthy care system is horrible now we have a chance to make it better and save a ton of money to boot.
Let's get rid of lobbyists,. Let's have term-limits & campaign finance reform. Then maybe I would trust the government and their choices.
aackc1: It would take a Constitutional amendment to get the kind of campaign finance reform. The current powers - Congress, corporations, and lobbyists - would all be against it (they might have to find honest work, what a shame).
A long, uphill battle. Probability of success? Zero.
They were just giving him his performance review
Me thinks Geitner was only picked instead of Summers in the first place because they didnt want to face the womens groups who would oppose Summers for his comments while at Harvard
Isn't summers the A-hole that repealed glass steagall act ???
Tim Geithner is a total lightweight. He reminds me of the Product Manager who was promoted because his bosses liked his earnestness and his style. However, on becoming Group Product Manager his lack of basic knowledge and managerial skills were seen to be glaringly absent.
His replacement should be Obama's priority, that is, after Afghanistan, Iraq, the economy, getting America back to work, getting our money back from the banks, and so on...but he should be replaced!
Please can someone get this country on a productive, manufacturing,grwong, businesses,jobs,moving again. We are going to fall behind every single day. In othe countries, we cannot even export american products, and here, all we have is from everywhere and all our jobs,and production,elsewhere. Just fix the economy and the rest will follow. Help,everyone,not just big guys, big industries, people are happy with crums, but people need to know they have light at the end of the tunnels.It can be done.
I'd say with a straight face that the black market may well be the closest thing to getting this country on a productive, manufacturing, grwong, businesses, jobs, moving again...
This Geithner story gets more sordid by the day. I still can't figure out why Obama made him Secretary of the Treasury when he failed to pay his own taxes. This guy is a joke. Obama should get rid of Geithner and Summers too. The only worthwhile guy in the bunch is Ben Bernecke
There is in this country something far more sinister than what is being reported here, folk. I am speaking mainly of the Central Banking system now in place In America. The Federal Reserve Board and these international bankers are responsible for our economy being as it is. Ever wonder why the Euro and the British pound is worth more than our dollar? Watch this. I learned a great deal.
http://video.google.com/videoplay?docid=-515319560256183936#
Why is everyone surprised? It was all over the news when Little Timmy was crowned Money King of the USA by Obama. His deep, deep connections to Wall Street have always been known. The only difference is that now we see by phone logs that Geithner has been legislation Wall Street according to the wishes of Wall Street. This is the "change" that Obama gave us. He changed Paulson's bald head for Timmy's curls. Same douche, different bag.
Jeffrey, what a great post!
'hockeydog
Yes, Bot, and thank you for the correction.
Sometimes all the acronyms get confusing,
CIA, FBI, NSA, IRS, NASA, NCAA, NAACP,
NRA, IRA, PLO, UPS, ICR,...,,"
Don't foret N.C.I.S.......they never get any respect....LOL.
flakes8, I know I'm walking into it, but have gotta ask,
"What is the N.C.I.S?"
If you are going to get rid of the people responsible for helping create the mess, you will have to remove Obama and most of the congress
http://www.pbs.org/moyers/journal/10092009/watch.html
and
http://www.youtube.com/watch?v=Rz1b__MdtHY
Obama should have gotten rid of them all, because he did not, it seems that hes involved with it as well.
too bad, cuz he had me at "hope" , now I see he is just another politician bamboozling us all.
Not another vote frome me.
OMG !! less then a year in and everyone wants someones head on a platter. And how much action and what had the BUSH admin done by its first year? "No child left behind" and a tax cut for that only helped 5% of the nation.
And look how well both of those programs turned out.
Every child got left behind (unless you were in a top 20% property tax school district) and the national debt doubled in 8 years.
Hey congrats REPUBs way to show fiscal conservation !!
(dems tax / reps spend) hey thanks guys !!
So much misinformation realy sucks.The tax cut covered everyone
British at birth =/= NBC.
Folks,
You miss the BIG picture. Peter Geithner (Tim's Dad) was responsible (Ford Foundation) for grants given to Barrack Obama's Mother (Sydney, Dunham,Obama Soetoro). So, Obama and Geithner have only (1) degree of personal separation. Geithner and Obama, making "music" together. Well-planned, and preordained. I even doubt the Larry Summers connection.
this is a real stretch. his mother was an East-West Center scholar in Honolulu.
Thank you.
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