Trouble Brewing

Was Geithner Wall Street's Crony?

Trouble ahead for Timothy Geithner? A long report today in The New York Times shows that, in his five years as president of the New York Fed, Geithner “forged unusually close relationships with executives of Wall Street’s giant financial institutions.” He dined in the corporate dining rooms or in the homes of bank executives, relying on them to assess the market's health. He was particularly close with the leadership at Citigroup and, when the bank's troubles started to arise, he was even approached to take over as its chief executive. In the spring 2007, "he lobbied behind the scenes for a plan that a government study said could lead banks to reduce the amount of capital they kept on hand"--a move the FDIC warned against but that executives at Citi and JP Morgan both pushed for. The standards were adopted, though have not yet taken effect.