Geithner’s Old Housemate Just Became A JPMorgan Executive


JPMorgan just hired back a top executive who let the Treasury secretary stay rent-free in his Washington townhouse. Philip Shenon on Geithner’s tight ties to the folks he’s meant to police.

The revolving door between Washington and Wall Street keeps spinning this summer.

And as it does, government ethics specialists tell The Daily Beast that Treasury Secretary Timothy Geithner will need to be more careful about his dealings with one of American’s most powerful banks.

The bank, JPMorgan Chase, has just rehired one of Geithner’s oldest and dearest friends, Daniel Zelikow, as a top executive, only a year after the Treasury secretary moved out of his rent-free accommodations in Zelikow’s $3.5 million Washington townhouse.

Geithner lived with Zelikow’s family in the six-bedroom house, which is next door to the residence of the ambassador of Monaco and not far from the home of Secretary of State Hillary Clinton, during most of his first eight months running the Treasury Department. At that time, Geithner was overseeing the bailout of several huge Wall Street banks, including JPMorgan, which received $25 billion in federal rescue funds from the TARP program.

Zelikow, a friend of Geithner’s since they were classmates at Dartmouth College in the early 1980s, begins work this month running JPMorgan’s new 12-member International Public Sector Group, which will develop foreign governments as clients.

Spokesmen for the Treasury Department and JPMorgan would not comment for The Daily Beast on how Zelikow’s return to the megabank might affect the Treasury secretary’s dealings with JPMorgan.

But government ethics specialists say under federal ethics rules, Geithner would have to limit his involvement in any JPMorgan project tied to his old friend, especially since Geithner recently took a gift worth many thousands of dollars in free rent from Zelikow.

Geithner did not, technically speaking, break any rules by accepting the free housing. He disclosed his living arrangement, ran it past the Treasury Department’s ethics officers—who approved it—and moved out of the house before his friend was hired back by JPMorgan. And the bank last December completed repayment of the government’s bailout money.

But as a political matter, the secretary continues to have some explaining to do. At a time of  populist anger over Washington’s bailout of big, resurgent banking institutions, Geithner has consistently fuelled the perception that he’s a clubby insider too cozy with Wall Street to police its excesses. After all, several of his closest aides at the Treasury Department are also veterans of the large Wall Street banks that the government was forced to rescue after the economic meltdown of 2008. Geithner raised eyebrows shortly after arriving at Treasury when he hired a newly departed Washington lobbyist for Goldman Sachs as his chief of staff.

Against that backdrop, the valuable freebie he took from the once and future JP Morgan exec raises questions about whether he’ll need to recuse himself anytime Treasury rules on issues of material interest to the bank that in any way involve Zelikow and his clients—or risk charges of favoritism.

Stephen Gillers, a law professor at New York University who is a specialist in government ethics and author of a leading textbook on legal ethics, described Geither’s original decision to move in with Zelikow last year as “just awful”—given the conflict-of-interest problems it seemed to create.

He tells The Daily Beast that Geithner now needs to avoid even the appearance of assisting JPMorgan in any way that suggested a “thank-you note” to Zelikow in exchange for last year’s free rent.

“He needs to be purer than Caesar’s wife—purer than Caesar’s whole family,” Gillers said of the Treasury secretary.

Zelikow’s current and former employers did plenty of business with the Treasury Department, where he worked as a deputy assistant secretary during the Clinton administration.

He joined JPMorgan for the first time in 1999, leaving in 2007 to join the quasi-governmental Inter-American Development Bank in Washington, which promotes the economies of Latin America and relies on the support from the United States government; as Treasury secretary, Geithner is a member of the development bank’s board of governors.

Last year, colleagues of Geithner and Zelikow denied there was any conflict of interest in the Treasury secretary accepting free rent in such a luxurious home, especially since Zelikow initially left JPMorgan long before Geithner moved in.

“Dan has been a close friend to Secretary Geithner since they met at college more than 25 years ago,” Andrew Williams, a Treasury Department spokesman, said last summer. “The ethics rules allow a federal employee to receive a gift from a personal friend.”

Geithner lived in Zelikow’s home during his long search for a permanent home in Washington for his wife and children. His family continued to live in New York, where Geithner ran the Federal Reserve Bank before joining the Obama administration, until the Geithners moved into a home in the Maryland suburbs last August.

Now, Zelikow is heading back to the bank, with one of his closest college pals in the job of Treasury secretary, making decisions on a hourly basis that influence the fate of JPMorgan and its megabank competitors.

In announcing Zelikow’s return in an Aug. 3 press release, JPMorgan quoted him as saying that “now is an excellent time to extend” the bank’s “historically strong capabilities to public sector clients around the world.” The release suggested that Zelikow’s responsibilities would focus on helping the bank find new business among the governments of developing countries.

Philip Shenon, a former investigative reporter at The New York Times, is the author of The Commission: The Uncensored History of the 9/11 Investigation.This article originally appeared at the Daily Beast and is republished here with permission.