Even before the tax and housekeeper scandals, the one knock on Geithner was that he was at the New York Fed during the period when Wall Street levered up, and that he apparently was unfazed by it. This was known and wasn’t expected to be a problem. But the fresh revelations may give this issue new life.
Obama’s enemies may find it hard to derail a nomination of this significance over what may be some minor issue, but if they can sieze on something, it might be worth raising a fuss.
With Citigroup teetering precariously again, Politico asks about Geithner’s role in supervising Citi during the years that the bank tied its own noose:
When Geithner was named president of the New York Fed five years ago, he was youthful but experienced. As undersecretary of Treasury in the late 1990’s and later, at the International Monetary Fund, he was no stranger to problems in global credit markets.
Rubin, his former boss at Treasury, described Geithner to The New York Times in 2007 as someone with a “calm way” no matter the circumstance. Rubin, a senior counselor and director at Citigroup after leaving Treasury, called Geithner “elbow-less,” referring to his widely recognised collaborative skills and easy manner.
Geithner inherited two Citigroup enforcement matters.
One, stemming from examinations in 2001 and 2002, involved allegations that Citigroup’s consumer finance subsidiary converted personal loans into home equity loans without properly assessing credit risk. By May 2004, the Fed filed an action against Citigroup and ordered the firm to pay a record $70 million in penalties.
The other case involved Citigroup’s role in helping Enron structure dubious off-balance sheet transactions that first propped up but later brought down the high-flying energy company. In July 2003, Citigroup agreed to pay $120 million to the SEC and entered into an agreement with the New York Fed to beef-up its risk management practices. Fed supervisors were to be informed of the company’s progress every three months.
It’s a long article for Politico, and there really aren’t any bombshells in there — mainly it’s a recapping of Citigroup over the last several years. But Politico is an important trade mag down in DC, and some of this might be new to the politicians that will decide Geithner’s fate, so just the fact that they’ve written this is news.
Meanwhile, the hearing for his nomination has been delayed until the day after the inauguration, January 21 as Senator John Kyl objected to the initial hearing date.