When the market rallied yesterday, many were quick to cite Tim Geithner’s appearance on Capitol Hill and some comments about the solid position of the banking sector.
That Geithner could lift the markets is quite a perception change since earlier this year, when he was considered toxic.
But though the market may rally, there are still considerable doubts about the Treasury Secretary, particularly when it comes to his presentation and handling of the economy.
Over at Portfolio, Gary Weiss has a profile of Geithner depicting him as a lifelong bureaucrat that’s lost the confidence of his former supporters. He frames it against a profile of Geithner he wrote last year, when he was quite popular among the big names in finance:
At the time, some of the nation’s most prominent figures in government and finance—former Federal Reserve chairmen Paul Volcker and Alan Greenspan, as well as John Thain, then CEO of Merrill Lynch, and former New York Fed chief Gerald Corrigan—were only too happy to share fond anecdotes about this youthful public official on the rise.
When I approached them again for this article, to get a word in defence of their beleaguered friend, the reaction was far different. Greenspan was “working against a series of his own deadlines and sends his regrets,” a spokesperson told me. Volcker was “not granting interviews.” Corrigan also declined to comment on Geithner. “It’s just a little bit early in his tenure,” said a spokesperson. But Geithner would have an uphill battle against his critics even if every white male over 60 in Washington were to vouch for him. To succeed, Geithner must make the transition from loyal subordinate and hardworking bureaucrat to the imaginative, inspiring leader the times demand.
Weiss also talked to Chris Whalen, of Institutional Risk Analytics, who relays a disturbing anecdote on Geithner. The setting was an NYU conference in 2006:
In the Q&A session that followed Geithner’s speech, Whalen asked a question about a topic that remains pertinent today—the 2004 Basel II accords, which set new global bank-capital standards. Whalen pointed out that one of the objectives of Basel II “was to actually grind the particular risk exposures”—that is, to require lenders to compute the probability of their borrowers’ defaulting on loans. “But banks said, ‘Oh, no, this is too expensive. You can’t do that.’ It didn’t fit with the quant, credit-derivative worldview,” Whalen said. It didn’t happen.
“I said, ‘Tim, isn’t this backsliding?’ ”
Geithner fixed Whalen with a vacant gaze and simply moved to another questioner, mumbling that he wasn’t prepared to answer the question.
Whalen was stunned. “It seemed to me that he had no idea what I was talking about,” he recalls. As for the look: “Think Bambi looking into the headlights on an 18-wheeler.”