Tim Geithner formed all his views of the financial crisis during his time as President of the New York Fed, where he worked side-by-side with many of the top banking CEOs. Because of this, and his conclusion that we’re still just in a liquidity crisis, he’s been an advocate of generous bailing out in order to get the credit flowing again.
But the NYT has done some excellent digging to shed more light on just how close to Wall Street and Wall Street-friendly Geithner has been.
For example, it says that early on in the crisis, he proposed a flat-out guarantee of all bank debt, a choice that would’ve put the taxpayer on the hook for trillions. It was quickly shot down… though in a sense it has now in fact become policy.
He also had extensive interation with Citigroup (C):
Mr. Geithner was particularly close to executives of Citigroup, the largest bank under his supervision. Robert E. Rubin, a senior Citi executive and a former Treasury secretary, was Mr. Geithner’s mentor from his years in the Clinton administration, and the two kept in close touch in New York.
Mr. Geithner met frequently with Sanford I. Weill, one of Citi’s largest individual shareholders and its former chairman, serving on the board of a charity Mr. Weill led. As the bank was entering a financial tailspin, Mr. Weill approached Mr. Geithner about taking over as Citi’s chief executive.
But for all his ties to Citi, Mr. Geithner repeatedly missed or overlooked signs that the bank — along with the rest of the financial system — was falling apart. When he did spot trouble, analysts say, his responses were too measured, or too late.
For his part Geithner says he immediately rejected the offer and informed the Federal Reserve’s lawyers, who suggested Geithner remove himself from dealing with Citigroup. Geithner also served (unpaid) on the board of the National Academy Foundation, a nonprofit founded by Weill.
The story paints a similar picture to many of the the other Geithner takedowns that’ve been floating around. He joins the Fed after an unusual, non-Wall Street backround. Everyone in banking comes to like him. He gets close with bankers. He takes extensive criticism for his role in shaping the bailout.