Tim Geithner | |
|---|---|
 Official portrait, 2009 | |
| 75thUnited States Secretary of the Treasury | |
| In office January 26, 2009 – January 25, 2013 | |
| President | Barack Obama |
| Deputy | Neal S. Wolin |
| Preceded by | Henry Paulson |
| Succeeded by | Jack Lew |
| 9thPresident of the Federal Reserve Bank of New York | |
| In office November 17, 2003 – January 26, 2009 | |
| Preceded by | William Joseph McDonough |
| Succeeded by | William C. Dudley |
| Under Secretary of the Treasury for International Affairs | |
| In office July 3, 1998 – January 20, 2001 | |
| President | Bill Clinton |
| Preceded by | David Lipton |
| Succeeded by | John B. Taylor |
| Personal details | |
| Born | Timothy Franz Geithner (1961-08-18)August 18, 1961 (age 64) New York City,New York, U.S. |
| Political party | Independent[1] |
| Spouse | |
| Children | 2 |
| Education | Dartmouth College (BA) Johns Hopkins University (MA) |
| Signature |  |
Geithner at aSenate Appropriations subcommittee hearing on the FY2012Treasury budget request. Recorded April 5, 2011 | |
Timothy Franz Geithner (/ˈɡaɪtnər/; born August 18, 1961) is an American formercentral banker who served as the 75thUnited States secretary of the treasury under PresidentBarack Obama from 2009 to 2013. He was thePresident of theFederal Reserve Bank of New York from 2003 to 2009, following service in theClinton administration. Since March 2014, he has served as president and chairman ofWarburg Pincus, aprivate equity firm headquartered in New York City.[2]
As President of the New York Fed and Secretary of the Treasury, Geithner had a key role in government efforts to recover from the2008 financial crisis and theGreat Recession. At the New York Fed, Geithner helped manage crises involvingBear Stearns,Lehman Brothers, and theAmerican International Group; as Treasury Secretary, he oversaw allocation of $350 billion under theTroubled Asset Relief Program, enacted during the previous administration in response to thesubprime mortgage crisis. Geithner also managed the administration's efforts to restructure regulation of the nation's financial system,[3] attempts to spur recovery of the mortgage market and the automobile industry, demands forprotectionism, tax reform, and negotiations with foreign governments on global finance issues.[4][5]
Geithner was born in Manhattan, New York, to Peter Franz Geithner and Deborah Moore.[6] His father, aGerman American, was the director of theFord Foundation's Asia program in New York during the 1990s, after working for theUnited States Agency for International Development in Zambia andZimbabwe.[7] During the early 1980s, Geithner's father oversaw the Ford Foundation'smicrofinance programs in Indonesia being developed byAnn Dunham Soetoro, Barack Obama's mother, and they met at least once inJakarta.[8] Geithner's paternal grandfather, Paul Herman Geithner (1902–1972), immigrated with his parents to the United States in 1908 fromZeulenroda, Germany.[9][unreliable source?]
Geithner's mother, aMayflower descendant, belongs to aNew England family.[9][unreliable source?] Her father, Charles Frederick Moore, Jr., served as vice-president of public relations for theFord Motor Company from 1952 to 1964, and advised PresidentDwight D. Eisenhower, as well asNelson Rockefeller andGeorge W. Romney, on their respective presidential campaigns. His uncle,Jonathan Moore, served in the departments ofDefense,Justice andState, as well as in the United Nations.[7]
Geithner spent most of his childhood living abroad, including in Zimbabwe; Zambia; India; and Thailand, where he completed high school at theInternational School Bangkok.[10] He studiedMandarin atPeking University in 1981, and atBeijing Normal University in 1982.[11] Like his father, paternal grandfather and uncle; Geithner attendedDartmouth College, graduating in 1983, with an A.B. in Government andAsian studies,[10] then earned a M.A. in international economics and East Asian studies fromJohns Hopkins University'sSchool of Advanced International Studies, in 1985.[10][12] He has also studied Japanese.[13]
Geithner worked forKissinger Associates in Washington, D.C., from 1985 to 1988, when he joined the International Affairs division of theU.S. Treasury Department.[14] He served as anattaché at theEmbassy of the United States in Tokyo, then as deputy assistant secretary for internationalmonetary andfinancial policy (1995–1996), senior deputy assistant secretary for international affairs (1996–1997), and assistant secretary for international affairs (1997–1998).[12] He wasUnder Secretary of the Treasury for International Affairs (1998–2001) under SecretariesRobert Rubin andLawrence Summers,[12] who are widely considered to have been his mentors.[15][16][17][18][19][20] While at the Treasury Department, he helped manage financial crises in Brazil, Mexico, Indonesia, South Korea, and Thailand.[19][20]
In 2001, Geithner left the Treasury to join theCouncil on Foreign Relations as a Senior Fellow in the International Economics department.[21] He was director of the Policy Development and Review Department at theInternational Monetary Fund from 2001 to 2003.[12]
In October 2003, Geithner was named president of theFederal Reserve Bank of New York.[14] As president of the New York Fed, he served as Vice Chairman of theFederal Open Market Committee. In 2006, he became a member of theWashington-based financial advisory body, theGroup of Thirty.[22]
In 2005, Geithner expressed concern over Wall Street trading infinancial derivatives, which ultimately contributed to the spread of the2008 financial crisis, though he did not pursue major reforms.[15] In 2004, Geithner called on banks to "build a sufficient cushion against adversity", though in May 2007, he expressed support for theBasel II accord, which critics, includingFederal Deposit Insurance Corporation chairpersonSheila Bair, argued would reduce the amount of capital banks would be required to hold to guard against losses.[15][23] That month, in a speech at theFederal Reserve Bank of Atlanta, Geithner stated, "Financial innovation has improved the capacity to measure and manage risk," but also cautioned that "financial innovation and global financial integration do not offer the prospect of eliminating the risk of asset price andcredit cycles, of manias and panics, or of shocks that could have systemic consequences."[24]
As president of the New York Fed, Geithner was a central figure in the U.S. government's response to the2008 financial crisis.
In mid-March 2008, together with then-Treasury SecretaryHenry Paulson, Geithner arranged the rescue andfire sale ofBear Stearns, which was at risk of bankruptcy, toJPMorgan Chase for $2 per share (later raised to $10 per share[25]).[26][16][27] The Fed agreed to provide financing for the deal and support up to $30 billion of Bear Stearns's "less-liquid assets", despite some internal protests.[28] In doing so, the New York Fed allowed Bear Stearns itself to calculate the value of assets acquired by the government and exposed itself to losses should those assets have declined in value, though JPMorgan agreed to absorb the first $1 billion in losses.[29][15][30] The New York Fed stored these assets in theMaiden Lanelimited liability company and awardedno-bid contracts to the Wall Streetasset managerBlackRock for management of the assets, with the intent of ridding itself of the assets within 10 years.[29][31] In testimony before theSenate Banking Committee, countering concerns that the rescue would invitemoral hazard problems, Geithner argued that "a sudden, disorderly failure of Bear would have brought with it unpredictable but severe consequences for the functioning of the broader financial system and the broader economy."[25] Under questioning from SenatorChris Dodd, Geithner denied involvement in setting the share price of JPMorgan's purchase of Bear Stearns.[29] Bear Stearns and JPMorgan chief executivesAlan Schwartz andJamie Dimon testified that Geithner andFederal Reserve ChairmanBen Bernanke were aware of the amount being discussed and encouraged negotiators to keep the price low to avoid rewarding investors.[32]
In the late summer of 2008, troubles at the financial services firmLehman Brothers were accelerating. In late August, the company announced that 1,500 employees (6% of its workforce) would be laid off, following 6,000 layoffs since June 2007.[33] On September 9, Lehman's share price plunged 45% on fears that the company was facing billions of dollars in losses, and on news that a potential investment in the company byKorea Development Bank had fallen through.[34] Three days later, Geithner convened a meeting of Wall Street executives, Secretary Paulson, andSecurities and Exchange Commission ChairmanChristopher Cox to review exposure to Lehman's fortunes and discuss a possible liquidation of Lehman. Geithner indicated that the government would not save Lehman and urged the executives to cooperate on an industry solution, warning that the crisis could spread to their own firms should a deal not be reached. Government officials believed Lehman's collapse would be less dangerous than that of Bear Stearns,[35] though Geithner sought to avoid that contingency nonetheless, citing the increase in market fragility by the time of Lehman's crisis.[36] Nevertheless, no industry rescue materialized.Bank of America, which had been in talks to purchase Lehman, pulled out after the government indicated it would not take on Lehman's risky real-estate assets, as it had with Bear Stearns.[37] On September 15, Lehman announced that it wouldfile for bankruptcy, making it the largest investment bank failure sinceDrexel Burnham Lambert in 1990.[38][37]
Geithner, Paulson, and Bernanke later argued that Lehman's financial situation was too dire for the government to have legally rescued it.[39] A team fromGoldman Sachs andCredit Suisse had estimated prior to Lehman's bankruptcy filing that Lehman's liabilities exceeded its assets by tens of billions of dollars (i.e., a negativenet worth).[36]
Geithner was instrumental in government dealings with theAmerican International Group (AIG) insurance company. Over the summer of 2008, ascredit rating agencies downgradedmortgage-backed securities, AIG faced mounting demands to provide increased collateral to buyers of itscredit default swaps. Consequently, by the time of Lehman's failure in September, AIG was facing a rapidly increasing multibillion-dollar capital shortfall. On September 13, AIG chiefRobert B. Willumstad informed Geithner that the company would need to raise $40 billion and asked for government assistance in doing so. Geithner rejected the request for government funds and pressed AIG to find a private-sector solution to the company'sliquidity crisis. On the morning of September, Geithner reiterated this decision at a meeting of Wall Street executives and requested that Goldman Sachs and JPMorgan organize an industry-based solution. By that evening, private-sector appetite for an AIG rescue has dissipated. Later that night, a consensus emerged at the New York Fed that AIG, with $500 billion in troubled credit-swap obligations, could not be allowed to fail. At a meeting of the Federal Reserve in Washington the next day, Geithner and Paulson proposed lending $85 billion to AIG, with all of AIG's assets held as collateral, in exchange for a 79.9%equity stake in AIG and veto rights over dividend payments. Upon delivering this offer to AIG, Geithner informed Willumstad that there would be "no negotiation".[36][15][39]
As a result of Lehman Brothers's failure,money market funds with exposure to Lehman securities found themselves in distress on the day of Lehman's bankruptcy filing. One such fund was theReserve Primary Fund. Due to the highly stablenet asset value (NAV) of money market funds ($1.00 per share), money market funds were extensively relied on by companies for regular cash demands (e.g., payroll). Following Lehman's bankruptcy filing, due to a slowdown in credit markets, the Primary Fund was unable to sell onceliquid assets to meet rapidly mounting demands for the redemption of investments. Geithner's New York Fed had been informed of the worsening situation at 7:50 that morning, and the next day rebuffed a request from the Primary Fund to assist it in making payments.[36] Unable to sell Lehman's securities held by the fund, the board of the Primary Fund announced that it would freeze redemptions for seven days and reduce its NAV to $0.97 per share, meaning a money market fund wouldbreak the buck for only the second time in the industry's history.[40]
To stabilize the financial market, Geithner proposed that the traditionalinvestment banks Goldman Sachs andMorgan Stanley transform themselves intobank holding companies to ensure continuing access to funding. Both banks completed the restructuring by September 21.[36][41]
Geithner believed, along with Paulson, that the Treasury needed new authority to respond to the2008 financial crisis.[16] Paulson described Geithner as a "very unusually talented young man...[who] understands government and understands markets".[27]
During the2008 presidential campaign, Geithner was rumored to be a possible choice for Treasury Secretary for bothJohn McCain andBarack Obama.[1] On November 24, 2008,President-electBarack Obama announced his intention to nominate Geithner to be Treasury Secretary.[42][43][44]
During his confirmation, it was disclosed that Geithner had not paid $35,000 inSocial Security and Medicare payroll taxes from 2001 through 2004 while working for theInternational Monetary Fund.[45] The IMF, as an international agency, did not withhold payroll taxes, but instead reimbursed the usual employer responsibility of these taxes to employees. Geithner received the reimbursements and paid the amounts received to the government, but had not paid the remaining half which would normally have been withheld from his pay. The issue, as well as other errors relating to past deductions and expenses, were noted during a 2006 audit by theInternal Revenue Service.[46][47][48][49] Geithner subsequently paid the additional taxes owed.[50][51] In a statement to theSenate Finance Committee, Geithner called the tax issues "careless", "avoidable", and "unintentional" errors.[50] Geithner testified that he used the softwareTurboTax to prepare his 2001 and 2002 returns, but that the tax errors were his own responsibility.[52][53]
On January 26, 2009, theU.S. Senate confirmed Geithner's appointment by a vote of 60–34.[54][55] Geithner was sworn in as Treasury Secretary by Vice PresidentJoe Biden and witnessed by President Barack Obama.[56]
Geithner had authority over the secondtranche of $350 billion from the $700 billion bankingbailout bill passed by Congress in October 2008. Under the Financial Stability Plan, he proposed to create a new investment fund to provide a market for the legacy loans and securities—the so-called "toxic assets"—burdening the financial system, using a mix of taxpayer and private money.[57] He also proposed expanding a lending program that would spend as much as $1 trillion to cover the decline in the issuance of securities backed by consumer loans. He further proposed to give banks new infusions of capital with which to lend. In exchange, banks would be required to cut thesalaries and perks of executives and sharply limitdividends andcorporate acquisitions.[58][59] The plan was criticized byNobel laureatesPaul Krugman andJoseph Stiglitz, a formerWorld BankChief Economist.[60][61]
TheTroubled Asset Relief Program (TARP) andtakeover ofFannie Mae andFreddie Mac amounted a combined outflow of $620.3 billion in Treasury funds in the form of spending, investments, and loans. As of July 2016, $689 billion has been returned to the Treasury, primarily in the form of refunds provided by bailed-out companies and revenue from dividends.[62]
Although President Obama expressed strong support for Geithner, outrage over hundreds of millions of dollars inbonus payments (oremployee "retention" payments) by theAmerican International Group, which had received more than $170 billion in federal bailout aid, undermined public support in early 2009. In March 2009, AIG paid $165 million in bonuses to its financial products division, the unit responsible for the company'snear collapse the year prior, following $55 million paid to the same division in December 2008 and $121 million in bonus payments to senior executives.[63][64] In early November 2008, a joint committee of theFederal Reserve,Ernst & Young, and AIG concluded that the bonus payments, which were in contracts predating the government takeover, could not be legally stopped.[65]
During his time at the New York Fed and early in his tenure as Treasury Secretary, Geithner's aides had closely dealt with AIG on compensation issues, though Geithner indicated he was not aware of AIG's plans for bonus payments until March 10, 2009. On March 11, 2009, Geithner calledEd Liddy, the AIG chief, to protest the bonus payouts and request that the contracting containing the bonuses be renegotiated.[65][66] Later in March, Liddy requested that employees who received bonuses of more than $100,000 return half of the payment.[67] At Geithner's urging, Liddy cut $9.6 million in payments to company's top 50 executives in half and tied the remainder to performance.[64]
In November 2009,Neil Barofsky, the Treasury Department Inspector General responsible for oversight of TARP funds, issued a report critical of the use of $62.1 billion of government funds to redeem derivative contracts held by several large banks which AIG had insured against losses. The banks received face value for the contracts although their market value at the time was much lower. In the report, Barofsky said the payments "provided [the banks] with tens of billions of dollars they likely would have not otherwise received". Terms for use of the funds had been negotiated with theNew York Federal Reserve Bank while Geithner was president.
In January 2010, Rep.Darrell Issa released a series of e-mails between AIG and the New York Fed. In these e-mails, the Fed urged AIG not to disclose the full details of the payments publicly or in itsSEC filings. Issa pushed for an investigation of the matter, and for records and e-mails from the Fed to be subpoenaed. Rep.Edolphus Towns, Chairman of theHouse Oversight and Government Reform Committee, issued subpoenas for the records and scheduled hearings for late January.Federal Reserve ChairmanBen Bernanke said the Fed would welcome a full review of its actions regarding the AIG payments.[68][69][70][71]
Geithner and his predecessor, former Treasury SecretaryHenry Paulson, both appeared before the Committee on January 27. Geithner defended the bailout of AIG and the payments to the banks, while reiterating previous denials of any involvement in efforts to withhold details of the transactions. His testimony was met with skepticism and angry disagreement by House members of both parties.[72][73][74]
In his bookBailout: How Washington Abandoned Main Street While Rescuing Wall Street,Neil Barofsky argues that Geithner never had the intention to utilize theHome Affordable Modification Program as intended by Congress. Instead of providing relief for homeowners to avoid foreclosures, it was Geithner's plan that the bank should proceed with these foreclosures. Geithner said that he "estimates" that the banks "can handle ten million foreclosures, over time", and that HAMP "will help foam the runway for them" by “keeping the full flush of foreclosures from hitting the financial system all at the same time."[75] As such, "banks participating in the program have rejected four million borrowers’ requests for help, or 72 percent of their applications, since the process began".[76]Citimortgage andJPMorgan Chase were among the banks that refused the most HAMP claims. As such, the program only helped 887,001 people out of the over 4 Million people that were originally estimated to be able to benefit from the program.[77]
In written comments to the Senate Finance Committee during his confirmation hearings, Geithner stated that the new administration believedChina was "manipulating"its currency and that the Obama administration would act "aggressively" using "all the diplomatic avenues" to change China's currency practices.[78] The Obama administration would pressure China diplomatically to change this practice more strongly than theGeorge W. Bush Administration had done.[79] The United States maintained that China's actions hurt American businesses and contributed to the2008 financial crisis.[80]
Shortly after assuming his role as Secretary of the Treasury, Geithner met in Washington with Chinese Foreign MinisterYang Jiechi. He told Yang that the U.S. attached great importance toits relations with China and that U.S.–China cooperation was essential in order for the world economy to fully recover.[81]
On June 1, 2009, during a question-and-answer session following a speech atPeking University, Geithner was asked by a student whether Chinese investments in U.S. Treasury debt were safe. His reply that they were "very safe" drew laughter from the audience.[82][83]
Geithner co-chaired the high-profileU.S.–China Strategic and Economic Dialogue from July 27 to 28 in 2009 in Washington, D.C., and led the Economic Track for the U.S. side.
In September 2011, Geithner told a forum that China had "made possible systematic stealing of intellectual property of American companies and have not been very aggressive to put in place the basic protections for property rights that every serious economy needs over time", a rebuke of longstanding policy on the part of China to demand patents and other intellectual property from companies that sought to produce their products in China. He furthered that China was acting "very, very aggressive in a strategy they started several decades ago", which he defined as the ultimatum of transferring technology or being unable to produce products in China.[84]
In summer 2010,The New York Times said Geithner "is President Obama's point man in opposing the extension of theBush tax cuts for the wealthy after their Dec. 31 expiration. ... [Geithner] has cited the projected $700 billion, 10-year cost of the tax cuts, and nonpartisan analyses that they do not stimulate the economy because the wealthy tend to save the additional money rather than spend it. 'I believe there is no credible argument to be made that the purpose of government is to borrow from future generations of Americans to finance an extension of tax cuts for the top 2 percent,' [he] said in a recent speech."[85]
Geithner was Obama's lead negotiator about thefiscal cliff and the increase in the 2013debt limit.[86][87]For example, on December 5, 2012, Geithner confirmed leaks from the White House,[88][89] Treasury Secretary Geithner told CNBC that the Obama Administration is "absolutely" willing to go over the fiscal cliff if Republicans refused to back off from their opposition to raising rates on wealthier Americans.[90][91]
Geithner weathered criticism early in the Obama presidency, when CongressmanConnie Mack (R-FL) suggested he should resign over the AIG bonus scandal, and Alabama SenatorRichard Shelby said that Geithner was "out of the loop". Democrats largely joined Obama in supporting Geithner, and there was no serious talk of his losing his job.[92]
In November 2009, Oregon RepresentativePeter DeFazio, speaking for himself and some fellow members of the Progressive Caucus, suggested that both Geithner andLawrence Summers, the director of theNational Economic Council, should be fired in order to curtail unemployment and signal a new direction for the Obama administration's fiscal policy.[93] When Geithner appeared in front of theCongressional Joint Economic Committee that month, the ranking House Republican,Kevin Brady of Texas, said to the secretary, "Conservatives agree that, as point person, you've failed. Liberals are growing in that consensus as well. Poll after poll shows the public has lost confidence in this president's ability to handle the economy. For the sake of our jobs, will you step down from your post?" Geithner defended his record, suggesting Brady was misrepresenting the situation and overestimating popular disapproval of his job performance.[94]
In June 2011,The New Republic criticized Geithner from the left, arguing that he was and is overly concerned with the deficit at a time when, following theGreat Recession, the government should be pursuing stimulus; and as a result, it is possible that thestimulus was smaller than it could have been.[95]
Geithner left the Obama administration on January 25, 2013,[96][97] and joined theCouncil on Foreign Relations as a Distinguished Fellow.[21] He lectures at theYale School of Management, and is co-chair of the board of directors of theInternational Rescue Committee.[21][98]
In March 2014, he became the president and managing director ofWarburg Pincus, aprivate equity firm.[99] In February 2016, it was announced that JPMorgan Chase would provide a line of credit to help Warburg Pincus executives invest in a new multibillion-dollar fund at the firm.[100][101] In July 2023, he became chairman of Warburg Pincus.[102]
His memoir of his time as Secretary of the Treasury,Stress Test: Reflections on Financial Crises, was published in May 2014.[103] Later that year, on October 7, 2014, Geithner testified inStarr v. United States, a lawsuit alleging that the government cheatedAmerican International Group shareholders of $40 billion by demanding a 79.9% stake in the company.[104][105]
In April 2016, he was one of eight former Treasury secretaries who called on the United Kingdom to remain a member of theEuropean Union ahead of theJune 2016 membership referendum.[106]
In July 2018,The Washington Post revealed that Mariner Finance, a company owned by the private equity firm of which Geithner is President, engaged inpredatory lending behavior; capturing the sentiments of many former employees of Mariner Finance interviewed byThe Post, a former manager trainee at a Mariner Finance branch in Nashville characterized the company's business model as "a way of monetizing poor people".[107][108]
In theHandbook of Financial Stress Testing published in 2022, Geithner reflected back on financial stress testing and suggested ways forward.[109]
Geithner married Carole Marie Sonnenfeld, his classmate at Dartmouth, on June 8, 1985, at his parents' summer home inOrleans, Massachusetts.[110] She is a licensed clinical social worker and an assistant clinical professor of psychiatry and behavioral sciences at George Washington University School of Medicine, where she teaches listening skills to medical students.[111] She is the author of a coming-of-age children's novel about grief.[112] Her father, Albert Sonnenfeld, was a professor of French and Comparative Literature at Princeton University and a food critic;[110] her mother, Portia, died when Carole was 25, shortly after she was married.[113]
Geithner was portrayed byBilly Crudup in theHBO filmToo Big to Fail, and byAlex Jennings in theBBC TV movieThe Last Days of Lehman Brothers.
He had been mentored by Lawrence Summers.
Summers also got along well with another Rubin protégé, Timothy F. Geithner, now chairman of the New York Federal Reserve Bank.
Geithner is a protege ofLawrence Summers and has been involved in the bailouts of Brazil, Mexico, Indonesia, South Korea and Thailand in the 1990s as the treasury undersecretary
{{cite news}}: CS1 maint: multiple names: authors list (link){{cite news}}: CS1 maint: multiple names: authors list (link){{cite news}}: CS1 maint: multiple names: authors list (link)According to senior administration officials, Obama is not eager to go over the cliff, but he is willing.
I have just confirmed that this is accurate – Obama is willing, albeit very reluctant, to go over the cliff.
Later on Wednesday, Treasury Secretary Timothy Geithner told CNBC that the administration "absolutely" was prepared to allow the country to go over the cliff on Jan. 1 if Republicans refused to back off from their opposition to raising rates on wealthier Americans.
'A way of monetizing poor people': How private equity firms make money offering loans to cash-strapped Americans
| Other offices | ||
|---|---|---|
| Preceded by | President of the Federal Reserve Bank of New York 2003–2009 | Succeeded by |
| Political offices | ||
| Preceded by | United States Secretary of the Treasury 2009–2013 | Succeeded by |
| U.S. order of precedence (ceremonial) | ||
| Preceded byas Former U.S. Cabinet Member | Order of precedence of the United States as Former U.S. Cabinet Member | Succeeded byas Former U.S. Cabinet Member |
