There are reasons why you might be dissatisfied with the job Timothy Geithner has done as Treasury Secretary, but his past as a Goldman Sachs banker isn't one of them -- because he never worked there. That's the theme of a rather amusing article in the New York Times today that explains this widespread misconception. Despite article's author Jackie Calmes managing to find numerous examples of people accusing Geithner of working for Goldman, he never even worked as an investment banker or at any other Wall Street firm. So why do people think he did?
The Bank Bailout
Geithner played a pivotal role in the 2008 bank bailout, which leads to the first reason why so many people associate Geithner with Wall Street. At the time he was the president of the New York Federal Reserve, which was in the thick of it. Geithner worked with former Treasury Secretary Hank Paulson (an actual Goldman alum) and Fed Chairman Ben Bernanke to save the banks and end the financial crisis. This made Geithner appear to be a figure very sympathetic to Wall Street. After all, he helped facilitate a program that resulted in taxpayers loaning big finance hundreds of billions of dollars.
The financial reform battle didn't exactly help to change public perception for Geithner. He was never seen as one of the outspoken leaders who wanted to punish Wall Street. Instead, the Treasury generally advocated sensible, middle-of-the-road reforms that would allow banks to continue to thrive, but hopefully prevent future instability in the financial system. This angered many progressive activists who wanted harsh measures like breaking up banks and prohibiting certain practices entirely. Geithner was even forced to stand back as former Fed chief and current Obama advisor Paul Volcker championed his aggressive approach to limit proprietary trading.
Haven't All Treasury Secretaries Worked at Goldman?
Finally, the financial crisis and subsequent bailout occurred during a transition in Washington from one administration to another. Geithner's predecessor Hank Paulson did, in fact, work as the CEO of Goldman Sachs. Average Americans outside the beltway probably don't as clearly differentiate between Treasury Secretaries as they do Presidents. But even there, nearly half of Americans wrongly believe that Obama authorized the bailout, when really Bush did. So right around the time when people began howling about Paulson giving money to his former bank, Geithner took over and the perception stuck.
Furthermore, the two most prominent Treasury Secretaries over the past two decades were Goldman alumni -- Paulson and Robert Rubin. So it's likely the public associates the role of Treasury Secretary with the bank and Wall Street.
So why is Geithner is always playing "good cop" if has no allegiance to Wall Street? From the beginning he has been more about practicality than politics. That might be one of the reasons why President Obama chose him. Geithner didn't buy into the notion of punishing Wall Street, because he understands that the financial sector is very important to the vitality of the U.S. economy. He didn't go along with the bailout because he wanted to save the bonuses of banker buddies, but because he shared Bernanke's fear of what the world would look like if the financial sector collapsed. Geithner's actions and policies make clear that he's a big advocate of the government helping to shape a healthier economy, but he also believes that the private sector shouldn't be crowded out.
Even if you don't agree with everything Geithner has done as Treasury Secretary -- and I don't -- it's hard to criticize him for taking a practical approach. He's not the kind of partisan hack that one so typically finds in Washington. He's a left-leaning pragmatist. Because he doesn't always follow the progressive anti-business talking points that so many other Democrats do, that makes him appears as an outsider. But his ability to see the value a thriving financial sector doesn't make him a former banker, even though that's what so many Americans have come to assume.
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