Much has been written about “Turbo” Tim Geithner since he first became Treasury Secretary on January 26, 2009. In his book, Too Big to Fail, Andrew Ross Sorkin wrote adoringly about Geithner’s athletic expertise. On the other hand, typing “Turbo Tim Geithner” into the space on the upper-right corner of this page and clicking on the little magnifying glass will lead you to no less than 61 essays wherein I saw fit to criticize the Treasury Secretary. I first coined the “Turbo” nickname on February 9, 2009 and on February 16 of that year I began linking “Turbo” to an explanatory article, for those who did not understand the reference.
Geithner has never lacked defenders. The March 10, 2010 issue of The New Yorker ran an article by John Cassidy entitled, “No Credit”. The title was meant to imply that Getithner’s efforts to save America’s financial system were working, although he was not getting any credit for this achievement. From the very outset, the New Yorker piece was obviously an attempt to reconstruct Geithner’s controversial public image – because he had been widely criticized as a tool of Wall Street.
Edward Harrison of Credit Writedowns dismissed the New Yorker article as “an out and out puff piece” that Geithner himself could have written:
Don’t be fooled; this is a clear plant to help bolster public opinion for a bailout and transfer of wealth, which was both unnecessary and politically damaging.
Another article on Geithner, appearing in the April 2010 issue of The Atlantic, was described by Edward Harrison as “fairly even-handed” although worthy of extensive criticism. Nevertheless, after reading the following passage from the first page of the essay, I found it difficult to avoid using the terms “fawning and sycophantic” to describe it:
In the course of many interviews about Geithner, two qualities came up again and again. The first was his extraordinary quickness of mind and talent for elucidating whatever issue was the preoccupying concern of the moment. Second was his athleticism. Unprompted by me, friends and colleagues extolled his skill and grace at windsurfing, tennis, basketball, running, snowboarding, and softball (specifying his prowess at shortstop and in center field, as well as at the plate). He inspires an adolescent awe in male colleagues.
In November of 2008, President George W. Bush appointed Neil M. Barofsky to the newly-established position, Special Inspector General for the Troubled Asset Relief Program (SIGTARP). Barofsky was responsible for preventing fraud, waste and abuse involving TARP operations and funds. From his first days on that job, Neil Barofsky found Timothy Geithner to be his main opponent. On March 31 of 2009, the Senate Finance Committee held a hearing on the oversight of TARP. The hearing included testimony by Neil Barofsky, who explained how the Treasury Department had been interfering with his efforts to ascertain what was being done with TARP funds which had been distributed to the banks. Matthew Jaffe of ABC News described Barofsky’s frustration in attempting to get past the Treasury Department’s roadblocks.
On the eve of his retirement from the position of Special Inspector General for TARP (SIGTARP), Neil Barofsky wrote an op-ed piece for the March 30, 2011 edition of The New York Times entitled, “Where the Bailout Went Wrong”. Barofsky devoted a good portion of the essay to a discussion of the Obama administration’s failure to make good on its promises of “financial reform”, with a particular focus on the Treasury Department:
Worse, Treasury apparently has chosen to ignore rather than support real efforts at reform, such as those advocated by Sheila Bair, the chairwoman of the Federal Deposit Insurance Corporation, to simplify or shrink the most complex financial institutions.
In the final analysis, it has been Treasury’s broken promises that have turned TARP — which was instrumental in saving the financial system at a relatively modest cost to taxpayers — into a program commonly viewed as little more than a giveaway to Wall Street executives.
It wasn’t meant to be that. Indeed, Treasury’s mismanagement of TARP and its disregard for TARP’s Main Street goals — whether born of incompetence, timidity in the face of a crisis or a mindset too closely aligned with the banks it was supposed to rein in — may have so damaged the credibility of the government as a whole that future policy makers may be politically unable to take the necessary steps to save the system the next time a crisis arises. This avoidable political reality might just be TARP’s most lasting, and unfortunate, legacy.
It should come as no surprise that in Neil Barofsky’s new book, Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street, the author pulls no punches in his criticism of Timothy Geithner. Barofsky has been feeding us some morsels of what to expect from the book by way of some recent articles in Bloomberg News. Here is some of what Barofsky wrote for Bloomberg on July 22:
More important, the financial markets continue to bet that the government will once again come to the big banks’ rescue. Creditors still give the largest banks more favorable terms than their smaller counterparts — a direct subsidy to those that are already deemed too big to fail, and an incentive for others to try to join the club. Similarly, the major banks are given better credit ratings based on the assumption that they will be bailed out.
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The missteps by Treasury have produced a valuable byproduct: the widespread anger that may contain the only hope for meaningful reform. Americans should lose faith in their government. They should deplore the captured politicians and regulators who distributed tax dollars to the banks without insisting that they be accountable. The American people should be revolted by a financial system that rewards failure and protects those who drove it to the point of collapse and will undoubtedly do so again.
Only with this appropriate and justified rage can we hope for the type of reform that will one day break our system free from the corrupting grasp of the megabanks.
In his review of Barofsky’s new book, Darrell Delamaide of MarketWatch discussed the smackdown Geithner received from Barofsky:
Barofsky may have an axe to grind, but he grinds it well, portraying Geithner as a dissembling bureaucrat in thrall to the banks and reminding us all that President Barack Obama’s selection of Geithner as his top economic official may have been one of his biggest mistakes, and a major reason the White House incumbent has to fight so hard for re-election.
From his willingness to bail out the banks with virtually no accountability, to his failure to make holders of credit default swaps on AIG take a haircut, to his inability to mount any effective program for mortgage relief, Geithner systematically favored Wall Street over Main Street and created much of the public’s malaise in the aftermath of the crisis.
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Barofsky, a former prosecutor, relates that he rooted for Geithner to get the Treasury appointment and was initially willing to give him the benefit of the doubt when it emerged that he had misreported his taxes while he worked at the International Monetary Fund.
But as more details on those unpaid taxes came out and Geithner’s explanations seemed increasingly disingenuous, Barofsky had his first doubts about the secretary-designate.
Barofsky, of course, was not alone in his skepticism, and Geithner’s credibility was damaged from the very beginning by the disclosures about his unpaid taxes.
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Barofsky concludes his scathing condemnation of Geithner’s “bank-centric policies” by finding some silver lining in the cloud – that the very scale of the government’s failure will make people angry enough to demand reform.
Once Geithner steps down from his position at the end of the year, we may find that his legacy is defined by Neil Barofsky’s book, rather than any claimed rescue of the financial system.