Timothy Geithner

Timothy Franz Geithner ( /ˈɡaɪtnər/; born August 18, 1961) is an American economist, central banker, and civil servant. He is the 75th and current United States Secretary of the Treasury, serving under President Barack Obama. He was previously the president of the Federal Reserve Bank of New York.

Geithner's position includes a large role in directing the Federal Government's spending on the late-2000s financial crisis, including allocation of $350 billion of funds from the Troubled Asset Relief Program enacted during the previous administration. At the end of his first year in office, he continued to deal with multiple high visibility issues, including administration efforts to restructure the regulation of the nation's financial system,^[2] attempts to spur recovery of both the mortgage market and the automobile industry, demands for protectionism, President Obama's tax changes, and negotiations with foreign governments on approaches to worldwide financial issues.^[3][4]

Family and education

Geithner was born in New York City, but spent most of his childhood in other countries, including present-day Zimbabwe, Zambia, India, and Thailand where he completed high school at the International School Bangkok.^[5] He attended Dartmouth College, in the tradition of his father and paternal grandfather, graduating with an A.B. in government and Asian studies in 1983.^[5] In the process he studied Mandarin at Peking University in 1981 and at Beijing Normal University in 1982.^[6] He earned an M.A. in international economics and East Asian studies from Johns Hopkins University's School of Advanced International Studies in 1985.^[5][7] He has studied Mandarin^[5] and Japanese.^[8]

Geithner's paternal grandfather, Paul Herman Geithner (1902–1972), emigrated with his parents from the German town of Zeulenroda to Philadelphia in 1908.^[9] His father, Peter F. Geithner, was the director of the Asia program at the Ford Foundation in New York in the 1990s. During the early 1980s, Peter Geithner oversaw the Ford Foundation's microfinance programs in Indonesia being developed by Ann Dunham Soetoro, President Barack Obama's mother, and they met in person at least once.^[10] Geithner's maternal grandfather, Charles F. Moore, was an adviser to President Dwight D. Eisenhower and served as Vice President of Public Relations from 1952 to 1964 for Ford Motor Company.^[11]

Geithner married Carole Sonnenfeld on June 8, 1985, at his parents' summer home in Orleans, Massachusetts. They have two children, a daughter and a son.^[12]

Early career

Geithner worked for Kissinger Associates in Washington for three years and then joined the International Affairs division of the U.S. Treasury Department in 1988. He went on to serve as an attaché at the Embassy of the United States in Tokyo. He was deputy assistant secretary for international monetary and financial policy (1995–1996), senior deputy assistant secretary for international affairs (1996–1997), assistant secretary for international affairs (1997–1998).^[7]

He was Under Secretary of the Treasury for International Affairs (1998–2001) under Treasury Secretaries Robert Rubin and Lawrence Summers.^[7] Summers was his mentor,^[13][14] but other sources call him a Rubin protégé.^[15][16][17]

In 2002 he left the Treasury to join the Council on Foreign Relations as a Senior Fellow in the International Economics department.^[18] He was director of the Policy Development and Review Department (2001–2003) at the International Monetary Fund.^[7]

In October 2003, at age 42,^[19] he was named president of the Federal Reserve Bank of New York.^[20] His salary in 2007 was $398,200.^[21] As President of the New York Fed, he served as Vice Chairman of the Federal Open Market Committee. In 2006, he also became a member of the Washington-based financial advisory body, the Group of Thirty.^[22] In May 2007, he worked to reduce the capital required to run a bank.^[19] In November he rejected Sanford Weill's offer to take over as Citigroup's chief executive.^[19]

In March 2008, he arranged the rescue and sale of Bear Stearns.^[13][23] In the same year, he played a supporting role to Henry Paulson, former CEO of Goldman Sachs, in the decision to bail out AIG just two days after deciding not to rescue Lehman Brothers from bankruptcy. Some Wall Street CEOs subsequently expressed the opinion that decisions in which Geithner participated, especially the failure to rescue Lehman, contributed to worsening the global financial crisis.^[24] As a Treasury official, he helped manage multiple international crises of the 1990s^[16] in Brazil, Mexico, Indonesia, South Korea, and Thailand.^[17]

Geithner believes, along with Henry Paulson, that the U.S. Department of the Treasury needs new authority to experiment with responses to the late-2000s (decade) financial crisis.^[13] Paulson has described Geithner as a "very unusually talented young man...[who] understands government and understands markets".^[23]

Secretary of the Treasury

Nomination

During the 2008 Presidential election, Geithner was one of three people tipped to be nominated for Treasury Secretary regardless of whether John McCain or Barack Obama won.^[1] On November 24, 2008, then-President-elect Barack Obama announced his intention to nominate Geithner to be Treasury Secretary.^[25][26]

It was revealed that Geithner had not paid $35,000 in self-employment taxes for the years 2001–2004.^[27] The International Monetary Fund (IMF), an international agency and his employer during the time in question, did not withhold Federal Insurance Contributions Act (FICA) tax, but instead reimbursed the usual employer responsibility of 50% of these taxes to employees who were subject to the taxes. Geithner had received the reimbursements and paid the amounts received to the government, but had not paid the other 50% which would normally have been withheld from his pay. This failure to pay was noted during a 2006 audit by the Internal Revenue Service (IRS), in which Geithner was assessed additional taxes of $14,847 for the 2003 and 2004 tax years. The statute of limitations had expired for 2001 and 2002, and Geithner did not file amended returns or pay the additional amounts due for those years until after Obama expressed his intent to nominate Geithner to be Secretary of the Treasury.^[28][29][30] He also deducted the cost of his children's sleep-away camp as a dependent care expense, when only expenses for day care are eligible for the deduction.^[30] Geithner subsequently paid the IRS the additional taxes owed,^[31] and was charged $15,000 interest, but was not fined for late payment.^[32]

In a statement to the Senate Finance Committee, Geithner called the tax issues "careless", "avoidable" and "unintentional" errors, and he said he wanted to "apologize to the committee for putting you in the position of having to spend so much time on these issues".^[31] Geithner testified that he used TurboTax to prepare his 2001 return, but that the tax errors were his own responsibility.^[33][34] The Obama campaign stated that Geithner was advised by his accountant that he did not owe any taxes beyond those assessed by the IRS following the 2006 audit.^[35] Geithner said at the hearing that he had always believed he was an employee, not a self-employed contractor, while serving at the IMF.^[36]

Confirmation

On January 26, 2009, the U.S. Senate confirmed Geithner's appointment by a vote of 60–34.^[37][38] Geithner was sworn in as Treasury Secretary by Vice President Joe Biden and witnessed by President Barack Obama.^[39]

Bank bailout

Geithner has the authority to decide what to do with the second tranche of $350 billion from the $700 billion banking bailout bill passed by Congress in October 2008. He is not mandated to seek Congressional approval, but went to Congress on February 10–11, 2009 to explain his plans. He proposes to create one or more "bad banks" to buy and hold toxic assets, using a mix of taxpayer and private money. He also proposes to expand 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 proposes to give banks new infusions of capital with which to lend. In exchange, banks would have to cut the salaries and perks of their executives and sharply limit dividends and corporate acquisitions.^[40][41] The plan has been criticized by Nobel-prize winning economist Paul Krugman^[42] as well as fellow Nobel laureate and former World Bank Chief Economist Joseph Stiglitz.^[43]

AIG bonuses

Although President Obama expressed strong support for Geithner, the outrage over the AIG bonuses has undermined public support. AIG paid bonuses to executives in its Financial Services division after receiving more than $170 billion in federal bailout aid.^[44] Even prior to the election, senior aides to Timothy Geithner have closely dealt with American International Group Inc. on compensation issues including bonuses, both from his time as president of the Federal Reserve Bank of New York and as Treasury secretary. In early November, 2008, a committee concluded that the bonuses, which were in contracts signed before the government takeover, couldn't be legally blocked. On March 3, 2009, appearing at a hearing of the House Ways and Means Committee Rep. Joseph Crowley, a New York Democrat, asked him about the bonuses that AIG would be paying to financial-products employees "in the coming weeks." On March 11, Geithner called Mr. Edward Liddy, AIG chief, to protest the bonus payouts. Mr. Geithner and Federal Reserve Chairman Ben Bernanke attended a hearing by Congress on March 24, 2009.^[45]

AIG payments to banks

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 the New 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 its SEC 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 the House Oversight and Government Reform Committee, issued subpoenas for the records and scheduled hearings for late January. Federal Reserve Chairman Ben Bernanke said the Fed would welcome a full review of its actions regarding the AIG payments.^{[46][47][48][49]}

Geithner and his predecessor, former Treasury Secretary Henry 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.^{[50][51][52][53]}

China

In written comments to the Senate Finance Committee during his confirmation hearings, Geithner stated that the new administration believed China was "manipulating" its currency and that the Obama administration would act "aggressively" using "all the diplomatic avenues" to change China's currency practices.^[54] The Obama administration would pressure China diplomatically to change this practice, more strongly than the George W. Bush Administration did.^[55] The United States maintained that China's actions hurt American businesses and contributed to the financial crisis.^[56]

Shortly after assuming his role as Secretary of the Treasury, Geithner met in Washington with Chinese Foreign Minister Yang Jiechi. He told Yang that the U.S. attached great importance to its relations with China and that U.S.–China cooperation was essential in order for the world economy to fully recover.^[57]

On June 1, 2009, during a question-and-answer session following a speech at Peking 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.^[58][59]

Geithner co-chaired the high-profile U.S.–China Strategic and Economic Dialogue from July 27 to 28 in Washington, D.C. and led the Economic Track for the U.S. side.

Opposing extension of tax cuts

In summer, 2010, Geithner "is President Obama’s point man in opposing the extension of the Bush 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." One journalist has argued that this initiative injects more Populism into his policy portfolio, in line with the Administration's inclination.^[60]

Criticism

Geithner weathered criticism early in the Obama presidency, when Congressman Connie Mack (R-FL) suggested he should resign over the AIG bonus scandal, and Alabama Senator Richard Shelby said that Geithner was "out of the loop". Democrats largely joined Obama in supporting Geithner, and there was no serious talk of him losing his job.^[61]

In November 2009, Geithner again came under fire from members of both the Congressional Progressive Caucus and the Republican Party. Oregon Representative Peter DeFazio suggested that both Geithner and Lawrence Summers, the director of the National Economic Council, should be fired in order to curtail unemployment and signal a new direction for the Obama administration's fiscal policy. "We think it is time, maybe, that we turn our focus to Main Street," said DeFazio, speaking for himself and some fellow members of the Progressive Caucus.^[62] When Geithner appeared in front of the Congressional Joint Economic Committee, 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.^[63]

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, following the Great Recession, the government should be pursuing stimulus; and as a result, it is possible that the stimulus was smaller than it could have been.^[64]

In media

Geithner was portrayed by Billy Crudup in the HBO film Too Big to Fail.

See also

• List of U.S. political appointments that crossed party lines

Memberships

• Center for Global Development (Board of Directors)^[65]
• Council on Foreign Relations^[18]
• Economic Club of New York (trustee)^[65]
• Bank for International Settlements, Committee on payment and settlement systems (chairman) ^[7]
• Bilderberg Group

References

Further reading

• Anderson, Jenny (2007-02-09). "Calm Before and During a Storm". The New York Times. http://www.nytimes.com/2007/02/09/business/09credit.html. 
• Cho, David; Irwin, Neil (2008-09-19). "In Crucible of Crisis, Paulson, Bernanke, Geithner Forge a Committee of Three". The Washington Post. http://www.washingtonpost.com/wp-dyn/content/article/2008/09/18/AR2008091804211.html. 
• Schreiber, Noam (2008-11-05). "Obama's Choice: The next Larry Summers… or Larry Summers". The New Republic. http://www.tnr.com/politics/story.html?id=c85b418b-5237-4f54-891f-8385243162bd. 
• Judis, John B. (2009-03-23). "The Geithner Disaster: How The Treasury Secretary Is Undermining Obama's Entire Economic Agenda". The New Republic. http://www.tnr.com/politics/story.html?id=3adafc9c-0f8f-4db2-8fb1-26f13303426d. 
• Stewart, James B., "Eight Days: the battle to save the American financial system", The New Yorker magazine, September 21, 2009.
• Cassidy, John (15 March 2010). "Annals of Economics: No Credit". The New Yorker 86 (4): 26–30. http://www.newyorker.com/reporting/2010/03/15/100315fa_fact_cassidy. Retrieved 15 January 2011. 

External links

• Biography at the United States Department of the Treasury
• Timothy Geithner at WhoRunsGov at The Washington Post
• Appearances on C-SPAN
• Timothy Geithner on Charlie Rose
• Timothy Geithner collected news and commentary at The New York Times
• Works by or about Timothy Geithner in libraries (WorldCat catalog)
• Biography at the Federal Reserve Bank of New York
• "Who’s Who: The Federal Open Markets Committee", msnbc.com
• "Bernanke's quiet skipper makes waves", MarketWatch
• "Toxic Assets Reduction Plan", The Justice Dept: March 23, 2009.
• "Liquidity Risk and the Global Economy", International Finance, Summer 2007
• "Geithner's Calendar at the New York Fed". The New York Times. April 26, 2009. http://documents.nytimes.com/geithner-schedule-new-york-fed. Retrieved April 26, 2009.  (2007–2009)
• Stewart, James (September 14, 2009), "Eight Days", The New Yorker, pp. 58–81, summary of occurrences in the eight days September 15–23, 2008, with interviews of Paulson, Bernanke, and Geithner
• "Morning Breakfast" discussion of the Obama administration's 2011 legislative priorities with David Cook of The Christian Science Monitor, July 2010
• "The State of the Economy"" at The Commonwealth Club, October 2010