Wall Street Has Geithner's Ear
Friday, October 9, 2009
As the federal government propped up the housing market and braced for the collapse of General Motors, Treasury Secretary Timothy F. Geithner capped a busy week this spring with phone conversations with three men.
The first was Lloyd Blankfein, the chief executive of Goldman Sachs. The second was Jamie Dimon, the chief executive of J.P. Morgan Chase. The third was President Obama.
Dimon and Blankfein are members of an exclusive club: Along with officials at Citigroup, they are among a cadre of Wall Street executives who have known Geithner for years, whose multibillion-dollar companies survived the economic crisis with his help, and who can pick up the phone and reach the nation's most powerful economic official.
Geithner's calendars, obtained by the Associated Press under the Freedom of Information Act, offer a glimpse into the extraordinary influence of those three companies. More than any of their rivals, Goldman Sachs, Citigroup and J.P. Morgan Chase can get Geithner on the phone -- several times a day if necessary -- giving them an unmatched opportunity to influence policy.
"They're people he has relationships with and who he can trust," said Taylor Griffin, a Treasury Department spokesman during the Bush administration. Griffin defended Geithner's relationships with industry executives: "There's only so much time in the day, and you can only talk to so many people. You choose the people whose point of view you value."
There is nothing inherently wrong with senior Treasury officials talking to industry executives, or even with the secretary keeping tabs on the market's biggest players. But the calendars offered fodder for critics who say Geithner is too close to the Wall Street firms he helped bail out.
"It's appropriate for Treasury officials to keep in touch with those who work in the markets every day, particularly when the economy and the markets are so fragile," Treasury spokesman Andrew Williams said.
Not all players in the market enjoy the same access. In the first seven months of Geithner's tenure, his calendars reflect at least 80 contacts with Blankfein, Dimon, and Citigroup Chairman Richard Parsons or chief executive Vikram Pandit.
Geithner had more contact with Citigroup than with House Financial Services Committee Chairman Barney Frank (D-Mass.), who leads the effort to approve Geithner's overhaul of the financial system. Geithner's contacts with Blankfein alone outnumber his contacts with Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee.
This is partly explained by the extraordinary clout of these companies. Goldman Sachs, J.P. Morgan Chase and Citigroup are among the dominant Wall Street players. Their executives can move not only markets but also entire economies. The Treasury invested heavily in each of them to keep the financial industry afloat, and Citigroup faces tighter scrutiny because the Treasury owns a significant stake in the bank.
But size does not tell the whole story. The Treasury also has a huge financial stake in Charlotte-based Bank of America, but chief executive Kenneth D. Lewis appears on Geithner's calendars only three times. Morgan Stanley chief executive John Mack also appears three times.
Smaller banks have felt frozen out of the process as the Treasury, first under President George W. Bush and now under President Obama, pushed through massive financial plans, said Wayne Abernathy, a lobbyist with the American Bankers Association, which represents banks of all sizes.
"Their focus was the big banks," he said. "They only focused on the guys that occupied the biggest space in front of them. We constantly remind them that there are hundreds of other banks, and they've had to adjust their programs to take other guys into account."
Geithner's relationship with Goldman Sachs, J.P. Morgan Chase and Citigroup dates to his tenure as president of the Federal Reserve Bank of New York, where he helped put together multibillion-dollar taxpayer bailouts for Wall Street last fall. Critics said the government was unwilling to let banks suffer the consequences of their bad bets.
Officials at the three companies had no comment on Geithner's calendars. Geithner did not take questions during his only public appearance Thursday, a conference call with reporters. Asked about Geithner's contacts with Wall Street, White House spokesman Robert Gibbs said the administration had "tremendous confidence in his stewardship and in his leadership." Geithner's predecessor at the Treasury, Henry Paulson, similarly kept in close touch with Wall Street power brokers. In particular, he was criticized for his close ties to Goldman Sachs, his former employer.
But Geithner's calendars show Geithner is too close to Wall Street, said Simon Johnson, a former chief economist for the International Monetary Fund who writes a weekly online column for The Washington Post.
By seeking information from such a narrow group of contacts, Johnson said, Geithner risks limiting his exposure to the views of his trusted banker colleagues.
Johnson said that Geithner must think he can set aside their inherent biases, he said, adding, "I don't see how you do that."