Former treasury secretary Timothy F. Geithner is preparing to borrow from JPMorgan Chase to help fund his new career in private equity.
Geithner, 54, secured a credit line with JPMorgan, one of the largest banks he oversaw during the financial crisis, to finance personal investments in funds started by his current employer, Warburg Pincus, according to a filing with the New York State Department. He is borrowing money to invest in a $12 billion private-equity fund that the firm raised in November, its first main fund since he joined almost two years ago, a person familiar with the situation said.
Top private-equity managers are often expected to pony up many millions of dollars for their new funds, to show investors that their interests are aligned. Having worked for the government for most of his career, including as president of the Federal Reserve Bank of New York, Geithner entered that high-stakes world with the earnings history of a government employee, albeit a high-ranking one. By borrowing money, investors can also amplify — or leverage — the returns on their own capital.
“You are in a position to make 20 percent to 30 percent on your position in the fund,” said Tom Bernhardt, a senior vice president at TorreyCove Capital Partners, a San Diego-based private-equity consultant.
The regulatory filing doesn’t disclose the size of the loan or the financial terms, such as the interest rate. Warburg Pincus hasn’t said how much Geithner agreed to commit to the new fund, and the filing doesn’t say whether he made use of the credit line to finance it.
Mary Zimmerman, a spokeswoman for New York-based Warburg Pincus, declined to comment or make Geithner available. Officials for JPMorgan declined to comment.
Warburg Pincus and executives pledged $800 million to their 12th fund, said the person familiar with the matter, or 6.7 percent of the $12 billion in total commitments that the firm had raised by November.
Warburg Pincus employed about 490 people at the end of 2014, but most of the money would typically come from mid- to high-level executives, including co-chief executives Joseph Landy and Charles Kaye. As the president of Warburg Pincus, Geithner ranks just below Landy and Kaye on the firm’s organizational chart. The company oversees about $40 billion in investments.
Once described by CNN Money as “one of the least wealthy treasury chiefs in recent history,” Geithner spent much of his life in public service, including stints at the Treasury Department and the International Monetary Fund before taking the helm of the New York Fed in 2003.
Geithner had an estimated net worth of $3.2 million when he became treasury secretary under President Obama in 2009. His predecessor, former Goldman Sachs Group Chairman Henry Paulson, was worth about $292 million when he took the post in 2005, according to the Center for Responsive Politics in Washington.
As treasury secretary, Geithner oversaw the repayment of bailout funds that the nation’s banks received following the 2008 financial crisis. JPMorgan chief executive Jamie Dimon, whose bank received $25 billion under the Troubled Asset Relief Program, called the program a “scarlet letter” and pushed for a quick repayment.
“Dear Timmy, we are happy to be able to pay back the $25 billion you lent us,” Dimon said in June 2009 at a conference, reading from a mock letter to Geithner. “We hope you enjoyed the experience as much as we did.”