Geithner Joins the Wall Street Party
By Staff News & Analysis - November 19, 2013

Mr. Geithner will join the private equity firm Warburg Pincus. Geithner, who played a major role in the federal government's rescue of the financial system, has spent most of his career in the public sector. He'll serve as president and managing director of the company in his new job. "When they approached me, they clearly wanted me to play a substantive role in helping them manage the firm," he told the Wall Street Journal. Geithner becomes the latest former administration official to head to a private equity firm, a common practice through many administrations. – The Hill

Dominant Social Theme: Who is more qualified than Mr. Geithner to run almost anything? Congratulations to him.

Free-Market Analysis: We'd like to think Mr. Geithner is qualified – but for what? This is just the way the game is played, as we can see from this excerpt.

It is disturbing, though, because business as usual continues despite the nation's increasing dysfunction. And Mr. Geithner came in with a cloud over his head, given that he had to admit non-payment of taxes for a considerable time.

Geithner is a prototypical technocrat in a tradition that stretches back, unfortunately, to Alexander Hamilton. In fact, one could characterize Geithner as a kind of Hamilton-on-steroids.

There really wasn't anything Geithner was shy about doing when it came to wielding federal power. He expected that fedgov was the market's dominant entity and that the US Treasury, Wall Street and the Federal Reserve would all work together as one single unit.

With this in mind, the catastrophe of 2008-2009 was gradually lessened and the financial industry was "stabilized." In fact, what this basically entailed was printing trillions of dollars to buttress banks' bottom lines. This did little or nothing for the "real" economy, but people like Geithner are taught that the real economy is merely an appendage of the financial one.

And so, Geithner did as he was asked to do. He made sure of the solvency of Wall Street and of the City and having done this for four years – and no doubt seeing that the situation was deteriorating further – he decided to head for the exit.

He has moved on to take the presidency of a white shoe Wall Street firm specializing in start-up investments. It is his first "private sector" job, we're told, but one he will be good at because of his work ethic and "commitment to leadership."

Others have a somewhat different opinion, as we can see from this article at Bloomberg:

Why People Are Mad at Tim Geithner for Jumping Into Private Equity … I'll admit to being a bit surprised to learn that former Treasury Secretary Timothy Geithner has agreed to become president of the private equity firm Warburg Pincus.

On the one hand, it shouldn't come as a shock that a guy with perhaps a deeper understanding than anyone else of how markets, government, and the economy interact should decide to apply those talents to making money. On the other hand, the news did surprise a lot of people who expected Geithner to become a university president or the head of an NGO or some other eminent non-Wall Street position.

I was in the latter camp, for two reasons. First, despite the comically widespread misimpression that Geithner was born into money and had worked for Goldman Sachs, he actually grew up abroad as the son of a USAID officer who later worked for the Ford Foundation. In this 2010 profile, he told me, as he'd told others, how his upbringing had shaped his values and worldview: "I saw from an early age what impact the U.S. could have on the world, for good and for not-so-good. My parents' friends, from an early stage in life, were in that world—Oxfam, CARE, World Bank, Amnesty International."

This experience, he suggested, was an important reason why he chose a career in public service rather than in the private sector. The second reason I assumed he'd go the university/NGO/eminent-author route is that it would hardly be incompatible with personal enrichment. Geithner already has a million-dollar book deal and could have made a whole lot more giving speeches.

… Regardless, Geithner has decided to try his hand at private equity, instead, and will undoubtedly excel. This has drawn condemnation from such people as Noam Scheiber at the New Republic (who got to know Geithner close up while working on an excellent book about the financial crisis and its aftermath).


The dysfunction we refer to above is amply evident in this excerpt, as well. First we learn that Geithner would make a terrific professor and then we are informed that he already has a million-dollar book deal. Our question is a simple one: Why?

The nation is in terrible shape; the proverbial corner has NOT been turned and the Keynesian nostrums that Geithner among others espouse have proven once again not to work. For this record of "achievement" Geithner has been awarded both a book contract and a presidency.

It is also notable that the "left" portion of the mainstream press is irate that Geithner went to work in what could laughably be called the private sector. This is seen somehow as a less apt choice for a distinguished individual than a career in education or a further berth in some area of "public service."

In fact, Geithner's choice may indicate knowledge of what may be occurring in the not-so-distant future. Warburg Pincus was founded by the famous Warburg family. Today, it is a firm that specializes in, among other things, private equity.

Here at The Daily Bell, we've been discussing the upcoming Wall Street Party, and it's apparently one Geithner is inviting himself to.

Warburg Pincus is a big player in venture capital investing with a main focus, according to various reports on the company, in the areas of energy, technology and healthcare. Energy and technology are areas we believe could prove quite popular if another leg of this long-running bull market comes to pass.

Geithner has positioned himself smack at the center of this potential party, right by the punch bowl where he'll be able to fill and refill his glass. If Geithner wants to make a lot of money fast and the stock market in particular continues to climb, then Geithner has made the right choice.

After Thoughts

What does Timmy know?

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