U.S. President Barack Obama and Treasury Secretary Timothy Geithner.Win McNamee/Getty Image
After surviving a beating from the political right and left over the bailouts of Wall Street banks and disgraced insurer AIG Inc., U.S. Treasury Secretary Timothy Geithner should be grateful just to still have his job. Apparently that isn't enough, so he's pushing the envelope. He's moved on to the next phase of the bailout: the Tim Geithner image makeover. He's embarked on an ambitious media offensive, arguing that he made all the right decisions when it mattered most during and after the market meltdown of 2008, and that things would have been much more catastrophic without the interventions he oversaw. Whether or not anyone agrees with him, the fact that Geithner hasn't been replaced has made his greatest talent even more obvious: He's a master at the art of political survival.
True, the U.S. financial system withstood 2008 and its aftershocks, but just barely. Many banks and investment dealers that were rescued with billions of taxpayers' dollars are minting cash again, the crisis a mere tin can in the rear-view mirror. But some banks are still too big to fail-meaning that Washington will have to bail them out in any future crisis, no matter how badly their executives may screw up. Out in the real economy, the argument that the financial system is now solid again provides cold comfort, because unemployment remains alarmingly high. A financial regulatory reform bill is winding its way through Congress-finally-but it's been watered down, and its fate remains in doubt. In light of the many challenges ahead, the Secretary's mere survival isn't good enough.
Geithner, 48, was controversial from the moment he was appointed by Barack Obama, a few weeks after the November, 2008, U.S. presidential election. The first hiccup was the revelation that Geithner hadn't paid some taxes while he'd worked for the International Monetary Fund from 2001 to 2003, and that he'd briefly employed a housekeeper with expired immigration papers. Geithner dutifully paid about $34,000 (all currency in U.S. dollars) in back taxes and apologized.
When that snafu was behind him, critics started questioning some of Geithner's very expensive decisions as president of the Federal Reserve Bank of New York in 2008. One gargantuan sore point: AIG's counterparties in credit default swaps and other financial arrangements were repaid pretty much in full on their contracts with the insurer. Goldman Sachs alone received $13 billion from the taxpayers, and Geithner was in the room when the deals were worked out. In March, 2009, his reluctance to even try to prevent AIG from distributing $165 million in executive bonuses provoked more outrage. His phone records were released, and-surprise-it turned out that he'd been speaking to CEOs of big banks multiple times a day.
There were numerous heated grillings before House and Senate committees, where Geithner's reputation as a less-than-inspirational speaker was cemented. Republicans started suggesting that he resign. The most ominous sign about his future, however, had little to do with Geithner directly: It was the loss of the Massachusetts Senate seat, long held by Ted Kennedy, to a Republican upstart named Scott Brown this past January. Geithner has been a public relations disaster for the Obama administration, and the Brown win was another example of how angry people are about the President's handling of the economy.
The Treasury Secretary could still be shown the door in the upcoming months, but the rhetoric has calmed down. So, Geithner-the-survivor now faces his next act: how to make sweeping changes to a financial system that everyone agrees is badly broken. For all the things that he may have done to prevent a financial apocalypse, a close look at his career trajectory suggests that shaking up the dollhouse might not be part of his DNA. Geithner is not a reformer, and reform is badly needed right now.
Geithner has worked at the Treasury Department, on and off, since 1988, and was mentored by Larry Summers and Robert Rubin, two former Democratic secretaries who were Wall Street-friendly and pro-deregulation. Geithner was reportedly hard-working and exceedingly loyal; he was eager to please his powerful patrons and loath to rock the boat. In 2003, at age 42, he was appointed president of the New York Fed.
The New York Fed is an odd institution. Its board is traditionally made up of Wall Street and corporate heavyweights, and the ones that oversaw Geithner included, at various times, Jamie Dimon, the CEO of JPMorganChase, Richard Fuld, then-chairman of Lehman Brothers, and Citigroup chairman Sandy Weill. Geithner took some steps to try to control derivatives markets while he was at the Fed. Yet he was also so appreciated by his Wall Street charges that he was reportedly approached about becoming CEO of Citigroup in 2007. That kind of flattery shapes a person's world view.
In a recent profile in The Atlantic, Joshua Green described Geithner as a "superstar of the bureaucracy." Those are not the words one would expect to read on the tombstone of an inspirational change agent.
Sheelah Kolhatkar is a contributor to Time magazine and a contributing editor at New York magazine.