Timmy's Telephone Travesty
by Simon Johnson
New revelations about Tim Geithner’s phone records show an appallingly small Wall Street circle. With a probe likely, Simon Johnson says the Treasury secretary needs a bailout—from Larry Summers.
Treasury Secretary Tim Geithner faces a major public-relations problem. His phone records and broader calendar, obtained by the Associated Press, indicate that
most of his contacts with the financial sector in the first seven months of this year were in fact with just three mega-banks: Goldman Sachs, Citigroup, and J.P. Morgan Chase.While such skewed access to a top policymaker would raise eyebrows at any time, this disclosure is particularly difficult for Geithner. He is known to have deep contacts with a small number of banks, partly from his time at the New York Fed (as reported by The New York Times in April) and partly from his mentor, Robert Rubin, formerly of Goldman and Citi.
If Geithner can argue that his contacts with Wall Street were part of a diversified portfolio of interactions on the part of the president’s inner circle, this would take the edge off his current predicament.
Geithner himself has confronted this issue directly before, and always insists that his policies are intended to help the entire financial system and thus the whole economy. “I've been in public service all my life…” he told PBS in May. “And I would never do anything and be part of any policy that's designed to benefit some piece of our financial system. The only thing that we care about and the only obligation I have is try to make sure this financial system is doing a better job of meeting the needs of businesses and families across the country."
Such statements are hard to square with the fact that, in the height of the crisis, he actually talked primarily with only three big banks—not even representative of the entire field of large banks (e.g., Wells Fargo and Bank of America), let alone the small and medium-size banking sector that is now getting hammered....
Presumably, there will now be a great deal of scrutiny—including congressional subpoenas—regarding actions of the Big Three that had the inside track to Secretary Geithner. Investigators will likely focus on follow-on phone calls and emails from the respective CEOs to managers of their trading desks and other people responsible for moving money around. Did any of these banks or individuals benefit in any measurable way (e.g., in terms of their stock price or the perceived risk of bankruptcy) from specific pieces of information gleaned or general tone inferred in exchanges with the secretary?...
http://www.thedailybeast.com/blogs-and-stories/2009-10-08/timmys-telephone-travesty/Goldman Sachs? Wow, how surprising.