I am struggling for the right metaphor to describe Timothy Geithner’s conduct. Marie Antionette ain’t bad, but perhaps better is the Last Commandment from Animal Farm:
All animals are equal, but some animals are more equal than others
This blogger was troubled by Geithner’s demeanor during the Senate hearings on the Bear Stearns bailout, when he was dismissive and conveyed the impression that he thought the appearance was a waste of his valuable time.
Then we have the issue of Geithner’s failure to pay payroll taxes. Perhaps he did somehow miss the IMF memo warning that he was indeed liable for the employer and employee portion (as someone who has run a business for 20 years, I cannot fathom ho Geithner would be ignorant on this front). Nevertheless, in 2006 he was audited for 2003 and 2004 and had to pony up (but was not required to pay penalties, would mere moretals ever get such white-glove treatment?).
What really does not pass the smell test is that Geithner had been employed by the IMF in 2001 and 2002 and had not paid payroll taxes then either. He did not clear up that issue when he learned he had filed incorrect returns via the 2006 audit; instead, it was Team Obama that connected the dots and got him to satisfy the older (but unassessed) tax deficiency.
Geithner is clearly an ambitious man. Even if he though he could get away with it, good judgmenet (and ethics, but we’ll put that aside for now) would have argued for cleaning up 2001 and 2002 sooner rather than later.
But guess what, his gamble paid off, he did get away with it (as he didn’t pay until forced to, and did not suffer as a result).
Willem Buiter has repeatedly charged with the Fed being a victim of what he called “cognitive regulatory capture” by Wall Street, The latest Geithner incident illustrates both that he is literally too close to the Street and has absorbed the industry’s attitude that rules don’t apply to players.
Newly installed Treasury Secretary Timothy Geithner issued new rules Tuesday restricting contacts with lobbyists – and then hired one to be his top aide.
Mark Patterson, a former advocate for Goldman Sachs, will serve as chief of staff to Geithner as the Treasury Department revamps the Wall Street bailout program that sent an infusion of cash to his former employer.
Patterson’s appointment marks the second time in President Barack Obama’s first week in office that the administration has had to explain how it’s complying with its own ethics rules as it hires a bevy of Washington insiders for administration jobs…
Treasury spokeswoman Stephanie Cutter lauded Patterson’s “long history of public service in the U.S. Senate, both as a staff director of the Senate Finance Committee and policy director for the Senate leader.
Yves here. Goldman has shrewdly in the last 15 years taken particular interest in hiring former government officials (if memory serves me right, Gerald Corrigan, former vice chairman of the FOMC, was Goldman’s first high profile acquisition, and the firm has since encouraged senior staffers to seek government posts. And lest we forget, Henry Paulson was assistant to John Erlichman, who was convicted of conspiracy, obstruction of justice and perjury). Back to the story:
“He brings significant expertise to the job of chief of staff and has agreed to a far-reaching ethics pledge to remove any hint of a conflict of interest,” she added.
According to that pledge, Patterson will be prohibited for the next two years from participating in Treasury decisions related to Goldman Sachs and the specific issues on which he lobbied.
Yves again. If you believe that, I have a bridge I’d like to sell you. If Patterson rescued himself from every decision that you and I thought he should step aside from, he’d be unable to do any meaningful work for Geithner. This commitment, to the extent it is observed at all, will be interpreted very narrowly. And I’m not alone in that view, particularly given the scope of his efforts:
Still, Sloan and financial service lobbyists question how Treasury will make those determinations. “Goldman so permeates the markets, how can you separate them out?” Sloan asked.
Patterson was a registered lobbyist for Goldman Sachs from 2005 until April of 2008. Lobbying disclosure forms suggest he represented the financial giant on a wide array of issues, including visas, tax credits for cellulosic ethanol and an Indian gaming facility in New York state. ….
The Treasury lobbying rules issued by Geithner Tuesday would restrict department lobbyist contacts connected to applications for funding from the Troubled Asset Relief Program and those associated with banks receiving government assistance.