Timothy Geithner has a great deal of competition for the title of worst Treasury Secretary of the United States, but he has swept the field as worst President of Federal Reserve Bank of New York (NY Fed). Geithner is a target rich environment for critics and he has a gift for saying things that are obviously depraved, but which he thinks are worthy of a public servant.
He did vastly more harm to the Nation as the President of the New York Fed than he did as Treasury Secretary. He was supposed to regulate most of the largest (and most criminal) bank holding companies – and failed so completely that he testified to Congress that he had never been a regulator and that the problem in banking leading up to the crisis was excessive regulation. His statement that he was never a regulator was truthful – but you’re not supposed to admit it, and you’re certainly not supposed to be proud of it. Geithner, Greenspan, and Bernanke are the three Fed leaders who could have prevented the entire crisis by being even modestly effective regulators.
Instead of regulating the banks, Geithner relied on the banks self-regulating through “stress tests.” The stress tests were (and remain) farcical. AIG, Fannie, Freddie, Lehman, the Irish banks, and the big three Icelandic banks all passed stress tests shortly before they collapsed. It is a measure of Geithner’s goofiness that he has entitled his book “Stress Test.”
As Treasury Secretary, Geithner made his infamous “foam the runways” comment. He admitted that while the way he ran the programs putatively designed to help distressed homeowners was causing them to fail frequently to help homeowners it was succeeding in easing the bank crashes.
Geithner repeatedly claimed as Treasury Secretary that he never worked for Wall Street (and as he left congratulated himself on not joining Wall Street – a few months before he did). As New York Fed President Geithner worked for Wall Street for five years and was handsomely rewarded for that service. As he has admitted, virtually bragged, he did not work for the American people as a regulator though that is what he was supposed to do.
Geithner’s Most Revealing Sentence
Geithner’s failure to regulate as President of the NY Fed was far more harmful than the anecdote I am about to relate and his “foam the runways” comment confirms that Geithner continued to work for the banks rather than the American people once he became Treasury Secretary. His service to the banks and contemptuous disregard of homeowners are even more appalling than the incident I will discuss. The sentence this article discusses, however, is the most revealing about a broader range of Geithner’s character. Each of the facets of Geithner’s character revealed by the sentence demonstrates his unfitness for office.
The sentence’s very existence demonstrates two facets of these character failures, for Geithner went out of his way in his book to craft the sentence. The context is that he is trying to settle a score with Neil Barofsky, the Special Inspector General for the Troubled Assets Relief Program (SIGTARP), because Barofsky audited, and often criticized TARP. It would be perfectly fine for Geithner to provide his arguments about why he thought Barofsky’s criticisms proved inaccurate. That could be a productive debate. But Geithner took the policy criticism personally and is out to hurt Barofsky through ad hominem attacks rather than to win a policy debate on the merits. People with Geithner’s vindictive mindset should never hold power.
Second, Geithner’s three primary ad hominem attacks on Barofsky are self-damning and boost Barofsky’s already stellar reputation. Geithner’s tone is deliberately snide, every word choice is slanted in clumsy attempts to demean Barofsky and his staff, and the attacks on Barofsky’s person are facially silly. In his effort to wound Barofsky Geithner has only further revealed his character defects. I will deal in this first article with only one of these ad hominem attacks. Geithner is outraged that Barofsky: “would requisition firearms and bulletproof vests for his antifraud troops.” Not content with trying to insult Barofsky, in the next sentence Geithner gratuitously and insultingly refers to Barofsky’s “well-armed team.”
Here’s why Geithner’s sentence is so revealing along so many disturbing dimensions.
- He is ignorant of law enforcement and fraud. Barofsky was personally responsible for protecting the health and lives of his staff of law enforcement officers (LEOs). That staff was required in the normal course of their duties to question criminal suspects and potentially arrest. Geithner obviously thinks it is silly that law enforcement officers who deal with financial fraud would (in modern America with massive gun ownership) be prepared to defend themselves against attacks. I worked frequently with FBI Special Agents that investigated fraud – they always had a side arm with them at work (including at lectures where I was one of the trainers on how to identify, investigate, and prosecute elite financial frauds). Indeed, FBI rules mandate that they have a side arm with them when they are working.
Had Geithner become Treasury Secretary before March 2003 he would have been in charge of the Secret Service. The Secret Service describes its investigative function in these terms:
“The Secret Service usually works criminal cases that are related to the nation’s financial security. The Secret Service was originally founded in 1865 to suppress counterfeit money and while the agency still spends a lot of time investigating counterfeit money both in the United States and overseas, today’s agents also investigate a variety of other financial crimes, including credit card fraud, computer fraud and bank fraud.”
Secret Service agents are LEOs. When they conduct these investigations they have side arms and vests (except in some undercover operations).
- Barofsky purchased vests and side arms for his LEOs (which Geithner tries to spin as “requisition[ing]” as if it were some high-handed and unprincipled act) because that is what virtually every other American leader of LEOs does to protect his people. (Note that the vest only moderately reduces risk. LEOs can be killed while wearing their vests.)
- Geithner seems to think that people who engage in fraud never engage in violence. As a criminologist and a former financial regulator I would like to inform him he is wrong. Regular readers know from prior columns that even as S&L regulators we were the subjects of threats of violence (including murder) from controlling S&L officers – and we had no arrest powers and no power to conduct the form of investigations in the subject’s home that can lead to attacks on LEOs.
- Try this hypothetical: Barofsky did not provide his LEOs with the minimal forms of defense against assault that are provided routinely to all U.S. LEOs – protective vests and side arms – and one of his LEOs was assaulted by a fraud suspect and seriously harmed or killed. What would Geithner have said in his book about Barofsky if that hypothetical had come to pass? He would have denounced Barofsky as incompetent and indifferent to the safety of his staff. (Indeed, Geithner would not have waited for the book had this hypothetical occurred. His book makes clear that Geithner viewed Barofsky as a thorn in his side that he hated. He would have jumped at the opportunity to remove that thorn by demanding that Barofsky resign.)
- Geithner was in charge of the TARP. The SIGTARP’s LEOs were his people risking their lives to help protect TARP from fraud. That means that they were protecting Geithner from the criticism he would have received if such frauds had not been detected and investigated by the TARP LEOs. Geithner, TARP’s leader, mocks those LEOs as Barofsky’s “well-armed team.” He repays their professionalism and their enormous success against those who sought to defraud TARP – which protected Geithner’s program and reputation – with mockery and contempt. Geithner’s actions are shameful. He was unworthy of those he mocks as Barofsky’s “well-armed” “antifraud troops.”
- Geithner reveals in this sentence and the overall paragraph his indifference to the frauds by the elite bank officers that caused the financial crisis and exposed TARP to further losses. He makes clear repeatedly his view that he never took elite bank fraud seriously or sought to hold the officers culpable. Instead, as the recent leaks by the Department of Justice (DOJ) reveal, it was Geithner and his subordinate officials at the Office of the Comptroller of the Currency (OCC – a bureau within Treasury) who led the chorus of alarm that led an already cowardly DOJ to adopt the infamous “too big to prosecute” doctrine that Attorney General Eric Holder is now desperately seeking to walk back. Every reference by Geithner to elite bank fraud is designed to mock anyone (i.e., Barofsky) that would take it seriously and try to hold the elite bank officers accountable for their crimes. Geithner makes his childish, sneering tone on the subject obvious to even the most casual reader with phrases such as “Barofsky’s desire to prevent perfidy” in addition to mocking the entire concept that fraud was important enough to warrant providing SIGTARP’s LEOs with even the most basic, essential forms of personal protection to reduce the risk that they would be maimed or killed in the performance of their duties.
If Geithner wants to start a journey of personal redemption he should forget Barofsky and all the imagined slights and make it his mission to meet personally with every SIGTARP LEO and apologize unreservedly for these passages – and then to apologize to them and the people of America in a very public publication.
The fact that Geithner would launch an ad hominem attack on Barofsky for taking the elementary protections any official must take to safeguard the LEOs who work for him establishes three reasons why he is unfit for leadership. He took an auditor’s professional criticisms of a program personally and seeks to settle a score through a personal attack on the auditor. That indicates he is too thin skinned to hold office and does not understand and value the essential function of internal audit. Geithner should have taken his own advice in his book: “The inconvenient truth of financial-crisis response is that the actions that feel right are often wrong.” The inconvenient truth of writing a book for the purpose of launching ad hominem assaults on the auditors is “the actions that feel right are often wrong.” Geithner tried to settle a score with Barofsky through an attack on his safeguarding his LEOs and instead scored an “own goal” of epic proportions.
His attack on Barofsky for protecting his people demonstrates that Geithner never took even a moment to learn about the function of SIGTARP or the nature of fraud. That he failed to do so while supposedly dealing with the aftermath of the three most destructive epidemics of accounting control fraud and the financial crisis they drove demonstrates why we have no successful prosecutions of the elite Wall Street criminals whose frauds drove the crisis.
That Geithner used Barofsky’s entirely normal and praise worthy protection of his LEOs as the basis for condemning Barofsky and his LEOs demonstrates that Geithner has sunk to the level of loathsome. But the fact that Geithner’s substantive criticisms of Barofsky were so pitiful that he felt he had to rely instead on mocking Barofsky and his LEOs as cowards because they were American law enforcement officers who wanted to have a side arm and a protective vest proves that Geithner has nothing but facially absurd ad hominem insults to levy at Barofsky even after years of plotting his revenge in his book.
The title of Geithner’s book that he wrote to settle these petty personal scores is a sad testament to his abject failure as a regulator while the NY Fed’s President. He relied on the delusion that banks would self-regulate themselves to safety and soundness through stress tests designed to ensure that even the most fraudulent bank could easily pass the faux stress test. In his book, Geithner was unable to present any action he took as an anti-regulator to warn the Nation about the three fraud epidemics, any effective action he took to stop those frauds, or any action he took to prosecute those frauds. He failed each of the three real “stress tests” that confronted him. Had he passed either of the first two tests we could have avoided the financial crisis. Had he passed the third test at least the fraudulent elite bank CEOs would have been imprisoned and their fraudulent proceeds confiscated so that it was clear that crime did not pay.
Bailing out banks is not hard when a nation has a sovereign currency and the banks’ debts are denominated in that currency. Bernanke, not Geithner, delivered the vast bulk of the real bailout that transferred the banks’ losses on the fraudulent assets to the Fed and allowed Geithner to claim that TARP was “profitable.”