Timothy F. Geithner
Encyclopedia
Timothy Franz Geithner is an American economist
, central bank
er, and civil servant. He is the 75th and current United States Secretary of the Treasury
, serving under President
Barack Obama
. He was previously the president of the Federal Reserve Bank of New York
.
Geithner's position includes a large role in directing the Federal Government's spending on the late-2000s financial crisis
, including allocation of $350 billion of funds from the Troubled Asset Relief Program enacted during the previous administration. At the end of his first year in office, he continued to deal with multiple high visibility issues, including administration efforts to restructure the regulation of the nation's financial system, attempts to spur recovery of both the mortgage market and the automobile industry, demands for protectionism
, President Obama's tax changes, and negotiations with foreign governments on approaches to worldwide financial issues.
, Zambia
, India
, and Thailand
where he completed high school at the International School Bangkok
. He attended Dartmouth College
, in the tradition of his father and paternal grandfather, graduating with an A.B.
in government and Asian studies
in 1983. In the process he studied Mandarin at Peking University
in 1981 and at Beijing Normal University
in 1982. He earned an M.A.
in international economics and East Asian studies from Johns Hopkins University's
School of Advanced International Studies
in 1985. He has studied Mandarin
and Japanese
.
Geithner's paternal grandfather, Paul Herman Geithner (1902–1972), emigrated with his parents from the German
town of Zeulenroda to Philadelphia in 1908. His father, Peter F. Geithner, was the director of the Asia program at the Ford Foundation
in New York in the 1990s. During the early 1980s, Peter Geithner oversaw the Ford Foundation's microfinance
programs in Indonesia being developed by Ann Dunham Soetoro, President Barack Obama
's mother, and they met in person at least once. Geithner's maternal grandfather, Charles F. Moore, was an adviser to President Dwight D. Eisenhower
and served as Vice President of Public Relations from 1952 to 1964 for Ford Motor Company
.
Geithner married Carole Sonnenfeld on June 8, 1985, at his parents' summer home in Orleans, Massachusetts
. They have two children, a daughter and a son.
in Washington for three years and then joined the International Affairs division of the U.S. Treasury Department
in 1988. He went on to serve as an attaché
at the Embassy of the United States in Tokyo
. He was deputy assistant secretary for international monetary
and financial policy
(1995–1996), senior deputy assistant secretary for international affairs (1996–1997), assistant secretary for international affairs (1997–1998).
He was Under Secretary of the Treasury for International Affairs (1998–2001) under Treasury Secretaries
Robert Rubin
and Lawrence Summers
. Summers was his mentor, but other sources call him a Rubin protégé.
In 2002 he left the Treasury to join the Council on Foreign Relations
as a Senior Fellow in the International Economics department. He was director of the Policy Development and Review Department (2001–2003) at the International Monetary Fund
.
In October 2003, at age 42, he was named president of the Federal Reserve Bank of New York
. His salary in 2007 was $398,200. As President of the New York Fed, he served as Vice Chairman of the Federal Open Market Committee
. In 2006, he also became a member of the Washington-based financial advisory body, the Group of Thirty
. In May 2007, he worked to reduce the capital required to run a bank. In November he rejected Sanford Weill's offer to take over as Citigroup
's chief executive.
In March 2008, he arranged the rescue and sale of Bear Stearns
. In the same year, he played a supporting role to Henry Paulson
, former CEO of Goldman Sachs
, in the decision to bail out AIG
just two days after deciding not to rescue Lehman Brothers
from bankruptcy
. Some Wall Street
CEOs subsequently expressed the opinion that decisions in which Geithner participated, especially the failure to rescue Lehman, contributed to worsening the global financial crisis. As a Treasury official, he helped manage multiple international crises of the 1990s in Brazil, Mexico, Indonesia, South Korea, and Thailand.
Geithner believes, along with Henry Paulson, that the U.S. Department of the Treasury needs new authority to experiment with responses to the late-2000s financial crisis. Paulson has described Geithner as a "very unusually talented young man...[who] understands government and understands markets".
regardless of whether John McCain
or Barack Obama
won. On November 24, 2008, then-President-elect
Barack Obama
announced his intention to nominate Geithner to be Treasury Secretary.
It was revealed that Geithner had not paid $35,000 in self-employment
taxes for the years 2001–2004. The International Monetary Fund
(IMF), an international agency and his employer during the time in question, did not withhold Federal Insurance Contributions Act (FICA) tax
, but instead reimbursed the usual employer responsibility of 50% of these taxes to employees who were subject to the taxes. Geithner had received the reimbursements and paid the amounts received to the government, but had not paid the other 50% which would normally have been withheld from his pay. This failure to pay was noted during a 2006 audit by the Internal Revenue Service
(IRS), in which Geithner was assessed additional taxes of $14,847 for the 2003 and 2004 tax years. The statute of limitations had expired for 2001 and 2002, and Geithner did not file amended returns or pay the additional amounts due for those years until after Obama expressed his intent to nominate Geithner to be Secretary of the Treasury. He also deducted the cost of his children's sleep-away camp as a dependent care expense, when only expenses for day care are eligible for the deduction. Geithner subsequently paid the IRS the additional taxes owed, and was charged $15,000 interest, but was not fined for late payment.
In a statement to the Senate Finance Committee, Geithner called the tax issues "careless", "avoidable" and "unintentional" errors, and he said he wanted to "apologize to the committee for putting you in the position of having to spend so much time on these issues". Geithner testified that he used TurboTax
to prepare his 2001 return, but that the tax errors were his own responsibility. The Obama campaign stated that Geithner was advised by his accountant that he did not owe any taxes beyond those assessed by the IRS following the 2006 audit. Geithner said at the hearing that he had always believed he was an employee, not a self-employed contractor, while serving at the IMF.
On January 26, 2009, the U.S. Senate
confirmed Geithner's appointment by a vote of 60–34. Geithner was sworn in as Treasury Secretary by Vice President
Joe Biden
and witnessed by President
Barack Obama
.
of $350 billion from the $700 billion banking bailout bill passed by Congress in October 2008. He is not mandated to seek Congressional approval, but went to Congress on February 10–11, 2009 to explain his plans. He proposes to create one or more "bad banks" to buy and hold toxic assets, using a mix of taxpayer and private money. He also proposes to expand a lending program that would spend as much as $1 trillion to cover the decline in the issuance of securities backed by consumer loans. He further proposes to give banks new infusions of capital with which to lend. In exchange, banks would have to cut the salaries and perks of their executives and sharply limit dividends and corporate acquisitions. The plan has been criticized by Nobel-prize
winning economist Paul Krugman
as well as fellow Nobel laureate and former World Bank
Chief Economist
Joseph Stiglitz.
bonuses has undermined public support. AIG
paid bonuses to executives in its Financial Services division after receiving more than $170 billion in federal bailout aid. Even prior to the election, senior aides to Timothy Geithner have closely dealt with American International Group
Inc. on compensation issues including bonuses, both from his time as president of the Federal Reserve Bank of New York and as Treasury secretary. In early November, 2008, a committee concluded that the bonuses, which were in contracts signed before the government takeover, couldn't be legally blocked. On March 3, 2009, appearing at a hearing of the House Ways and Means Committee Rep. Joseph Crowley
, a New York Democrat, asked him about the bonuses that AIG would be paying to financial-products employees "in the coming weeks." On March 11, Geithner called Mr. Edward Liddy, AIG chief, to protest the bonus payouts. Mr. Geithner and Federal Reserve Chairman Ben Bernanke
attended a hearing by Congress on March 24, 2009.
, the Treasury Department Inspector General responsible for oversight of TARP funds, issued a report critical of the use of $62.1 billion of government funds to redeem derivative contracts held by several large banks which AIG had insured against losses. The banks received face value for the contracts although their market value at the time was much lower. In the report, Barofsky said the payments "provided [the banks] with tens of billions of dollars they likely would have not otherwise received". Terms for use of the funds had been negotiated with the New York Federal Reserve Bank
while Geithner was president.
In January 2010, Rep. Darrell Issa
released a series of e-mails between AIG and the New York Fed. In these e-mails, the Fed urged AIG not to disclose the full details of the payments publicly or in its SEC filings. Issa pushed for an investigation of the matter, and for records and e-mails from the Fed to be subpoenaed. Rep. Edolphus Towns, Chairman of the House Oversight and Government Reform Committee, issued subpoenas for the records and scheduled hearings for late January. Federal Reserve Chairman Ben Bernanke
said the Fed would welcome a full review of its actions regarding the AIG payments.
Geithner and his predecessor, former Treasury Secretary Henry Paulson
, both appeared before the Committee on January 27. Geithner defended the bailout of AIG and the payments to the banks, while reiterating previous denials of any involvement in efforts to withhold details of the transactions. His testimony was met with skepticism and angry disagreement by House members of both parties.
In written comments to the Senate Finance Committee during his confirmation hearings, Geithner stated that the new administration believed China
was "manipulating" its currency
and that the Obama administration would act "aggressively" using "all the diplomatic avenues" to change China's currency practices. The Obama administration would pressure China diplomatically to change this practice, more strongly than the George W. Bush Administration
did. The United States maintained that China's actions hurt American businesses and contributed to the financial crisis.
Shortly after assuming his role as Secretary of the Treasury, Geithner met in Washington with Chinese Foreign Minister Yang Jiechi. He told Yang that the U.S. attached great importance to its relations with China
and that U.S.–China cooperation was essential in order for the world economy to fully recover.
On June 1, 2009, during a question-and-answer session following a speech at Peking University
, Geithner was asked by a student whether Chinese investments in U.S. Treasury debt were safe. His reply that they were "very safe" drew laughter from the audience.
Geithner co-chaired the high-profile U.S.–China Strategic and Economic Dialogue
from July 27 to 28 in Washington, D.C. and led the Economic Track for the U.S. side.
for the wealthy after their Dec. 31 expiration. ... [Geithner] has cited the projected $700 billion, 10-year cost of the tax cuts, and nonpartisan analyses that they do not stimulate the economy because the wealthy tend to save the additional money rather than spend it. 'I believe there is no credible argument to be made that the purpose of government is to borrow from future generations of Americans to finance an extension of tax cuts for the top 2 percent,' [he] said in a recent speech." One journalist has argued that this initiative injects more Populism
into his policy portfolio, in line with the Administration's inclination.
(R-FL) suggested he should resign over the AIG bonus scandal, and Alabama Senator Richard Shelby
said that Geithner was "out of the loop". Democrats largely joined Obama in supporting Geithner, and there was no serious talk of him losing his job.
In November 2009, Geithner again came under fire from members of both the Congressional Progressive Caucus
and the Republican Party. Oregon Representative Peter DeFazio
suggested that both Geithner and Lawrence Summers
, the director of the National Economic Council, should be fired in order to curtail unemployment
and signal a new direction for the Obama administration's fiscal policy. "We think it is time, maybe, that we turn our focus to Main Street," said DeFazio, speaking for himself and some fellow members of the Progressive Caucus. When Geithner appeared in front of the Congressional Joint Economic Committee, the ranking House Republican, Kevin Brady
of Texas, said to the secretary, "Conservatives agree that, as point person, you've failed. Liberals are growing in that consensus as well. Poll after poll shows the public has lost confidence in this president's ability to handle the economy. For the sake of our jobs, will you step down from your post?" Geithner defended his record, suggesting Brady was misrepresenting the situation and overestimating popular disapproval of his job performance.
In June 2011, The New Republic
criticized Geithner from the left, arguing that he was and is overly concerned with the deficit at a time, following the Great Recession, the government should be pursuing stimulus; and as a result, it is possible that the stimulus was smaller than it could have been.
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Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
, central bank
Central bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...
er, and civil servant. He is the 75th and current United States Secretary of the Treasury
United States Secretary of the Treasury
The Secretary of the Treasury of the United States is the head of the United States Department of the Treasury, which is concerned with financial and monetary matters, and, until 2003, also with some issues of national security and defense. This position in the Federal Government of the United...
, serving under President
President of the United States
The President of the United States of America is the head of state and head of government of the United States. The president leads the executive branch of the federal government and is the commander-in-chief of the United States Armed Forces....
Barack Obama
Barack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...
. He was previously the president of the Federal Reserve Bank of New York
Federal Reserve Bank of New York
The Federal Reserve Bank of New York is one of the 12 Federal Reserve Banks of the United States. It is located at 33 Liberty Street, New York, NY. It is responsible for the Second District of the Federal Reserve System, which encompasses New York state, the 12 northern counties of New Jersey,...
.
Geithner's position includes a large role in directing the Federal Government's spending on the late-2000s financial crisis
Late-2000s financial crisis
The late-2000s financial crisis is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s...
, including allocation of $350 billion of funds from the Troubled Asset Relief Program enacted during the previous administration. At the end of his first year in office, he continued to deal with multiple high visibility issues, including administration efforts to restructure the regulation of the nation's financial system, attempts to spur recovery of both the mortgage market and the automobile industry, demands for protectionism
Protectionism
Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...
, President Obama's tax changes, and negotiations with foreign governments on approaches to worldwide financial issues.
Family and education
Geithner was born in New York City, but spent most of his childhood in other countries, including present-day ZimbabweZimbabwe
Zimbabwe is a landlocked country located in the southern part of the African continent, between the Zambezi and Limpopo rivers. It is bordered by South Africa to the south, Botswana to the southwest, Zambia and a tip of Namibia to the northwest and Mozambique to the east. Zimbabwe has three...
, Zambia
Zambia
Zambia , officially the Republic of Zambia, is a landlocked country in Southern Africa. The neighbouring countries are the Democratic Republic of the Congo to the north, Tanzania to the north-east, Malawi to the east, Mozambique, Zimbabwe, Botswana and Namibia to the south, and Angola to the west....
, India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
, and Thailand
Thailand
Thailand , officially the Kingdom of Thailand , formerly known as Siam , is a country located at the centre of the Indochina peninsula and Southeast Asia. It is bordered to the north by Burma and Laos, to the east by Laos and Cambodia, to the south by the Gulf of Thailand and Malaysia, and to the...
where he completed high school at the International School Bangkok
International School Bangkok
The International School of Bangkok is in the western-style community of Nichada Thani, in Nonthaburi Province.- ISB history :ISB opened in 1951. Its initial enrollment was 50 children of United Nations and U.S. diplomats. First located on Rajadamri Road, ISB expanded to provide both primary and...
. He attended Dartmouth College
Dartmouth College
Dartmouth College is a private, Ivy League university in Hanover, New Hampshire, United States. The institution comprises a liberal arts college, Dartmouth Medical School, Thayer School of Engineering, and the Tuck School of Business, as well as 19 graduate programs in the arts and sciences...
, in the tradition of his father and paternal grandfather, graduating with an A.B.
Bachelor of Arts
A Bachelor of Arts , from the Latin artium baccalaureus, is a bachelor's degree awarded for an undergraduate course or program in either the liberal arts, the sciences, or both...
in government and Asian studies
Asian studies
Asian studies, a term used usually in the United States for Oriental studies and is concerned with the Asian peoples, their cultures, languages, history and politics...
in 1983. In the process he studied Mandarin at Peking University
Peking University
Peking University , colloquially known in Chinese as Beida , is a major research university located in Beijing, China, and a member of the C9 League. It is the first established modern national university of China. It was founded as Imperial University of Peking in 1898 as a replacement of the...
in 1981 and at Beijing Normal University
Beijing Normal University
Beijing Normal University , colloqiually known as 北师大 or Beishida, is a public research university located in Beijing with strong emphasis on basic disciplines of humanities and sciences...
in 1982. He earned an M.A.
Master of Arts (postgraduate)
A Master of Arts from the Latin Magister Artium, is a type of Master's degree awarded by universities in many countries. The M.A. is usually contrasted with the M.S. or M.Sc. degrees...
in international economics and East Asian studies from Johns Hopkins University's
Johns Hopkins University
The Johns Hopkins University, commonly referred to as Johns Hopkins, JHU, or simply Hopkins, is a private research university based in Baltimore, Maryland, United States...
School of Advanced International Studies
Paul H. Nitze School of Advanced International Studies
The Paul H. Nitze School of Advanced International Studies , a division of Johns Hopkins University based in Washington, D.C., is one of the world's leading and most prestigious graduate schools devoted to the study of international affairs, economics, diplomacy, and policy research and...
in 1985. He has studied Mandarin
Chinese language
The Chinese language is a language or language family consisting of varieties which are mutually intelligible to varying degrees. Originally the indigenous languages spoken by the Han Chinese in China, it forms one of the branches of Sino-Tibetan family of languages...
and Japanese
Japanese language
is a language spoken by over 130 million people in Japan and in Japanese emigrant communities. It is a member of the Japonic language family, which has a number of proposed relationships with other languages, none of which has gained wide acceptance among historical linguists .Japanese is an...
.
Geithner's paternal grandfather, Paul Herman Geithner (1902–1972), emigrated with his parents from the German
German Empire
The German Empire refers to Germany during the "Second Reich" period from the unification of Germany and proclamation of Wilhelm I as German Emperor on 18 January 1871, to 1918, when it became a federal republic after defeat in World War I and the abdication of the Emperor, Wilhelm II.The German...
town of Zeulenroda to Philadelphia in 1908. His father, Peter F. Geithner, was the director of the Asia program at the Ford Foundation
Ford Foundation
The Ford Foundation is a private foundation incorporated in Michigan and based in New York City created to fund programs that were chartered in 1936 by Edsel Ford and Henry Ford....
in New York in the 1990s. During the early 1980s, Peter Geithner oversaw the Ford Foundation's microfinance
Microfinance
Microfinance is the provision of financial services to low-income clients or solidarity lending groups including consumers and the self-employed, who traditionally lack access to banking and related services....
programs in Indonesia being developed by Ann Dunham Soetoro, President Barack Obama
Barack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...
's mother, and they met in person at least once. Geithner's maternal grandfather, Charles F. Moore, was an adviser to President Dwight D. Eisenhower
Dwight D. Eisenhower
Dwight David "Ike" Eisenhower was the 34th President of the United States, from 1953 until 1961. He was a five-star general in the United States Army...
and served as Vice President of Public Relations from 1952 to 1964 for Ford Motor Company
Ford Motor Company
Ford Motor Company is an American multinational automaker based in Dearborn, Michigan, a suburb of Detroit. The automaker was founded by Henry Ford and incorporated on June 16, 1903. In addition to the Ford and Lincoln brands, Ford also owns a small stake in Mazda in Japan and Aston Martin in the UK...
.
Geithner married Carole Sonnenfeld on June 8, 1985, at his parents' summer home in Orleans, Massachusetts
Orleans, Massachusetts
Orleans is a town in Barnstable County, Massachusetts, United States. Barnstable County is coextensive with Cape Cod. The population was 5,890 at the 2010 census....
. They have two children, a daughter and a son.
Early career
Geithner worked for Kissinger AssociatesKissinger Associates
Kissinger Associates, Inc., founded in 1982, is a New York City-based international consulting firm, founded and run by Henry Kissinger, and Brent Scowcroft...
in Washington for three years and then joined the International Affairs division of the U.S. Treasury Department
United States Department of the Treasury
The Department of the Treasury is an executive department and the treasury of the United States federal government. It was established by an Act of Congress in 1789 to manage government revenue...
in 1988. He went on to serve as an attaché
Attaché
Attaché is a French term in diplomacy referring to a person who is assigned to the diplomatic or administrative staff of a higher placed person or another service or agency...
at the Embassy of the United States in Tokyo
Embassy of the United States in Tokyo
The Embassy of the United States in Tokyo represents the United States to Japan. Along with consulates general in Osaka, Nagoya, Sapporo, Fukuoka, and Naha, the embassy provides assistance to American citizens and issues visas to foreign nationals who wish to visit or immigrate to the United...
. He was deputy assistant secretary for international monetary
Monetary policy
Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment...
and financial policy
Fiscal policy
In economics and political science, fiscal policy is the use of government expenditure and revenue collection to influence the economy....
(1995–1996), senior deputy assistant secretary for international affairs (1996–1997), assistant secretary for international affairs (1997–1998).
He was Under Secretary of the Treasury for International Affairs (1998–2001) under Treasury Secretaries
United States Secretary of the Treasury
The Secretary of the Treasury of the United States is the head of the United States Department of the Treasury, which is concerned with financial and monetary matters, and, until 2003, also with some issues of national security and defense. This position in the Federal Government of the United...
Robert Rubin
Robert Rubin
Robert Edward Rubin served as the 70th United States Secretary of the Treasury during both the first and second Clinton administrations. Before his government service, he spent 26 years at Goldman Sachs eventually serving as a member of the Board, and Co-Chairman from 1990-1992...
and Lawrence Summers
Lawrence Summers
Lawrence Henry Summers is an American economist. He served as the 71st United States Secretary of the Treasury from 1999 to 2001 under President Bill Clinton. He was Director of the White House United States National Economic Council for President Barack Obama until November 2010.Summers is the...
. Summers was his mentor, but other sources call him a Rubin protégé.
Council on Foreign Relations
The Council on Foreign Relations is an American nonprofit nonpartisan membership organization, publisher, and think tank specializing in U.S. foreign policy and international affairs...
as a Senior Fellow in the International Economics department. He was director of the Policy Development and Review Department (2001–2003) at the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
.
In October 2003, at age 42, he was named president of the Federal Reserve Bank of New York
Federal Reserve Bank of New York
The Federal Reserve Bank of New York is one of the 12 Federal Reserve Banks of the United States. It is located at 33 Liberty Street, New York, NY. It is responsible for the Second District of the Federal Reserve System, which encompasses New York state, the 12 northern counties of New Jersey,...
. His salary in 2007 was $398,200. As President of the New York Fed, he served as Vice Chairman of the Federal Open Market Committee
Federal Open Market Committee
The Federal Open Market Committee , a committee within the Federal Reserve System, is charged under United States law with overseeing the nation's open market operations . It is the Federal Reserve committee that makes key decisions about interest rates and the growth of the United States money...
. In 2006, he also became a member of the Washington-based financial advisory body, the Group of Thirty
Group of Thirty
The Group of Thirty, often abbreviated to G30, is an international body of leading financiers and academics which aims to deepen understanding of economic and financial issues and to examine consequences of decisions made in the public and private sectors related to these issues...
. In May 2007, he worked to reduce the capital required to run a bank. In November he rejected Sanford Weill's offer to take over as Citigroup
Citigroup
Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...
's chief executive.
In March 2008, he arranged the rescue and sale of Bear Stearns
Bear Stearns
The Bear Stearns Companies, Inc. based in New York City, was a global investment bank and securities trading and brokerage, until its sale to JPMorgan Chase in 2008 during the global financial crisis and recession...
. In the same year, he played a supporting role to Henry Paulson
Henry Paulson
Henry Merritt "Hank" Paulson, Jr. is an American banker who served as the 74th United States Secretary of the Treasury. He previously served as the Chairman and Chief Executive Officer of Goldman Sachs.-Early life and family:...
, former CEO of Goldman Sachs
Goldman Sachs
The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients...
, in the decision to bail out AIG
AIG
AIG is American International Group, a major American insurance corporation.AIG may also refer to:* And-inverter graph, a concept in computer theory* Answers in Genesis, a creationist organization in the U.S.* Arta Industrial Group in Iran...
just two days after deciding not to rescue Lehman Brothers
Lehman Brothers
Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
from bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
. Some Wall Street
Wall Street
Wall Street refers to the financial district of New York City, named after and centered on the eight-block-long street running from Broadway to South Street on the East River in Lower Manhattan. Over time, the term has become a metonym for the financial markets of the United States as a whole, or...
CEOs subsequently expressed the opinion that decisions in which Geithner participated, especially the failure to rescue Lehman, contributed to worsening the global financial crisis. As a Treasury official, he helped manage multiple international crises of the 1990s in Brazil, Mexico, Indonesia, South Korea, and Thailand.
Geithner believes, along with Henry Paulson, that the U.S. Department of the Treasury needs new authority to experiment with responses to the late-2000s financial crisis. Paulson has described Geithner as a "very unusually talented young man...[who] understands government and understands markets".
Secretary of the Treasury
Nomination
During the 2008 Presidential election, Geithner was one of three people tipped to be nominated for Treasury SecretaryUnited States Secretary of the Treasury
The Secretary of the Treasury of the United States is the head of the United States Department of the Treasury, which is concerned with financial and monetary matters, and, until 2003, also with some issues of national security and defense. This position in the Federal Government of the United...
regardless of whether John McCain
John McCain
John Sidney McCain III is the senior United States Senator from Arizona. He was the Republican nominee for president in the 2008 United States election....
or Barack Obama
Barack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...
won. On November 24, 2008, then-President-elect
President-elect of the United States
President-elect of the United States is the title used for an incoming President of the United States in the period between the general election on Election Day in November and noon eastern standard time on Inauguration Day, January 20, during which he is not in office yet...
Barack Obama
Barack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...
announced his intention to nominate Geithner to be Treasury Secretary.
It was revealed that Geithner had not paid $35,000 in self-employment
Self-employment
Self-employment is working for one's self.Self-employed people can also be referred to as a person who works for himself/herself instead of an employer, but drawing income from a trade or business that they operate personally....
taxes for the years 2001–2004. The International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
(IMF), an international agency and his employer during the time in question, did not withhold Federal Insurance Contributions Act (FICA) tax
Federal Insurance Contributions Act tax
Federal Insurance Contributions Act tax is a United States payroll tax imposed by the federal government on both employees and employers to fund Social Security and Medicare —federal programs that provide benefits for retirees, the disabled, and children of deceased workers...
, but instead reimbursed the usual employer responsibility of 50% of these taxes to employees who were subject to the taxes. Geithner had received the reimbursements and paid the amounts received to the government, but had not paid the other 50% which would normally have been withheld from his pay. This failure to pay was noted during a 2006 audit by the Internal Revenue Service
Internal Revenue Service
The Internal Revenue Service is the revenue service of the United States federal government. The agency is a bureau of the Department of the Treasury, and is under the immediate direction of the Commissioner of Internal Revenue...
(IRS), in which Geithner was assessed additional taxes of $14,847 for the 2003 and 2004 tax years. The statute of limitations had expired for 2001 and 2002, and Geithner did not file amended returns or pay the additional amounts due for those years until after Obama expressed his intent to nominate Geithner to be Secretary of the Treasury. He also deducted the cost of his children's sleep-away camp as a dependent care expense, when only expenses for day care are eligible for the deduction. Geithner subsequently paid the IRS the additional taxes owed, and was charged $15,000 interest, but was not fined for late payment.
In a statement to the Senate Finance Committee, Geithner called the tax issues "careless", "avoidable" and "unintentional" errors, and he said he wanted to "apologize to the committee for putting you in the position of having to spend so much time on these issues". Geithner testified that he used TurboTax
TurboTax
TurboTax is an American tax preparation software package developed by Michael A. Chipman of Chipsoft in the mid-1980s. TurboTax became an Intuit product as a result of the 1993 acquisition of its creator, San Diego-based Chipsoft. Chipsoft, now known as Intuit Consumer Tax Group, is still based in...
to prepare his 2001 return, but that the tax errors were his own responsibility. The Obama campaign stated that Geithner was advised by his accountant that he did not owe any taxes beyond those assessed by the IRS following the 2006 audit. Geithner said at the hearing that he had always believed he was an employee, not a self-employed contractor, while serving at the IMF.
Confirmation
United States Senate
The United States Senate is the upper house of the bicameral legislature of the United States, and together with the United States House of Representatives comprises the United States Congress. The composition and powers of the Senate are established in Article One of the U.S. Constitution. Each...
confirmed Geithner's appointment by a vote of 60–34. Geithner was sworn in as Treasury Secretary by Vice President
Vice President of the United States
The Vice President of the United States is the holder of a public office created by the United States Constitution. The Vice President, together with the President of the United States, is indirectly elected by the people, through the Electoral College, to a four-year term...
Joe Biden
Joe Biden
Joseph Robinette "Joe" Biden, Jr. is the 47th and current Vice President of the United States, serving under President Barack Obama...
and witnessed by President
President of the United States
The President of the United States of America is the head of state and head of government of the United States. The president leads the executive branch of the federal government and is the commander-in-chief of the United States Armed Forces....
Barack Obama
Barack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...
.
Bank bailout
Geithner has the authority to decide what to do with the second trancheTranche
In structured finance, a tranche is one of a number of related securities offered as part of the same transaction. The word tranche is French for slice, section, series, or portion, and is cognate to English trench . In the financial sense of the word, each bond is a different slice of the deal's...
of $350 billion from the $700 billion banking bailout bill passed by Congress in October 2008. He is not mandated to seek Congressional approval, but went to Congress on February 10–11, 2009 to explain his plans. He proposes to create one or more "bad banks" to buy and hold toxic assets, using a mix of taxpayer and private money. He also proposes to expand a lending program that would spend as much as $1 trillion to cover the decline in the issuance of securities backed by consumer loans. He further proposes to give banks new infusions of capital with which to lend. In exchange, banks would have to cut the salaries and perks of their executives and sharply limit dividends and corporate acquisitions. The plan has been criticized by Nobel-prize
Nobel Memorial Prize in Economic Sciences
The Nobel Memorial Prize in Economic Sciences, commonly referred to as the Nobel Prize in Economics, but officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel , is an award for outstanding contributions to the field of economics, generally regarded as one of the...
winning economist Paul Krugman
Paul Krugman
Paul Robin Krugman is an American economist, professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University, Centenary Professor at the London School of Economics, and an op-ed columnist for The New York Times...
as well as fellow Nobel laureate and former World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
Chief Economist
World Bank Chief Economist
The World Bank Chief Economist provides intellectual leadership and direction to the Bank’s overall development strategy and economic research agenda, at global, regional and country levels...
Joseph Stiglitz.
AIG bonuses
Although President Obama expressed strong support for Geithner, the outrage over the AIGAIG
AIG is American International Group, a major American insurance corporation.AIG may also refer to:* And-inverter graph, a concept in computer theory* Answers in Genesis, a creationist organization in the U.S.* Arta Industrial Group in Iran...
bonuses has undermined public support. AIG
AIG
AIG is American International Group, a major American insurance corporation.AIG may also refer to:* And-inverter graph, a concept in computer theory* Answers in Genesis, a creationist organization in the U.S.* Arta Industrial Group in Iran...
paid bonuses to executives in its Financial Services division after receiving more than $170 billion in federal bailout aid. Even prior to the election, senior aides to Timothy Geithner have closely dealt with American International Group
American International Group
American International Group, Inc. or AIG is an American multinational insurance corporation. Its corporate headquarters is located in the American International Building in New York City. The British headquarters office is on Fenchurch Street in London, continental Europe operations are based in...
Inc. on compensation issues including bonuses, both from his time as president of the Federal Reserve Bank of New York and as Treasury secretary. In early November, 2008, a committee concluded that the bonuses, which were in contracts signed before the government takeover, couldn't be legally blocked. On March 3, 2009, appearing at a hearing of the House Ways and Means Committee Rep. Joseph Crowley
Joseph Crowley
Joseph Crowley is the U.S. Representative for , serving since 1999. He is the Chairman of the New Democrat Coalition and the Queens County Democratic Party. He is a member of the Democratic Party....
, a New York Democrat, asked him about the bonuses that AIG would be paying to financial-products employees "in the coming weeks." On March 11, Geithner called Mr. Edward Liddy, AIG chief, to protest the bonus payouts. Mr. Geithner and Federal Reserve Chairman Ben Bernanke
Ben Bernanke
Ben Shalom Bernanke is an American economist, and the current Chairman of the Federal Reserve, the central bank of the United States. During his tenure as Chairman, Bernanke has overseen the response of the Federal Reserve to late-2000s financial crisis....
attended a hearing by Congress on March 24, 2009.
AIG payments to banks
In November 2009, Neil BarofskyNeil Barofsky
Neil M. Barofsky was the Special United States Treasury Department Inspector General to oversee the Troubled Assets Relief Program into 2011, but submitted his resignation in February...
, the Treasury Department Inspector General responsible for oversight of TARP funds, issued a report critical of the use of $62.1 billion of government funds to redeem derivative contracts held by several large banks which AIG had insured against losses. The banks received face value for the contracts although their market value at the time was much lower. In the report, Barofsky said the payments "provided [the banks] with tens of billions of dollars they likely would have not otherwise received". Terms for use of the funds had been negotiated with the New York Federal Reserve Bank
Federal Reserve Bank of New York
The Federal Reserve Bank of New York is one of the 12 Federal Reserve Banks of the United States. It is located at 33 Liberty Street, New York, NY. It is responsible for the Second District of the Federal Reserve System, which encompasses New York state, the 12 northern counties of New Jersey,...
while Geithner was president.
In January 2010, Rep. Darrell Issa
Darrell Issa
Darrell Edward Issa is the U.S. Representative for , and previously the 48th, serving since 2001. He is a member of the Republican Party. He was formerly a CEO of Directed Electronics, the Vista, California-based manufacturer of automobile security and convenience products...
released a series of e-mails between AIG and the New York Fed. In these e-mails, the Fed urged AIG not to disclose the full details of the payments publicly or in its SEC filings. Issa pushed for an investigation of the matter, and for records and e-mails from the Fed to be subpoenaed. Rep. Edolphus Towns, Chairman of the House Oversight and Government Reform Committee, issued subpoenas for the records and scheduled hearings for late January. Federal Reserve Chairman Ben Bernanke
Ben Bernanke
Ben Shalom Bernanke is an American economist, and the current Chairman of the Federal Reserve, the central bank of the United States. During his tenure as Chairman, Bernanke has overseen the response of the Federal Reserve to late-2000s financial crisis....
said the Fed would welcome a full review of its actions regarding the AIG payments.
Geithner and his predecessor, former Treasury Secretary Henry Paulson
Henry Paulson
Henry Merritt "Hank" Paulson, Jr. is an American banker who served as the 74th United States Secretary of the Treasury. He previously served as the Chairman and Chief Executive Officer of Goldman Sachs.-Early life and family:...
, both appeared before the Committee on January 27. Geithner defended the bailout of AIG and the payments to the banks, while reiterating previous denials of any involvement in efforts to withhold details of the transactions. His testimony was met with skepticism and angry disagreement by House members of both parties.
China
People's Republic of China
China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...
was "manipulating" its currency
Renminbi
The Renminbi is the official currency of the People's Republic of China . Renminbi is legal tender in mainland China, but not in Hong Kong or Macau. It is issued by the People's Bank of China, the monetary authority of the PRC...
and that the Obama administration would act "aggressively" using "all the diplomatic avenues" to change China's currency practices. The Obama administration would pressure China diplomatically to change this practice, more strongly than the George W. Bush Administration
George W. Bush administration
The presidency of George W. Bush began on January 20, 2001, when he was inaugurated as the 43rd President of the United States of America. The oldest son of former president George H. W. Bush, George W...
did. The United States maintained that China's actions hurt American businesses and contributed to the financial crisis.
Shortly after assuming his role as Secretary of the Treasury, Geithner met in Washington with Chinese Foreign Minister Yang Jiechi. He told Yang that the U.S. attached great importance to its relations with China
Sino-American relations
For the article on U.S.-Taiwan relations, see Republic of China – United States relations.Sino-American or People's Republic of China–United States relations refers to international relations between the United States of America and the government of People's Republic of China...
and that U.S.–China cooperation was essential in order for the world economy to fully recover.
On June 1, 2009, during a question-and-answer session following a speech at Peking University
Peking University
Peking University , colloquially known in Chinese as Beida , is a major research university located in Beijing, China, and a member of the C9 League. It is the first established modern national university of China. It was founded as Imperial University of Peking in 1898 as a replacement of the...
, Geithner was asked by a student whether Chinese investments in U.S. Treasury debt were safe. His reply that they were "very safe" drew laughter from the audience.
Geithner co-chaired the high-profile U.S.–China Strategic and Economic Dialogue
U.S.–China Strategic and Economic Dialogue
The U.S.–China Strategic and Economic Dialogue is a high-level dialogue for the United States and China to discuss a wide range of bilateral, regional and global political, strategic, security, and economic issues between both countries. The establishment of the S&ED was announced on April 1,...
from July 27 to 28 in Washington, D.C. and led the Economic Track for the U.S. side.
Opposing extension of tax cuts
In summer, 2010, Geithner "is President Obama’s point man in opposing the extension of the Bush tax cutsBush tax cuts
The Bush tax cuts refers to changes to the United States tax code passed during the presidency of George W. Bush and extended during the presidency of Barack Obama that generally lowered tax rates and revised the code specifying taxation in the United States...
for the wealthy after their Dec. 31 expiration. ... [Geithner] has cited the projected $700 billion, 10-year cost of the tax cuts, and nonpartisan analyses that they do not stimulate the economy because the wealthy tend to save the additional money rather than spend it. 'I believe there is no credible argument to be made that the purpose of government is to borrow from future generations of Americans to finance an extension of tax cuts for the top 2 percent,' [he] said in a recent speech." One journalist has argued that this initiative injects more Populism
Populism
Populism can be defined as an ideology, political philosophy, or type of discourse. Generally, a common theme compares "the people" against "the elite", and urges social and political system changes. It can also be defined as a rhetorical style employed by members of various political or social...
into his policy portfolio, in line with the Administration's inclination.
Criticism
Geithner weathered criticism early in the Obama presidency, when Congressman Connie MackConnie Mack IV
Cornelius Harvey McGillicuddy IV popularly known as Connie Mack IV is the U.S. Representative for , serving since 2005. He is a member of the Republican Party. The district includes Fort Myers and Naples....
(R-FL) suggested he should resign over the AIG bonus scandal, and Alabama Senator Richard Shelby
Richard Shelby
Richard Craig Shelby is the senior U.S. Senator from Alabama. First elected to the Senate in 1986, he is the ranking member of the United States Senate Committee on Banking, Housing, and Urban Affairs and was its chairman from 2003 to 2007....
said that Geithner was "out of the loop". Democrats largely joined Obama in supporting Geithner, and there was no serious talk of him losing his job.
In November 2009, Geithner again came under fire from members of both the Congressional Progressive Caucus
Congressional Progressive Caucus
The Congressional Progressive Caucus is the largest caucus within the Democratic caucus in the United States Congress with 83 declared members, and works to advance progressive issues and positions....
and the Republican Party. Oregon Representative Peter DeFazio
Peter DeFazio
Peter Anthony DeFazio is the U.S. Representative for , serving since 1987. He is a member of the Democratic Party. The district includes Eugene, Springfield, Roseburg and part of Corvallis. As Oregon's most senior member of Congress, he is the dean of Oregon's House of Representatives delegation...
suggested that both Geithner and Lawrence Summers
Lawrence Summers
Lawrence Henry Summers is an American economist. He served as the 71st United States Secretary of the Treasury from 1999 to 2001 under President Bill Clinton. He was Director of the White House United States National Economic Council for President Barack Obama until November 2010.Summers is the...
, the director of the National Economic Council, should be fired in order to curtail unemployment
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
and signal a new direction for the Obama administration's fiscal policy. "We think it is time, maybe, that we turn our focus to Main Street," said DeFazio, speaking for himself and some fellow members of the Progressive Caucus. When Geithner appeared in front of the Congressional Joint Economic Committee, the ranking House Republican, Kevin Brady
Kevin Brady
Kevin Patrick Brady is the U.S. Representative for , serving since 1997. He is a member of the Republican Party. The district includes a large swath of suburban and rural territory around Houston and Beaumont....
of Texas, said to the secretary, "Conservatives agree that, as point person, you've failed. Liberals are growing in that consensus as well. Poll after poll shows the public has lost confidence in this president's ability to handle the economy. For the sake of our jobs, will you step down from your post?" Geithner defended his record, suggesting Brady was misrepresenting the situation and overestimating popular disapproval of his job performance.
In June 2011, The New Republic
The New Republic
The magazine has also published two articles concerning income inequality, largely criticizing conservative economists for their attempts to deny the existence or negative effect increasing income inequality is having on the United States...
criticized Geithner from the left, arguing that he was and is overly concerned with the deficit at a time, following the Great Recession, the government should be pursuing stimulus; and as a result, it is possible that the stimulus was smaller than it could have been.
Memberships
- Center for Global DevelopmentCenter for Global DevelopmentThe Center for Global Development is a non-profit think tank based in Washington, D.C. that focuses on international development. It was founded in November 2001 by former senior U.S. official Edward W. Scott, director of the Peterson Institute for International Economics, C. Fred Bergsten, and...
(Board of Directors) - Council on Foreign RelationsCouncil on Foreign RelationsThe Council on Foreign Relations is an American nonprofit nonpartisan membership organization, publisher, and think tank specializing in U.S. foreign policy and international affairs...
- Economic Club of New YorkThe Economic Club of New YorkThe Economic Club of New York is a non-profit and non-partisan membership organization located in New York City and founded in 1907. Its stated purpose is the promotion of the study and discussion of social, economic, and political questions....
(trustee) - Bank for International SettlementsBank for International SettlementsThe Bank for International Settlements is an intergovernmental organization of central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks." It is not accountable to any national government...
, Committee on payment and settlement systems (chairman) - Bilderberg GroupBilderberg GroupThe Bilderberg Group, Bilderberg conference, or Bilderberg Club is an annual, unofficial, invitation-only conference of approximately 120 to 140 guests from North America and Western Europe, most of whom are people of influence. About one-third are from government and politics, and two-thirds from...
Further reading
- Stewart, James B.James B. StewartJames Bennett Stewart is an American lawyer, journalist, and author.-Life and career:Stewart was born in Quincy, Illinois. A graduate of DePauw University and Harvard Law School, James B. Stewart is a member of the Bar of New York and Bloomberg Professor of Business and Economic Journalism at the...
, "Eight Days: the battle to save the American financial system", The New YorkerThe New YorkerThe New Yorker is an American magazine of reportage, commentary, criticism, essays, fiction, satire, cartoons and poetry published by Condé Nast...
magazine, September 21, 2009.
External links
- Biography at the United States Department of the TreasuryUnited States Department of the TreasuryThe Department of the Treasury is an executive department and the treasury of the United States federal government. It was established by an Act of Congress in 1789 to manage government revenue...
- Biography at the Federal Reserve Bank of New YorkFederal Reserve Bank of New YorkThe Federal Reserve Bank of New York is one of the 12 Federal Reserve Banks of the United States. It is located at 33 Liberty Street, New York, NY. It is responsible for the Second District of the Federal Reserve System, which encompasses New York state, the 12 northern counties of New Jersey,...
- "Who’s Who: The Federal Open Markets Committee", msnbc.comMsnbc.commsnbc.com is a news website owned and operated as a joint venture by NBCUniversal and Microsoft.In addition to original content from its news staff, msnbc.com is the news website for the NBC News family, with content from the cable television news channel MSNBC, NBC shows such as Today, NBC Nightly...
- "Bernanke's quiet skipper makes waves", MarketWatchMarketWatchMarketWatch operates a financial information website that provides business news, analysis and stock market data to some 6 million people. MarketWatch offers personal finance news and advice, tools for investors and access to industry research. Along with its flagship website, the company operates...
- "Toxic Assets Reduction Plan", The Justice Dept: March 23, 2009.
- "Liquidity Risk and the Global Economy", International FinanceInternational Finance (journal)International Finance is a peer-reviewed academic journal aimed at "bridging the gap between theory and policy in macroeconomics and finance." Its founder and editor-in-chief is Benn Steil, director of international economics at the Council on Foreign Relations.- Purpose :International Finance...
, Summer 2007 (2007–2009) - Stewart, James (September 14, 2009), "Eight Days", The New YorkerThe New YorkerThe New Yorker is an American magazine of reportage, commentary, criticism, essays, fiction, satire, cartoons and poetry published by Condé Nast...
, pp. 58–81, summary of occurrences in the eight days September 15–23, 2008, with interviews of Paulson, Bernanke, and Geithner - "Morning Breakfast" discussion of the Obama administration's 2011 legislative priorities with David Cook of The Christian Science MonitorThe Christian Science MonitorThe Christian Science Monitor is an international newspaper published daily online, Monday to Friday, and weekly in print. It was started in 1908 by Mary Baker Eddy, the founder of the Church of Christ, Scientist. As of 2009, the print circulation was 67,703.The CSM is a newspaper that covers...
, July 2010 - "The State of the Economy"" at The Commonwealth ClubThe Commonwealth ClubThis article concerns the historic Virginia building. For other places called "Commonwealth Club", see Commonwealth Club.The Commonwealth Club, is a private gentlemen's club in Richmond, Virginia, USA. Its present clubhouse was completed in 1891. The defining structure of the Commonwealth Club...
, October 2010
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