Timothy Geithner: The Perfect Protégé

How Tim Geithner helped to save the economy — but failed to change the system.

October 5, 2010

How Tim Geithner helped to save the economy — but failed to change the system.

Timothy Geithner was the perfect protégé. Born to internationalism and public service, he always was a young man on the move, full of high earnestness. His father, Peter Geithner, had been head of the Ford Foundation in Asia.

In the late 1960s, around the same time little Barack Obama was running around the muddy alleyways of Jakarta — Obama and Geithner were almost exactly the same age, each born in August 1961 — young Tim was spending his formative years, from six to 11, going to an international school in New Delhi. Foreigners from advanced countries are always horrified to distraction by the poverty of India.

It is the kind of desperate, almost medieval poverty that exists nowhere in the West — families living in garbage cities, children with horrific disfigurements forced to beg by their parents in the middle of the streets of its major cities, such as Delhi and Mumbai. As Peter Geithner recalled, young Americans usually reacted to this culture shock by going to one extreme or another.

Either they poured out their empathy and sought to become more like the Indians, or they isolated themselves as much as possible behind the walls of their international settlements and clubs. Tim Geithner did neither: Even then he was a middle-of-the-road guy. He mainly wanted to learn. And he would remain cautious in the extreme about taking sides.

It was part of what helped him bond with Obama later on. "We had the same piece of experience in a narrow sense of growing up outside the United States, looking at the United States from afar," Geithner told me afterward. "I decided I wanted to work for my country after seeing how it was perceived by the world."

It was in Jakarta that Obama came to appreciate both the powerlessness of his native companions and the status that came from having a white American mother, Ann, who worked for the U.S. embassy. (Obama and Geithner later learned, to their mutual astonishment, that the president's mother had met Geithner's father when she was a researcher working in Jakarta.)

So it was with Tim Geithner. When the Geithner family moved to Bangkok in 1976 and Tim was a young teen, he would also make his way over to the U.S. embassy as a mystical locus of power. Mort Abramowitz, who was then the U.S. ambassador to Thailand, used to give lectures at the embassy on the Indo-Chinese refugee problem in the aftermath of the Vietnam War, which is when he first met Geithner.

It is somewhat ironic in view of all the aspersions thrown at him during his first months as Treasury secretary — that he was too young, too scared of the spotlight — that at 15 Geithner was already mature beyond his years. "He was an avid listener," recalled Abramowitz.

As Geithner later said at his Treasury swearing in: "My father gave me, among many wonderful things, the important gift of showing me the world as a child. It was that experience — seeing firsthand the extraordinary influence of American policy on the world — that led me to work in government."

It also led him to see the world in gray and to never stray too far from the status quo. Geithner went to Dartmouth and then almost immediately headed to Washington to work in government.

He became a man of the establishment, always trying to fix problems — yet always deferring to the reigning zeitgeist. And in the late 1980s and early 1990s, during Geithner's formative years as a policymaker, the reigning zeitgeist was Wall Street's.

After Bill Clinton's Treasury Secretary, Bob Rubin, elevated him from a deputy assistant secretary, Geithner traveled with the Treasury chief everywhere and came to be seen as a zealous protector of his reputation — the perfect protégé.

In later years, after Rubin went back to work on Wall Street and Summers returned to his natural milieu, academia, Geithner would stay in government, and the Rubinesque interventions of the Asia crisis (big, but temporary, leaving Wall Street intact in the end) would continue to be a model for him in the years ahead.

"I think he was persuaded that what the Treasury and the IMF had done in Asia had worked. He was oblivious to the criticisms," said an economist who worked with Geithner later on. "He was competent, and he knew how to take control of a meeting. But he would never be bold. He would not tamper with the balance sheets of the big banks."

Geithner had always been a staff man, the backroom guy. Suddenly he was the cynosure of every market player and government minister at a time when the abyss was still in sight. But he wasn't ready for prime time. Often relaxed behind the scenes, with an ebullient and sometimes giddy sense of humor, Geithner tightened up in front of the cameras.

He was the anti-Rubin, utterly ill at ease when he knew all eyes were on him. In the face of a terrifying global crisis, the boyish-looking Geithner came off as unsophisticated. Though he spoke well, Geithner sometimes slurred his syllables like a teenager rushing through an oral report in class so he could return to his seat.

He had an unfortunate tendency to blush noticeably, as he did when someone asked him about People magazine's selection of him as one of its "50 Most Beautiful People." And he appeared to be learning to read a teleprompter on the job. Geithner hadn't "played the center ring until now," David Axelrod, Obama's chief strategist, explained sympathetically.

"There is a bully pulpit, a theatricality to the role that is unlike any role he's held before." Beyond that, Axelrod told me, "this guy was appointed a general and dropped in the middle of a full-scale war. It takes a little while to get your bearings."

Over the first weeks of the administration, as the markets continued to show no confidence in a revival, the attacks on him grew ever more savage. Bloggers began comparing Geithner to little Macaulay Culkin, joking that he was "home alone" at the undermanned Treasury.

The comedian Bill Maher put up photos of Geithner alongside a deer in the headlights and suggested that President Obama ought to just hire the deer. "Quite simply, the Timothy Geithner experience has been a disaster," Representative Connie Mack announced in early March, calling for his resignation "for the good of the country."

He was also plagued by what many critics say was a tendency to overpromise. In interviews, he invoked his experience in Tokyo as a Treasury attaché in the early 1990s — pledging to avoid the timid response of Japan after its bubble burst, and to apply "overwhelming force," an economic Powell doctrine.

The markets were underwhelmed when they didn't see a big, detailed plan right away. Geithner argued that if you added up all of the Treasury's programs, along with the record $890 billion stimulus plan, he had used as much force as he could, and just about as fast as he could.

Finally, toward the end of March 2009, Geithner began to look steadier as he finally delivered the long-awaited details of his scheme to save the banking system by auctioning off those toxic mortgage assets, newly euphemized by the Treasury as "legacy" assets.

"The fever broke," then-White House chief of staff Rahm Emanuel told me at the time. The steadiness of character that Obama had so identified with when he met Geithner — "The bandwidth on his emotions is very small," as Emanuel put it — began to reassure the markets.

Editor's Note: This piece has been adapted from "Capital Offense: How Washington's Wise Men Turned America's Future over to Wall Street" by Michael Hirsh by arrangement with John Wiley & Sons, Copyright (c) 2010.

Takeaways

Geithner became a man of the establishment, always trying to fix problems — yet always deferring to the reigning zeitgeist.

Geithner had always been a staff man, the backroom guy. Suddenly he was the cynosure of every market player and government minister at a time when the abyss was still in sight.

Though he spoke well, Geithner sometimes slurred his syllables like a teenager rushing through an oral report in class so he could return to his seat.

Young Americans usually reacted to culture shock by going to one extreme or another. Tim Geithner did neither: Even then he was a middle-of-the-road guy.

Bloggers began comparing Geithner to little Macaulay Culkin, joking that he was "home alone" at the undermanned Treasury.