November 25th, 2013
in Op Ed
by Dean Baker, Center for Economic Policy Research
Andrew Ross Sorkin is angry that people are upset by seeing former Treasury Secretary Timothy Geithner cash in on his public service by taking a job at the private equity company Warburg Pincus. In his column he complained:
"Within 24 hours of Timothy F. Geithner's announcement on Saturday that he would join Warburg Pincus, the private equity firm, a parade of naysayers emerged, almost like clockwork, to criticize the former Treasury secretary's move as a prime example of the evil of the government's revolving door."
As a Geithner defender, Sorkin apparently had hoped that critics would refrain from commenting until Geithner's new job was no longer news.
Sorkin seems to miss the issue here. There is little reason to believe that Geithner's experience in government would give him the sort of expertise that would be expected from a top executive at a private equity company. His record also does not demonstrate an especially astute understanding of the economy, since he consistently underestimated the duration and severity of the downturn, after completely missing the original collapse. The latter could be seen as pretty big gaffe, since he was pretty much sitting at ground zero at the time as president of the New York Fed.
While Geithner may not have expertise in investment or economics to sell, he does have political connections. This is presumably the reason that a private equity company would be willing to pay him a 7-figure salary and give him a top position. Sorkin is also being either naive or disingenuous when he comments on Geithner's past opposition to the carried interest tax subsidy that benefits private equity firms like Warburg Pincus:
"If he changes course now that he is in industry, he deserves a drubbing."
If Geithner changes courses now, he will probably not send a note to Sorkin notifying him of his new views on the issue. This change will likely be exhibited in close door meetings with Geithner's former associates.
Perhaps some of the comment on Geithner's new job was motivated by this line from a New York Magazine article:
"Geithner says it's 'extremely unlikely' he will take a job in the world of finance, but the idea that he is somehow, secretly, working hand in hand with that community persists, and every once in a while someone pulls out records of his phone calls and meetings with CEOs as evidence."
Presumably Geithner was reflecting some of the same sentiments as the critics derided by Sorkin when he indicated that he would probably not seek a job in finance.
Sorkin actually provides a valuable service with this piece since it displays the contempt with which elites view the rest of the country. At one point he favorably notes a comment from Ben White at Politico:
"Ben White of Politico on Monday joked sarcastically in his email newsletter about the criticism of Mr. Geithner's new role: 'Maybe he should have joined the priesthood.'"
Among the other positions open to Geithner were the presidency of his alma mater, Dartmouth, or possibly the head of a major charity (Sorkin suggests Red Cross). These are jobs that would pay high 6-figure or low 7-figure salaries. Such pay would put Geithner at the edge of the top 0.1 percent of the workforce and give him annual earnings 30 or more times as much as the typical worker. However for elite types, this would be the same as taking a vow of poverty and joining the priesthood.