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In Private Papers, A More Candid Tim Geithner Speaks Out

The former Treasury secretary and architect of the Obama administration’s financial rescue sounds more like some of his detractors in papers that were never meant to be public.

More than 500 pages of private papers obtained by ProPublica show a different side of former Treasury Secretary Timothy Geithner. Above, Geithner walks to the U.S. Court of Federal Claims in Washington, D.C., on Oct. 7. (Andrew Harrer/Bloomberg via Getty Images)

Pop quiz: Which high-profile official faulted the Obama administration for the following botched responses to the financial crisis?

1) Policing bad banks: "The enforcement response we sought came way more slowly than would have been ideal ... and (inevitably) fell far short of what people thought would be appropriate ...

2) A mortgage task force Obama announced in his 2012 State of the Union speech "was not about the average individual victims, but more the fights among the consenting adults that had sold and bought mortgage securities that performed badly."

3) The government's $25 billion National Mortgage Settlement to fix botched foreclosures "was ridiculously protracted and ultimately unsatisfying in the penalties imposed and relief sought."

Outspoken progressive Sen. Elizabeth Warren, D-Mass.?

Libertarian firebrand Sen. Rand Paul, R-Ky.?

Sorry, no. The answer is actually Timothy Geithner, the former Treasury secretary, architect of the crisis rescue packages and, more typically, the Obama administration's stalwart defender.

The criticisms all come from a cache of previously unreleased documents prepared for Geithner's recent memoir, "Stress Test," that are part of one of the biggest legal fights from the financial crisis, a case against the government by shareholders of insurance giant AIG.

The 500-plus pages of private papers obtained by ProPublica show a different side of Geithner – one more candidly critical of the administration's policies and of his own shortcomings. In some instances, they express views he watered down or left out of the book, particularly when it comes to the administration's efforts to police Wall Street and get relief to homeowners.

Geithner declined to comment, spokeswoman Jenni LeCompte said.

In the book's chief analogy, Geithner and the administration are firefighters battling a cataclysmic financial arson. They can punish the arsonists by letting the big banks burn down, but the greater good is to save them, though not necessarily their shareholders, and prevent the collapse of the whole financial system.

That theme is echoed in the private papers, but they also make clear that Geithner believed the rescue came up short on multiple fronts.

"We sought a very powerful enforcement response by competent authorities," he writes in a May 2013 memo titled "On the Politics of the Crisis Response" and slugged "TFG draft." "This didn't turn out as we'd hoped, in part because we didn't give it enough attention."

The memo, written after Geithner left the Treasury job, seeks to explain why the government rescues were not politically popular and tilted toward Wall Street rather than Main Street.

Enforcement was slow "in part because the illegal stuff was very hard to prove," Geithner writes, but also because of expectations "given the prevailing view that the crisis was caused by criminals [sic] behavior of a few bankers and mortgage brokers and investors."

Attempts to shake up supervision fizzled. "We changed part of the leadership of the financial oversight system, but not in a way that signaled a new team of sheriffs," he says. "The bank supervisors got tougher, but we had no high-profile firings."

Obama's regulatory picks, he goes on, were not initially seen as "likely to be tough enforcers."  He cites his own background as "a former sort of bank supervisor" during his prior job as president of the Federal Reserve Bank of New York before and during the crash. (The New York Fed supervised giant Wall Street banks; Geithner's book acknowledges that he missed troubles at Citigroup and didn't push hard enough for bank safeguards.)

Some of the administration's enforcement efforts were misplaced, Geithner adds, singling out the Securities and Exchange Commission. "A huge part of the SEC's attention was on insider trading," he says, "which though offensive and damaging played no role in causing the crisis."

In "Stress Test," Geithner argued that the amount of mortgage fraud "deserved a more forceful enforcement response than the government delivered." At the same time, he said it would be "inaccurate" to say "Wall Street paid no price for its misbehavior," given that big banks paid more than $100 billion in fines related to the crisis. 

The 2013 memo is less evenhanded. Besides criticizing the national mortgage settlement, which was mostly meant to help foreclosed borrowers, Geithner faults a Justice Department mortgage fraud task force as a "good idea, (that) delivered little."

"We put in place innovative and quite expensive programs to help homeowners refinance and restructure mortgages and to support small business lending," he writes. "Here, too, the programs seemed small, and limited, and late relative to the magnitude of the damage done by the crisis."

ProPublica has reported extensively on the failings of government mortgage relief programs and the failure to prosecute corporate wrongdoers.

The Geithner papers, portions of which are redacted, were produced in the ongoing AIG case in the Federal Court of Claims in Washington, D.C., and have not been widely available.

In the lawsuit, former AIG chief Maurice Greenberg and other shareholders are seeking $40 billion to resolve claims the government's 2008 bailout imposed more onerous terms on the insurer than banks. Geithner defended the government in testimony earlier this month.

Besides several memos like the one from 2013, the papers include transcripts of informal conversations Geithner had with his collaborators while working on the book. In some of this material, a visceral distrust of populists, business groups, labor leaders, politicians and the media emerges, as does a sense of being unfairly under siege.

"We took a pragmatic course focusing on things that were central to the crisis — wars of necessity not wars of choice," Geithner writes. "This put us in no man's land, as we found ourselves on so many policy issues, with reforms that enraged the right, but did not really satisfy the left."

"I had deep distrust and scorn for the prevailing populist impulse" and didn't expect "broader public acclaim for the shit we had to do," the 2013 memo says. In other musings, he declares himself no fan of the Tea Party or what he called "professional progressives."

In an accounting from his book, Geithner estimates that the various government rescue efforts, as of the end of 2013, resulted in a $166 billion surplus for taxpayers. That is the net difference between almost $200 billion in positive results from programs adopted in 2008 minus losses of more than $30 billion from Obama's auto and housing rescues.

But the media, in Geithner's view, didn't give enough credit to the administration's successes, which quickly became "old news," and were slow to correct mistakes.

In one transcript, Geithner calls a prominent news anchor who'd interviewed him a "super dick," though he also admits, "I kind of deserved it." Another widely followed business columnist, who he asked to correct a mistake, was a "crazy person," he says.

All the same, Geithner was willing to cooperate with writers who took a more humanistic or favorable approach; he mentions a 2010 article in Vogue as well as a 2009 interview with a prominent editorial columnist Geithner said didn't "really know anything about this stuff."

Geithner faults himself and the Obama administration for not doing a better job in communicating good news, especially the positive results from TARP, the $700 billion program to buy troubled assets and equity from banks.

The TARP was organized by Hank Paulson, Geithner's predecessor at Treasury under the Bush administration. President Obama "was not going to go out and say 'I just want to remind you of this stuff that Paulson and Geithner did that I supported' as a senator, Geithner says in one transcript. Obama could not trumpet the returns because unemployment remained too high, he adds.

In his book, Geithner took Washington's political culture to task for "backbiting and posturing and political gamesmanship." He is even more critical in private.

Labor leaders wasted their time on fighting regulation of derivatives – the complex financial securities that helped inflame the crisis – because "it was not going to have any measurable effect on the fortunes of organized labor," he wrote in the 2103 memo.

The business community, too, had its "share of extortion or protection rackets like the Chamber of Commerce," Geithner writes, though "it was often hard to tell who was corrupting whom. The politicians did all sorts of things to raise money, some of them extortion-like."

As for the "smart, old, global businesses," they were "stunningly naive about how easily they were played" and how their money was spent "in all sorts of dumb ways."

Geithner confesses to some naiveté of his own.

"I really had no idea of the limits of executive and president power on economic issues," he writes in the 2013 memo. "I had no idea how little leverage we had over individual members of Congress." Geithner says he made a "very good prop" at hearings because "I attracted so much attention. No questions were really ever asked with the purpose of being answered."

"Nothing with Congress was on the up and up," he writes. "Only the slimmest pretense of seriousness."

At one point Geithner admits to sounding "kind of whiney."

One misconception that troubled him was a persistent belief that he had once worked on Wall Street. That was not true; most of his career was in the government.

Once he left the administration, that changed. In late 2013, Geithner went to work in New York at the private equity firm Warburg Pincus, where he is president and managing director.

Do you have thoughts to share about Tim Geithner or the government's response to the financial crisis? Email Jeff.Gerth@propublica.org

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