Entry Event: Tim Geithner To Join Private Equity Giant Warburg Pincus
When Tim Geithner announced his departure from the US Treasury in January, the only question was how long would it take the former NY Fed head to get a job with the only industry that he cared about as either a Fed or Treasury official: Wall Street. Tim did his best to diffuse such speculation with amusing stories about writing books, which were accentuated by his refusal to join the Fed chairmanship race. Why not? After all there was nobody that Wall Street would benefit more from as the head of the Fed than TurboTax Tim. Today, less than a year after his exit from public service, the answer has presented itself - Tim Geithner is joining private equity titan Warburg Pincus, his first private sector job in decades since working for Henry Kissinger early in his career.
The WSJ broke the story:
Mr. Geithner, who has spent most of his career outside the private sector, said in an interview he plans to start in March at the New York-based firm, known for its role in buyouts of companies including eye-care firm Bausch & Lomb Inc., luxury retailer Neiman Marcus Group Inc. and stadium concessionaire Aramark Corp.
At Warburg, he will serve as president and managing director, not the kind of figurehead or advisory positions that public-sector figures often land after government stints. Mr. Geithner, 52 years old, is expected to work on mapping the firm's strategy and management, investor relations and on matters related to the firm's investments.
"When they approached me, they clearly wanted me to play a substantive role in helping them manage the firm," he said. Citing the firm's global reach and "low-key" nature, he said Warburg is "culturally very compatible with what I was looking for."
Warburg Co-Chief Executive Charles Kaye said Mr. Geithner will be "absolutely a full-time member of the partnership. He will very much be here every day." Mr. Geithner will report directly to the co-CEOs.
The revolving door into private equity is a staple for former government workers, who have worked on behalf of Wall Street, if not Main Street, for the entire careers, and upon their "reitrement" comes the time to get paid. "Earlier this year, KKR & Co. tapped David Petraeus, the former general and Central Intelligence Agency chief, to lead an internal team focused on macroeconomic forecasting and public policy. Former Vice President Dan Quayle and former Treasury Secretary John Snow work for Cerberus Capital Management LP. Carlyle Group LP has enlisted many officials from the Bush and Clinton administrations, including former Secretary of State James Baker III, in advisory roles."
How much would Tim Geithner get paid? It is not immediately unclear: "Warburg Pincus declined to discuss Mr. Geithner's compensation, but it said he would be a partner and invest in its funds." What is clear is that his all in comp would be order of magnitude greater than the paltry $190,000 he was getting when providing trillions in taxpayer funds to bailout the Wall Street oligarchy, among which firms like Warburg Pincus.
In the end, the narrative goes, it was a choice between a book and a job paying millions.
Mr. Geithner has long considered a career in investing once his days in Washington ended. He has been reluctant to take a job with any banks, which he once regulated, and views private-equity firms and other investment managers as different from the institutions he oversaw as New York Fed chief.
Mr. Geithner had been weighing job options while writing an account of the financial crisis, due out next year.
In August, Mr. Kaye and Joseph Landy, Warburg's other co-chief executive, reached out to Mr. Geithner through a mutual acquaintance. A series of meetings at Warburg's Lexington Avenue headquarters and Manhattan restaurants followed, Mr. Landy said.
The best news: since carried interest tax rates are as low as ever with the PE lobby prevailing as usual over the the hypocritical calls of the "Patriotic Millionaires" to raise income tax for the rich (if not so much tax on assets or carried interest) not even TurboTax will be able to confuse the $0.00 in the "amount owed" line.
In conclusion we extend our sincerest congratulations to Mr. Geithner. After all, injustice once again prevails, and the man who now documentedly leaked Fed secrets to Wall Street has finally gotten his comeuppance.
On August 17, 2007, the Fed's Board of Governors announced a key change to primary credit lending terms, whereby the discount rate was cut by 50 bp — to 5.75% from 6.25% — and the term of loans was extended from overnight to up to thirty days. This reduced the spread of the primary credit rate over the fed funds rate from 100 basis points to 50 basis points. News of the emergency measure was supposed to be kept secret from market participants as it was substantially market moving. It wasn't. And just when we thought our opinion of the outgoing Treasury Secretary and former NY Fed head Tim Geithner, whose TurboTax incompetence is now legendary, couldn't get lower, it got lower. Much lower.
From the August 16, 2007 transcript (page 13 of 37) of the conference call preceding this announcement.
MR. LACKER. If I could just follow up on that, Mr. Chairman.
CHAIRMAN BERNANKE. Yes, go ahead.
MR. LACKER. Vice Chairman Geithner, did you say that [the banks] are unaware of what we’re considering or what we might be doing with the discount rate?
VICE CHAIRMAN GEITHNER. Yes.
MR. LACKER. Vice Chairman Geithner, I spoke with Ken Lewis, President and CEO of Bank of America, this afternoon, and he said that he appreciated what Tim Geithner was arranging by way of changes in the discount facility. So my information is different from that.
CHAIRMAN BERNANKE. Okay. Thank you. Go ahead, Vice Chairman Geithner.
VICE CHAIRMAN GEITHNER. Well, I cannot speak for Ken Lewis, but I think they have sought to see whether they could understand a little more clearly the scope of their rights and our current policy with respect to the window. The only thing I’ve done is to try to help them understand—and I’m sure that’s been true across the System—what the scope of that is because these people generally don’t use the window and they don’t really understand in some sense what it’s about.
At least we now know who the bankers' mole on the FOMC was before, as gratitude for his services, he was promoted to Treasury Secretary of the US. Because if he leaked one, he leaked them all.
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And now that he is no longer beholden to the "American People" it's truly time to get paid.
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