Geithner goes private

Geithner smartly passes on a big bank job, barely

Tim Geithner is smart enough to pass on a big bank job. After 25 years in the public sector, the former US Treasury Secretary will finally make some money on Wall Street. But he won't join Goldman Sachs, Citi or any of the institutions he helped bail out. He'll work for private equity titan, Warburg Pincus. Although he never had to rescue that industry, Geithner had a hand in reforms that arguably made buyout firms richer. 

Since Geithner left Washington last January, speculation had been swirling on where he'd land next. He took some time to write a book, which will be out sometime next year. But as a relatively young retired Treasury boss and former New York Federal Reserve president, he would be a valuable addition to almost any financial firm - both for his political connections and expertise of finance and markets. 

Going to a bank would have damaged his reputation. At the Fed, he helped design the 2008 bank rescue programme, in which every large US bank participated. He later helped administer the bailout and stress tests while running the Treasury. Cleverly, he's entering Wall Street through a door with enough distance to escape impropriety.  

As president of Warburg, which manages $35 billion of assets, he'll work on various aspects of strategy and management. Warburg isn't completely unattached from banking. Some of its investments include bond insurer MBIA and Santander Consumer USA, a firm affiliated with the Spanish bank that provides subprime auto loans. 

The Dodd-Frank bank reforms Geithner championed while working for President Barack Obama cracked down on the sorts of activities in which financial institutions could participate but had a lighter touch on buyout firms. Indeed, some facets of the law arguably helped push investment opportunities and cash away from lenders to firms like Warburg, which face a much looser regulatory regime. Come to think of it, Geithner's choice is more telling than it is scandalising. He's going to an industry that can take bigger risks and write fatter paychecks without socialising any losses. There's a lesson for the rest of Wall Street in that decision.