Timothy F. Geithner was appointed as U.S. Treasury
Secretary in January 2009. The next month, he announced the controversial $2 trillion Financial Stability Plan
. He would use funds from the Treasury's Troubled Asset Relief Program (TARP
), as well as the Federal Reserve's TALF, to seed a Public-Private Investment Program. In it, he asked banks to match funds to purchase subprime mortgages
. However, banks didn't want to participate in taking on more bad debt. Others preferred to hold onto their toxic assets, writing them down over the course of years rather than taking an immediate loss.
In March, he was criticized for allowing AIG to pay out $165 million in bonuses to the same employees who caused the firm's $170 billion bailout with taxpayer dollars.
As Treasury Secretary, Geithner became manager of the same TARP fund he coauthored. TARP was funded by the $700 billion bailout package approved by Congress in October 2008. TARP was used to add liquidity to failing investment and commercial banks, and much of it has been paid back. TARP was also used to bail out automakers, and provide mortgage assistance through the HARP program.
TARP was credited by the Congressional Oversight Panel as "stopping an economic panic.” However the Congressional Budget Office (CBO) estimated that TARP ended up costing taxpayers $25 billion, a figure contested by the Treasury Secretary.
Why Is Geithner Important to the U.S. Economy?:
The man filling the job of U.S. Treasury Secretary is important to the economy, no matter who he is. Geithner's history as New York Federal Reserve Chair, co-architect of the $700 billion bailout, and background in the IMF means he has had a more important role than many. He is the only member of President Obama's initial economic team
to remain until the end of Obama's first term. Geithner's experience meant a smooth transition for the Obama Administration in handling the financial crisis. His prior tenure at the Treasury meant he understood currency markets and the impact of a declining dollar
What Role Did Geithner Play in the 2008 Financial Crisis?:
Between 2003 and 2009, Geithner was the head of the Federal Reserve
Bank of New York, which also made him the vice chairman of the Federal Open Market Committee (FOMC
). Geithner was very active in efforts by the Treasury and Federal Reserve to intervene in the 2008 financial crisis
. Geithner was intimately involved in the bailout of insurance company AIG
, investment bank Bear Stearns
, commercial bank Citigroup
, and mortgage giants Fannie Mae and Freddie Mac
. These were all companies that were so intricately involved in the world's financial markets that they were deemed too big to fail
. However, despite attempts to rescue Lehman Brothers
, it went bankrupt, kickstarting the financial crisis.
Tim Geithner almost didn't make it through the confirmation process to become Treasury Secretary. During the hearings, it came out that he neglected to pay tens of thousands of dollars in federal income taxes. Many pointed out this wouldn't set a good precedent for the head of the I.R.S. However, Geithner argued that many employees of the International Monetary Fund (IMF
), where he was a senior executive at the time, were confused about what they owed and neglected to pay the full amount. Most Senators approved of the job he did during the financial crisis, and saw the tax shortfall as an oversight, not outright tax evasion. (Source: New York Times, Tim Geithner Bio
Geithner's Early Career:
Geithner worked for the Department of Treasury between 1988 and 2003. He was Under Secretary for International Affairs from 1999 to 2001 under Secretaries Robert Rubin and Lawrence Summers. He was chairman of the G-10’s Committee on Payment and Settlement Systems of the Bank for International Settlements, a member of the Council on Foreign Relations, and the Group of Thirty.
Before working for the Treasury and Federal Reserve, Geithner was director of the Policy Development and Review Department at the IMF from 2001 until 2003. He also worked for Kissinger Associates.
Geithner has a Master's in International Economics and East Asian Studies from the Johns Hopkins School of Advanced International Studies. He has a B.A. in government and Asian studies from Dartmouth College. He has studied Japanese and Chinese and has lived in East Africa, India, Thailand, China, and Japan. He was born in New York and attended high school in Bangkok, where his father was working as an Asia expert for The Ford Foundation. He also spent part of his childhood in Zambia, Zimbabwe and India. (Source: New York Federal Reserve website; The Australian, "Treasury's next chief no rookie," November 25, 2008)