I’ll admit to being a bit surprised to learn that former Treasury Secretary Timothy Geithner has agreed to become president of the private equity firm Warburg Pincus. On the one hand, it shouldn’t come as a shock that a guy with perhaps a deeper understanding than anyone else of how markets, government, and the economy interact should decide to apply those talents to making money.
On the other hand, the news did surprise a lot of people who expected Geithner to become a university president or the head of an NGO or some other eminent non-Wall Street position. I was in the latter camp, for two reasons. First, despite the comically widespread misimpression that Geithner was born into money and had worked for Goldman Sachs, he actually grew up abroad as the son of a USAID officer who later worked for the Ford Foundation. In this 2010 profile, he told me, as he’d told others, how his upbringing had shaped his values and worldview: “I saw from an early age what impact the U.S. could have on the world, for good and for not-so-good. My parents’ friends, from an early stage in life, were in that world—Oxfam, CARE, World Bank, Amnesty International.” This experience, he suggested, was an important reason why he chose a career in public service rather than in the private sector.
The second reason I assumed he’d go the university/NGO/eminent-author route is that it would hardly be incompatible with personal enrichment. Geithner already has a million-dollar book deal and could have made a whole lot more giving speeches. This isn’t to suggest there’s anything particularly wrong with private equity—just to underscore that Geithner himself frequently expressed admiration for those who devote their lives to public service and had, through age 52, done so himself with the exception of a short stint as an analyst at Kissinger Associates while in his 20s.
Regardless, Geithner has decided to try his hand at private equity, instead, and will undoubtedly excel. This has drawn condemnation from such people as Noam Scheiber at the New Republic (who got to know Geithner close up while working on an excellent book about the financial crisis and its aftermath). And this, in turn, has prompted counterattacks from Geithner defenders such as Politico’s Ben White: “The problem with much of the criticism is that it fails to actually pinpoint what it is that Geithner is doing wrong, beyond the vague notion that he is somehow reducing people’s confidence in regulation.”
It’s true, as White argues, that Geithner isn’t going to work for Goldman Sachs (GS), or Citigroup (C), or some other direct beneficiary of the government support he helped design and implement during the crisis. But at the same time, I don’t think it’s very hard to fathom—or it shouldn’t be, anyway—why people who understand Geithner’s considerable contributions to the public good (and know that he never worked for Goldman) might nonetheless be disappointed by his decision.
Here’s a stab at it: For all the criticism directed his way, Geithner was the exceedingly rare example of the idea that you can be a talented, high-level regulator and public servant and exist entirely apart from Wall Street financial interests. That won’t be true any longer. Geithner’s joining Warburg Pincus, while perfectly defensible on moral and ethical grounds, will nevertheless deepen public suspicion that the interests of Wall Street and Washington are one and the same; that they trump the public’s interest; and that government service, especially in the realm of financial regulation, is merely prelude to a remunerative career later on and is conducted with that career in mind. That may not be fair to Geithner, who didn’t create this state of affairs. But he could have stood as a prominent counterexample to this widespread view—and now he can’t.