Ex FDIC Chair: Citigroup (NYSE: C) CEO Pandit Has Geithner to Thank for Keeping Job
During the financial crisis of 2008, perhaps no firm is more emblematic of the meltdown then Citigroup (NYSE: C), the New York based banking behemoth which required a massive government loan to avert failure, following a series of bad investments and mismanagement. Now, Shela Bair, the former FDIC chief, alleges that Citigrop’s CEO Vikram Pandit has Treasury Secretary Tim Geithner to thank for keeping his job.
The former financial regulator Bair says that Treasury Secretary Timothy Geithner was primarily concerned with shoring up Citigroup and other banks in his response to the financial crisis, rather than holding those banks accountable. Bair, on a media tour for her new book “Bull by the Horns” recounts the inner workings of regulators and meetings with elected officials and top bank representatives as they collectively sought to stave off failure.
Bair heavily criticizes Geithner in the book for his role (then as the President of the New York Federal Reserve) for having the wrong goal in mind. To his credit, similar arguments are made against Bair in former Treasury Secretary Hank Paulson’s book, and Sorkin’s “Too Big to Fail”. In those cases, the authors allege Bair failed to understand the importance of saving the banks from collapse, and the contagion it would have surely spread.
Bair, who served as chair of the Federal Deposit Insurance Corporation (FDIC) between 2006 and 2011, states “He was in constant communication with [Citigroup CEO] Vikram Pandit throughout that whole process, and I felt like he and Vikram were figuring out what they were going to do and then trying to jam it on me. I do think that a lot of the policy decisions that were made were made through the prism of what Citigroup needed.” “He viewed these institutions as entities that needed to be taken care of,” Bair said of Geithner, adding he thought the banks “needed to be taken care of and that this was just a big systemic event, and we needed to protect them – whereas I wanted them to have accountability. They had caused this.”
“If you view the banks themselves as victims just of the larger crisis, then you’re going to just try to help them however you can, and I think that was his guiding philosophy,” she added.
The ex post facto criticism of Geithner and the system in general will likely help sell books and perhaps put her in good graces of the general public – but the question remains, would having let them failed actually improved the economy? Most signs point to no.