The ethics problems in the financial sector are rooted in conflicts of interest, some willful, some systemic, some naive. The presumption of the Obama administration when it chose Timothy Geithner to be Treasury Secretary at this time of collapsing trust in bid business was that Geithner, a supposedly canny insider, would bring to the job an invaluable understanding of the systemic problems, and perhaps he has. But the fact that he also brought a stunning insensitivity to basic conflicts principles is disturbing.
Although it has never been major news, Geithner accepted the invitation of a Wall Street executive, Daniel M. Zelikow, to live in his $3.5 million Washington, D.C. townhouse when Geithner joined the Cabinet. He lived there for over a year. Now Zelikow has accepted a high ranking job at powerful banking giant JPMorgan Chase, guaranteeing that any action Geithner takes that benefits the bank will create an appearance of payback, back-scratching, and quid pro quo….because, you know, it just might be that.
Geithner’s cozy arrangement didn’t break any Administration ethics rules, which in Washington, D.C. is often taken as proof of ethical conduct. He disclosed the living arrangement and had it approved by the Treasury Department’s ethics officers. He also moved out of Zelikow’s house before his roomie was hired back by JPMorgan. It still shows a dead conflicts ethics alarm, in the head of one guy who needs to have a high-performance, state-of-the-art version. As Prof. Stephen Gillers told The Daily Beast, Geithner now “needs to be purer than Caesar’s wife—purer than Caesar’s whole family.”
The stunning thing is that it was all so unnecessary. Geithner is no pauper; he can afford his own housing. And he isn’t an idiot; he had to realize that accepting rent-free lodging and sharing a house with a key figure in the sector his department’s policies most effect looked terrible. The only conclusion that makes sense is that Geithner knew it was a conflict of interest, and just didn’t care.
Which is exactly how the Goldman Sachs executives thought when they simultaneously sold investment vehicles to customers and bet the company’s money that they would fail. Yes, Geithner thinks like an insider, all right.
A Treasury Secretary with a busted ethics alarm does not inspire confidence, however.
Or trust.
Ethics Alarms 
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When you hire most of your economic advisers from Goldman Sachs, and the rest of them with GS connections, you get what you pay for. To imagine that such people will do what’s good for the country above what’s good for themselves, and for GS, is, frankly, naive. It appears that you are unable or unwilling to imagine the extent of depravity and evil such people are capable of, but that doesn’t make them other than who they are.
I’m not much of a fan of depravity or evil, or GS either, but I want a Treasury Secretary who understands that business, and that’s what appealed about Geithner’s appointment. His tax carelessness–or more likely, cheating–was a strong reason to ditch him, but the country’s situation at that time was truly desperate, so he got a pass.
I think Jack’s judgment is too harsh. Geithner has friends all over the business. So would most people with the qualifications necessary for the job. He disclosed the arrangement publicly. There’s no conflict over and above his friendship.
I think he’s not rich, by the way–he’s been living on a civil servant’s salary for years.
Hmmm.. so for which of these living arrangements would you think mere disclosure suffices for eliminating the “appearance of impropriety,” which is forbidden for all federal employees: 1) Justice Scalia rooming with the head of the Federalist Society; 2) The Interior Secretary being housed gratis by the CEO of Exxon 3)Eric Holder living in the guest house of the New Black Panthers leader, or 4) Dick Cheney being put up by the COB of Halliburton?
My answer: disclosure doesn’t do a thing. Admitting you might be biased doesn’t eliminate the bias. All of these would be terrible, look terrible, decrease trust in the government, and show awful judgment. Just like Geithner.
Appearance is a tricky thing to pin a decision on. I think Geithner is close to the line, but I’d clear him. He could say, “I didn’t do anything wrong, but I won’t do it again.”
But would you come out the same on my hypotheticals?
Hypothetical verdicts:
1) Justice Scalia rooming with the head of the Federalist Society–improper
2) The Interior Secretary being housed gratis by the CEO of Exxon–absolutely against the rules–beyond “appearance”
3)Eric Holder living in the guest house of the New Black Panthers leader–ugly (and improper)
4) Dick Cheney being put up by the COB of Halliburton?–not when he was VP
Agree 100%
I just don’t see that Geithner’s situation is a much better.
Ditto, Kagan, on her 2005-2008 seat on an advisory council for GS, not to mention her misappropiation and alteration of medical opinion of the ACOG on partial-birth abortion to suit the Clinton administration’s inclusion as exception in passing abortion legislation. Why can’t we find honorable people who still know the ins and outs of the halls of high finance to be considered for government positions as economic advisors, not to mention the even more heinous insult of not being able to find them in life-appointments for those who rule on law?
When someone holds a high office in government, they likewise hold a position of high trust. Having correspondingly high ethics should be parcel to this. I know it too rarely is… but that’s another issue!
But ethics alone aren’t enough. The constant observance of propriety by word and deed, in practice and in image, must be extended to the citizens which the official serves. In Geithner’s case, he has time and again projected the arrogant presumption that he is not to be held to standards because of his position, but is himself a judge over lesser mortals. He has done with by word and deed since his nomination for Secretary. Nor has he displayed any mitigating competance in his job.
Alexander Hamilton had his personal faults, too. But he was competant. That didn’t stop a corrupt politician (Aaron Burr) from gunning him down! If duelling were still legal, would we see a modern day repeat of that event? Geithner vs., say, Blago?!
I’d pay to see that one. I wonder if Weehawken is still available for special events?