Are the good folks at the New York Times breaking ranks and actually criticizing a decision by president-elect Barack Obama?
Such seemed to be the case Tuesday when the Gray Lady published, on the front page of the business section no less, an article highly critical of proposed Treasury Secretary Timothy Geithner.
Entitled "Where Was Geithner in Turmoil?", Andrew Ross Sorkin's piece actually pointed fingers at Obama's choice to head the Treasury department for his potential involvement in the nation's current financial crisis (emphasis added throughout):
Mr. Geithner’s involvement in several ultimately ill-fated efforts to buttress the American financial system is the very reason some Wall Street C.E.O.’s — a number of whom spoke on the condition of anonymity for fear of piquing the man who regulates them — question whether he’s up to the challenge.
“We have only two things to say about Tim Geithner, who we do not know: A.I.G. and Lehman Brothers,” said Christopher Whalen of Institutional Risk Analytics. “Throw in the Bear Stearns/Maiden Lane fiasco for good measure,” he said.
“All of these ‘rescues’ are a disaster for the taxpayer, for the financial markets and also for the Federal Reserve System as an organization. Geithner, in our view, deserves retirement, not promotion.”
Ouch. But there was more:
Mr. Geithner also oversaw and regulated an entire industry whose decline has delivered a further blow to an already weakened American economy. Under his watch, some of the biggest institutions that were the responsibility of the New York Fed - Bear Stearns, Lehman Brothers, Merrill Lynch and most recently, Citigroup - faltered. While he was one of the first regulators to smartly articulate the potential for an impending disaster, a number of observers question whether he went far enough to stop the calamity.
Perhaps what has most people on Wall Street stirring is Mr. Geithner's role in the fall of Lehman. At the time of its bankruptcy, he, along with Mr. Paulson, appeared to be the most vocal in supporting the government's refusal to bail out the firm, according to people involved in various meetings. With hindsight, many in the financial industry blame a deepening of the global financial crisis on the government's decision to let Lehman crumble.
There's no question that history will look upon the decision to not bail out Lehman as the catalyst which worsened the financial crisis. Look at what happened to the market since:
The Dow Jones Industrial Average closed at 11,422 on Friday, September 12. On Monday, September 15, after the announcement the government was not going to bail out Lehman, and the filing of its bankruptcy, the Dow plummeted 504 points beginning a two and a half month rout of epic proportions.
As such, there's no question history will view the Lehman bankruptcy as the catalyst, and likely why the Times noticed how the Obama team is doing everything possible to distance Geithner from this decision:
Perhaps not surprisingly, there have been moves afoot in recent weeks by some in the New York Fed and Obama team to put distance between Mr. Paulson and Mr. Geithner, whose salary was $398,200 last year and who will take a pay cut to $191,300 in his new role.
These include the suggestion that Mr. Geithner was not in league with Mr. Paulson over Lehman; that Mr. Geithner pressed to save the firm from bankruptcy; that he was a lone voice on the subject and was overruled by Mr. Paulson and Ben S. Bernanke, the Fed chairman, on this issue.
The validity of this new claim is hard to verify. The New York Fed declined to comment.
Many executives suggest it may be a bit of revisionist history. "If that's true, he did a good job of hiding it," said one executive who spent the weekend at the New York Federal Reserve the weekend of Lehman's fall.
Fascinating the Times would question Obama's selection this way, wouldn't you agree?