Tim Geithner, the US Treasury secretary, acted to shield Citigroup
’s bondholders and management from accountability at the height of the financial crisis while taxpayers were left on the hook, a former US bank regulator has alleged.
Sheila Bair, who served as chairman of the Federal Deposit Insurance Corp during the crisis and its aftermath, levelled fresh attacks at Mr Geithner, the Obama administration, fellow financial regulators and bankers such as Vikram Pandit, Citi’s chief executive, in a new book that has laid bare policy disagreements
of the past few years.
Ms Bair claims that Mr Geithner was relentless in his advocacy for Citi, both in its attempts to buy faltering lenders and when it came to applying restrictions tied to its various rescue packages by the government. “Tim seemed to view his job as protecting Citigroup from me, when he should have been worried about protecting the taxpayers from Citi,” Ms Bair wrote of Mr Geithner, who she nicknamed the “bail-outer in chief” of the 2008 crisis.
Officials who worked with Mr Geithner at the time said every decision made to rescue large financial groups was done with the broader economy in mind at a time when it was facing its steepest decline since the Great Depression.
Ms Bair criticises Mr Pandit for a lack of commercial banking experience and says she tried to force him out. Ms Bair was “pushing hard” for Jerry Grundhofer, former chief executive of US Bancorp, to replace Mr Pandit.
Citi’s board “could have done so much better than Pandit”, Ms Bair wrote.
Ultimately, she says, Mr Geithner did not want Mr Pandit to be replaced. Ms Bair attributes the decision to his close relationship with Robert Rubin, the former Treasury secretary who had served as Citi’s chairman.
Taxpayers were unnecessarily put at risk and Citi, despite its weakness at the time, was allowed to avert nationalisation, a forced reorganisation
or meaningful restrictions on its activities, Ms Bair alleges.
“The public justifiably wanted retribution. Citi should have been led to the pillory,” Ms Bair writes.
A spokeswoman for Mr Geithner declined to comment.
Citi said: “Since Vikram Pandit became CEO during the financial crisis, Citi has executed a strategy based on returning to the basics of banking and building a culture of responsible finance.”
“It is a simpler, smaller, safer and stronger institution than it was five years ago and this record speaks for itself.”
Ms Bair also alleged that Mr Geithner and other senior officials in the Obama administration were not concerned with helping distressed homeowners. She said Mr Geithner fought reform proposals championed by her and her allies because he wanted to protect Wall Street groups.
Additional reporting contributed by Tom Braithwaite in New York