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Timothy F Geithner will join the private equity firm Warburg Pincus as president, the firm announced on Saturday. It would be his first prominent position since leaving office as Treasury Secretary this year.
The unusually low-key announcement — made with little fanfare on a Saturday morning — is Geithner’s first foray into the private sector in 25 years, after serving in the Treasury Department, the International Monetary Fund and the Federal Reserve Bank of New York.
As president of the New York Fed in 2008, Geithner helped lead the federal government’s response to the financial crisis, including the sale of Bear Stearns and the bailout of the American International Group.
After being confirmed as Treasury Secretary the next year, he supervised the Obama administration’s efforts to stabilise the financial system like the Troubled Asset Relief Program,as well as initiatives that included the rescue of the automakers. Since leaving the Treasury, Geithner has joined the Council on Foreign Relations as a fellow and has taken paid speaking engagements.
Geithner follows in the path of past Treasury Secretaries who, after leaving government, have accepted lucrative Wall Street posts. After leaving the Clinton administration, Robert E Rubin joined Citigroup. John W Snow, a Treasury secretary in the George W Bush administration, joined the private equity firm Cerberus. While Mr Geithner has been given the lofty title of president, several private equity executives questioned whether he would be much more than a prominent name who would help Warburg Pincus open doors on the fund-raising side, especially with foreign investors like sovereign wealth funds. Unlike past Treasury Secretaries Henry M Paulson Jr and Mr Rubin (both alumni of Goldman Sachs), Geithner has been a public servant for most of his career. He has never worked at a bank, and he has no experience making private equity deals. Geithner initially seemed unlikely to join Wall Street. While he was praised for helping prevent the financial crisis from worsening, critics repeatedly assailed his policies during the Obama administration as too friendly to the nation’s biggest banks. One longstanding criticism is that he made permanent the idea that companies that were “too big to fail” would be bailed out if they ran into trouble.
His new employer, Warburg Pincus, is a 47-year-old private equity firm that oversees $35 billion in assets. Unlike rivals like the Blackstone Group and Kohlberg Kravis Roberts, the firm has remained privately held and has kept a low profile.
Still, its investments have included buying control of the eye-care company Bausch & Lomb and the luxury retailer Neiman Marcus. Both were sold this year in multibillion-dollar deals.
“Warburg Pincus has an excellent record of performance, a very compelling global strategy and an ethical reputation of the highest regard,” Geithner said in a statement. “I look forward to working with my new colleagues and to contributing to the firm’s continued growth and success.” Warburg Pincus has also taken stakes in banks aided by taxpayer dollars through TARP. That includes Webster Financial, a New England lender in which the firm reaped a return of about 35 per cent. Another was Sterling Financial, a Washington State institution in which the buyout firm invested $139 million; it was sold two months ago to another bank, Umpqua, for $2 billion.
Geithner has intersected with the private equity industry in other ways. Last year, he suggested that the tax rate on carried interest, or the share of private equity firms’ profits from deals, should rise from its current 15 per cent.
“If you look at any tax reform proposal out there that has any patina of bipartisan support, they believe we have to rethink how we treat investment income and carried interest,” he said at a CNBC conference last July.
He is expected to start at Warburg Pincus on March 1.
