Phone calls say a lot about us.
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Our phone bill is like a graphic history of our daily lives.
If Regis is trying to stump you on your way to that million-dollar payday, who you call really matters.
Take phone calls made and received by current Treasury Secretary Tim Geithner or his predecessor, Hank Paulson.
At every critical juncture during the height and breadth of the financial crisis, both men spent an inordinate amount of the time chatting it up with their buddies on Wall Street.
We Think We Know Why
They may have simply been catching up on the latest Wall Street gossip or lamenting the loss of their favorite basketball team. Nobody really knows.
There’s no law or regulation that says that the Treasury Secretary or any other government official is precluded from phoning a friend. In fact, we probably want high ranking regulators or policymakers like Paulson and Geithner staying in touch with the folks on the ground.
But there’s a fine line between keeping your finger on the pulse of Wall Street and the appearance of chummy impropriety. This seems like the latter.
While Geithner’s phone calls to his BFF’s (Best Friends Forever) on Wall Street from his strategic perch as the nation’s top economic official may be less frequent than Paulson’s, their potential significance is no less telling.
For example, at the conclusion of a busy week last spring while the federal government was in the midst of propping up the housing market and saving General Motors from its date with oblivion, Geithner had late night telephone conversations with three key players in the financial crisis.
Call No. 1 was with Lloyd Blankfein, CEO of Goldman Sachs. The second was with Jamie Dimon, the CEO at JP Morgan Chase. The third was from President Obama. Following the call with his boss, Geithner was back on the phone again with Blankfein.
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As the former President of the New York branch of the Federal Reserve Bank, Geithner has known these Wall Street power brokers for years. Like Paulson, who held of post as the CEO of Goldman Sachs before coming to Treasury, Geithner obviously has formed close relationships with the likes of Blankfein, Dimon and top management at other Wall Street banks such as Vikram Pandit at Citigroup.
Motivation Behind the Calls
Phone records, however, show that Geithner has had more contact with Citigroup than with Rep. Barney Frank, D-MA, who is leading the effort to approve Geithner's overhaul of the financial system. Geithner's calls to Goldman’s Blankfein far outnumber his telephone conversations with Sen. Chris Dodd, D-CN, Chairman of the Senate Banking Committee.
At every turn during the wild ride that has defined this financial crisis, Wall Street banks like Goldman Sachs and JP Morgan have not only been ahead of the curve, they’ve prospered. While hundreds of thousands of businesses, including community and regional banks, have struggled to survive, these guys have posted record profits.
Last fall when it looked as if the financial system was about to collapse, Geithner as the President of the New York Fed engineered the multibillion dollar taxpayer bailouts for Goldman, JP Morgan and Citigroup. The CEOs of these banks had unfettered access to Geithner then, and it did not stop when he donned the mantle as the U.S. Treasury Secretary.
In all fairness to Geithner, not every banking mogul pops up on his call sheet. He has had relatively little contact with Bank of America’s outgoing CEO Ken Lewis even though the federal government has a hefty investment in the Charlotte, NC, based bank. This lack of access may, in part, explain why Lewis is being forced to tender his resignation.
During the height of the crisis, Geithner had no contact with officials at General Motors, and only one call with the fellows at Chrysler. The latter was probably a call to bid the former American carmaker arivaderci as it was folded under the banner of the Italian auto company Fiat.
Geithner also had very little contact with officials at Wells Fargo. But he made lots of calls to Larry Fink, CEO of BlackRock, Inc., one of Wall Street’s largest private equity managers with assets topping $1.37 trillion.
Perhaps it’s just a coincidence that BlackRock was one of the select firms that was awarded a potentially lucrative slot to manage Treasury’s Public-Private Investment Program to dispose of “toxic assets.” As an outsider looking in, that‘s not the way it appears.
Maybe Geithner is not phoning the likes of Wells Fargo, General Motors or Bank of America because he has a “friends and family” cell phone plan that only lets him call New York. On the other hand, maybe he's only doing what most of us would do naturally, if and when we reached the lonely pinnacle of our profession … rely on friends who got us there.
In politics, perception often is more important than reality.
From the plain evidence, each of these firms has had unparalleled access to Mr. Geithner, and to Mr. Paulson before him. Each has flourished while the rest of us have floundered.
Mr. Geithner and his boss talk a good game. From my vantage point, however, the players may have changed. But it sure seems the rules have remained the same.
In the end, it’s not what you know but rather, who you know.
You make the call.
John Cohn is a senior partner in the Globe West Financial Group, based in West Los Angeles. He may be contacted at www.globewestfinancial.com
