TEXT OF INTERVIEW
Kai Ryssdal: We’ve got a standing request into the Treasury Department to have a chat with Secretary Timothy Geithner. He’s a tough guy to get on the line, as you might imagine. Busy trying to fix the economy and all. But a story out today from the Associated Press does shed some light on his telephone habits. The AP got its hands on the first seven months worth of the secretary’s appointment calendars. They show a whole lot of time, 80 conversations over those seven months, spent on the phone with executives from three big Wall Street banks: JPMorgan, Citigroup and Goldman Sach. For some insight into who Mr. Geithner ought to be talking to, if not Wall Street, we’ve called Anil Kashyap at the University of Chicago. Good to have you with us.
ANIL Kashyap: Great to be here.
Ryssdal: Two ways to look at this story, I suppose. One, and I wanted to run both of them by you. The first is isn’t this who we want Treasury secretary to be talking to? The people who run the big banks in New York City and what’s the big deal?
Kashyap: What’s the alternative? He isn’t talking to them, and he’s trying to rewrite the rules of finance and just kinda sitting in a cave by himself and sending out smoke signals or something. It’s completely naive and impractical to think that given all the taxpayer money that we’ve put into some of these institutions, and given the changes in the rules of the game that he’s proposing, that he would be doing this in isolation.
Ryssdal: Well, let me run another thought by you then. That what you really want in a Treasury secretary who is trying to overhaul the entire U.S. economy, and a good chunk of the global economy as well, is a guy who is talking to everybody. And that no matter who calls, you gotta pick up the phone.
Kashyap: It’s overlooked and perhaps not understood. But for the first four months of the administration, he had essentially zero people confirmed. And as a matter of law, even if he’s got deputies that are in the wings, awaiting confirmation and all that, they cannot speak externally to anybody on behalf of the Treasury. So I’m sure he took more calls the first few months than even maybe he cared to because he literally couldn’t hand them over to a deputy.
Ryssdal: To that point though of who he is talking to, I mean the United States government is into the Bank of America for $45 billion. But in the first seven months, according to the AP this morning, Ken Lewis, the CEO of Bank of America, only appears on the Treasury secretary’s call sheet like three times, but he’s talking to Lloyd Blankfein at Goldman Sachs practically every other day.
Kashyap: Given the trouble Mr. Lewis was in maybe he didn’t want to be talking to anybody in the government. That doesn’t mean that there weren’t other people throughout the Treasury and the Federal Reserve that would have been in contact with BofA.
Ryssdal: Are you stratified that Secretary Geithner is getting the advice he ought to have?
Kashyap: Sure. The case for being concerned about something like this would be if there was this mysterious backroom process and all of the sudden up pops a bunch of legislation that seems to come from nowhere. I think the concern about the Treasury is just that they haven’t had the traction to push regulatory reform as far as it needs to go. You know, we’re a year past Lehman, and if it were to happen again, he’d have essentially the same toolkit that they had a year ago.
Ryssdal: Isn’t part of what’s raised a lot of questioning about this, though, isn’t the fact that Mr. Geithner comes from the New York Federal Reserve, he is by some seen as captive to the wishes of Wall Street, and this certainly isn’t helping his case any.
Kashyap: I’d like to hear how we could have rewritten the rules for the financial system without consulting the people whose businesses were going to be most affected. I just don’t think that’s the way Washington does work, and I don’t even think it’s the way it should work. If he’s going to propose something that’s going to be dead on arrival because the entire financial services industry is going to pull out all stops to lobby against it, it’s in our interest to have him know that ahead of time or to try and figure out where they can find agreement.
Ryssdal: Anil Kashyap teaches economics and finance at the University of Chicago Booth School of Business. Thanks a lot.