Timothy Geithner has landed a new job, after leaving his position as Secretary of the Treasury earlier this year: president of the 47-year-old New York-based private equity firm Warburg Pincus.
Geithner’s previous experience is mostly in leadership of public-sector financial institutions: at the IMF, the Federal Reserve Bank of New York, and Treasury.
But he brings plenty of assets with him to the private-sector, and in particular, to private equity, says banking consultant Bert Ely.
“Geithner certainly has an enormous number of contacts and a well-developed reputation with nations across the world,” says Ely. “And so he can be particularly effective in providing entrée to these sovereign wealth funds and the investments they make.”
That’s countries such as China, Norway, and the Gulf States, with enormous cash reserves that need to be invested around the world.
Warburg Pincus is the fifth-biggest private-equity firm on the planet, according to Private Equity International’s 2013 list. It has $35 billion in assets under management.
The firm tends to keep a low profile, though it’s bought, and then sold, legendary brands like eyeware company Bausch & Lomb and high-end retailer Neiman Marcus.
The Treasury Department under Geithner is credited during President Obama’s first term with rescuing banks deemed “too big to fail,” and for crafting the new regulatory regime under Dodd-Frank designed to prevent another financial crisis from happening.
Karen Shaw Petrou at Federal Financial Analytics says private equity firms like Warburg Pincus have a very different risk profile from the mega-banks that Timothy Geithner’s Treasury Department helped bail out.
“I think the risks there of a systemic crisis are low,” says Petrou, “because there are many private equity firms and the key to them is going their own way. If they all bet on the same companies, there wouldn’t be any significant upside. And these are guys who are all about making big money as fast as they can — that’s what private equity is about fundamentally.
Timothy Geithner is on the record favoring increased taxes on private-equity firms and their principals. He said last year that the tax on carried interest — the share of private equity firms’ profits from deals — should be raised from its current 15 percent rate.