In an interview with The Washington Post, Treasury Secretary Geithner made two interesting, and in my mind conflicting, statements. First, he was asked a question regarding the fact that the government now has controlling interest in the insurance industry, auto industry, and banking industry:
WaPost: How do you keep from making the mirco-decisions when you're making the big decisions with these companies?
Geithner: We do not want to be in the business of running on a day-to-day basis any of these entities. We do not want to be in the business of owning any share in these companies over the longer-term. So everything we do will be designed to improve the odds that we get out quickly, that taxpayers have no ongoing relationship, that we protect the taxpayer's interests in the near term. That would be our objective, we don't want to be in the business of running these companies.
Ok, sounds like the party line. I appreciate the position, we don't want the government to be in the business of running companies. And Geithner's position has consistently been that he only wants to keep the rescue measures in place long enough to make sure all companies are healthy. There are a lot of problems with this position--a big one being that any company in a competitive market runs the risk of going bankrupt--but that's not the point of this post. What Geithner said next is what was disappointing.
Given that AIG chief executive Ed Liddy has announced he is stepping down, the WaPost asked about the government's role in searching for his successor. Geithner said that AIG has begun the search with Treasury's "support and encouragement." So the reporter asked a clarifying question:
WaPost: So the federal government, and you in particular, will have a role in finding a replacement for him?
Geithner: The Board (of AIG), with the Trustees engagement, will run a careful search process. I'm confident they will do their best to find someone that's going to take on that challenge.
WaPost: But you get to sign off on it.
Geithner: Well, uh, you know, in general, where we have a substantial stake, taxpayers have substantial exposure, we're gonna want to make sure that there is strong leadership for these companies.
The correct answer would have been to say, "No, I do not have sign off." I understand the argument that taxpayer money is holding the firm afloat and that taxpayers have a right to protect their interests. But Treasury has more interests than just the taxpayers. There are voters (not all taxpayers), special interest groups, political pressures from the White House, and a myriad of other factors. Even things like, why not use public power to chose a minority or a woman instead of another old white guy? That's what Presidents face in appointing people--like Supreme Court Justices. It's not as simple as just an investor protecting his interests. The government does not have the aligned incentives to appropriately weigh in on the discussion of who should lead AIG or any firm.
Watch the whole five minute interview here.