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Geithner to Join Warburg Pincus

Posted by Steve Markowitz on November 19, 2013

The Wall Street Journal reported that Timothy Geithner, former U.S. Treasury Secretary, is joining Warburg Pincus, a private equity company.  Geithner will become the firm’s president and managing director

Tim GeithnerWarburg Pincus is a well-known New York buyout firm specializing in using other people’s money, i.e. borrowed funds, to buy companies.  They then slice and dice the companies and ultimately (fairly quickly resell them at a profit.  While some argue that such firms help make companies more efficient, they also saddle their acquisitions with significant debt that often hurts these companies’ long-term viability.  In addition, firms like Warburg Pincus typically place huge management fees on the companies until they are resold.

While Timothy Geithner is a bright and talented individual, he has no experience in the private equity world.  It is likely that his deep contacts within the government significantly increase his value to the new employer.

Geithner going for the gold after leaving government is too often the case for former politicians and government employees.  This includes former CIA chief David Petraeus becoming an executive of another large buyout firm, KKR.  Republicans are not immune to this incestuous type relationships after leaving government.  Former VP Dan Quayle and former Treasury Secretary John Snow work for Cerberus Capital Management.  The examples are endless.  If the departing government employee is not good enough to get a cushy job at an investment bank, they likely become a high paid Washington lobbyists for a special interest group.

In the case of Timothy Geithner, joining a buyout firm is especially troubling given the firm’s close relationship to the New York investment banks that were bailed out by the government under Geithner’s direction.  Geithner was a key architect of the banks’ bailouts, as well as that of AIG.  He was often criticize or allowing AIG executives to receive the huge bonuses even after the bailout.

It is been a long time since working for the government meant being a public servant.  It has since become a guaranteed avenue for achieving power and wealth.

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