Geithner's Been Deaf to Volcker for 30 Years
NEW YORK (TheStreet) -- Former Federal Reserve Chairman Paul Volcker and former Treasury Secretary Tim Geithner may both be Democrats and close advisers to President Obama, but it is not secret that Volcker has been far more willing than Geithner to take on big financial institutions.
It is more than a little bit ironic, then, that, as we learn from Geithner's newly published memoir, "Stress Test," Volcker was the guest speaker when Geithner graduated from Dartmouth College in 1983.
In a statement freighted heavily with (maybe unintended) symbolism, Geithner writes that Volcker speech was entirely inaudible.
"I'd like to say that his speech inspired me to pursue a career as a truth-telling central banker and public servant, but, honestly, the sound system was so garbled I couldn't head a word."
Later, while running the Treasury Department, the Geithner would find use for the Volcker, even though they remained philosophically almost as far apart on how to rein in the big banks as they are in stature. (Geithner is 5' 9," while Volcker stands 6' 7".)
In the debate over post crisis legislation, one of the most controversial elements was a provision that would come to be known as The Volcker Rule. Aimed at limiting proprietary trading and similar risky activities by banks, the rule is probably the single-biggest profit killer for companies like JPMorgan Chase
While Geithner initially disapproved of the rule, he eventually embraced it as a way to gain credibility with liberals. First, though, he wanted to defang the rule.
"I didn't know if it would do much to make the system more stable, but I thought we could design it in a way that would minimize the potential damage to useful financial activity," Geithner writes.
Geithner also includes an amusing anecdote about an interaction he and Volcker had on the New York-Washington shuttle, around the time the government was under intense criticism for approving about $165 million in bonuses to the AIG