Timothy F. Geithner will join the private equity firm Warburg Pincus as president, the firm announced on Saturday, the former Treasury secretary’s first new prominent position since leaving office earlier this year.
The unusually low-key announcement â€" made with little fanfare on a Saturday morning â€" is Mr. Geithner’s first foray into the private sector in 25 years, after serving in the Treasury Department, the International Monetary Fund and the Federal Reserve Bank of New York.
It was as president of the New York Fed in 2008 that Mr. Geithner helped lead the federal government’s response to the financial crisis, including the fire sale of Bear Stearns and the bailout of the American International Group.
After being confirmed as President Obama’s first Treasury secretary the next year, he supervised the administration’s efforts to stabilize the financial system like the Troubled Asset Relief Program, or TARP, as well as initiatives that included the rescue of the auto makers. Since leaving Treasury, Mr. Geithner has taken up a fellowship at the Council on Foreign Relations and embarked on paid speaking engagements.
Mr. Geithner follows in the path of past Treasury secretaries who, after leaving government, have taken lucrative Wall Street posts. After leaving the Clinton administration, Robert E. Rubin joined Citigroup. And John Snow, a Treasury Secretary in the George W. Bush administration, joined the private equity firm Cerberus.
While Mr. Geithner has been given the lofty title of president, several private equity executives questioned whether he will be much more than a boldface name who will help Warburg Pincus open doors on the fund-raising side, especially with foreign investors like sovereign wealth funds.
Unlike past Treasury secretaries Henry M. Paulson Jr. and Mr. Rubin (both Goldman Sachs alumni), Mr. Geithner has been a public servant for most of his career. He has never worked at a bank nor has any experience doing private equity deals.
Indeed, Mr. Geithner initially seemed unlikely to join Wall Street. While he garnered praise for helping to arrest the financial crisis from worsening, critics repeatedly assailed his policies during the Obama administration as too friendly to the nation’s mega-banks. One longstanding criticism is that he made permanent the idea that “too big to fail†institutions would be bailed out if they ran into trouble.
Now he will be joining Warburg Pincus, a 47-year-old private equity firm that oversees $35 billion in assets. Unlike rivals like the Blackstone Group and Kohlberg Kravis Roberts, the firm has stayed privately held and low-profile.
Still, its investments have included buying control of the eye-care company Bausch & Lomb and the luxury retailer Neiman Marcus. Both were sold in multibillion-dollar deals earlier this year.
“Warburg Pincus has an excellent record of performance, a very compelling global strategy and an ethical reputation of the highest regard,†Mr. Geithner said in a statement. “I look forward to working with my new colleagues and to contributing to the firm’s continued growth and success.â€
Warburg Pincus has also taken stakes in banks aided by taxpayer dollars through TARP. One was Webster Financial, a New England lender in which the firm reaped a return of about 35 percent. Another was Sterling Financial, a Washington state institution in which the buyout firm invested $139 million; it was sold to another bank, Umpqua, two months ago for $2 billion.
Mr. Geithner has intersected with the private equity industry in other ways. Last year, he suggested that the tax rate on carried interest, or the share of private equity firms’ profits from deals, should rise from its current rate of 15 percent.
“If you look at any tax reform proposal out there that has any patina of bipartisan support, they believe we have to rethink how we treat investment income and carried interest,†he said at a CNBC conference last July.
He is expected to start at Warburg Pincus on March 1.
