Monday, 18 November 2013

No Tim, No

Caesar's wife must be above suspicion , as the saying goes. It is not just important to be right, you must also appear to be right. This is even more important for very public figures. That is why this post is titled No Tim, No .

Timothy Geithner, the former Treasury Secretary (in Indian parlance, Finance Minister) is going to become the President of Warburg Pincus, an investment banking firm. There is nothing legally wrong in what Geithner is doing. He was the Treasury Secretary during Obama's first term.  He left office in January 2013 and has been writing  a book since. Now comes the news that he is to become the head of Warburg. He is perfectly entitled to do whatever he wants once he steps out of pubic office.

The problem is the old one of Caesar's wife being above suspicion.The cosy nexus between businessmen and politicians is a significant problem today - especially in the US after Citizens United. The financial sector is in the eye of the storm of government attention and regulation , much of which Geithner himself started when he was Treasury Secretary. In his new role, he will have a considerable amount of interaction with the US government. While he may want to , and maybe even will, be prim and proper, it is inconceivable that he will apeear to be so in the eyes of the public. While we will be charitable to Warburg, it is not inconceivable that they hired him precisely for his political talents and connection.

This is the age old problem of government servants and regulators leaving their jobs, or retiring, and then joining the very corporates they regulated or oversaw.  In some countries there are statutory cooling off periods before they can do so. My belief is that it should never be done. It is impossible to ignore the conflicts of interest. Even if the individual concerned is meticulously honest, he will have to recuse himself from virtually any issue that has a bearing on his old job. That will make him completely ineffective. In effect, the very reason corporates hire them is to take advantage of their past connections. That is why it is wrong.

The reverse flow also happens. Corporate honchos join the government too - in the US many past Treasury Secretaries have been CEOs of Goldman Sachs. I would not go so far as to ban corporate types from joining the government - the flow of talent from the private sector to the government is one to be encouraged. But I believe, they should not take up a position that is in the same field as where they came from. I have no problem with say Henk Paulson becoming the Secretary of Education , but as Treasury Secretary, where his job would be to supervise his former employer Goldman Sachs , ...... that fails the test of Caesar's wife. I know this would not utilise his talent in his field of expertise, but if public trust in government is to be maintained, fairness must be above board. Do you really think Paulson's decision not to rescue Lehman Brothers, a hated rival of Goldman Sachs, can ever be whiter than white, even though it may have actually been so ?

I am well aware that such a view will be met with derision in today's circles as old fashioned, romantic rubbish. Yes, old fashioned values have little support in today's environment. But that does not detract from the merits of them. Pompeia, Ceasar's wife held a festival for women only in which Cloudius gatecrashed dressed as a woman, ostensibly for seducing her.  He was caught, but in the trial that followed, he was acquitted. And yet, Caesar divorced Pompeia, leading to that famous expression. Can you imagine in today's world, such standards being set by those in power. Alas, that is why governance today is at such a low point.  When values come to the fore again, we shall be governed by honourable people.

6 comments:

The Million Miler said...

can we have a bureaucrat becoming a politician?
there is a steel baron who is a member of the parliament and part of the ruling dispensation. we had a media / telecom minister whose brother is in the top 10 wealthiest folks in India with an estimated (accounted) net worth of a few billion dollars.. lamentably, the list is endless in India unfortunately!

Sriram Khé said...

TMM's comment is yet another confirmation for me that I am far removed from India. Unlike the much younger me who was familiar with the names of politicians and business folks in different parts of India, the present me has no idea who is being referred to ...
The good thing is that the US offers more than enough to comment and make fun of and nothing is lost ;)

Yes, the public ought to have confidence that the elected and appointed officials in government have nothing but the welfare of the people on their minds and not their own individual welfare. And for that, yes, they ought to be above suspicion. I am on your side on this ...
But, if cabinet appointments are made based on their expertise (at least, that is how it works in the US context) then, for all purposes, we are merely borrowing them for a term or two from their regular careers. A finance man (so far, all men) before joining the cabinet will be a finance man after joining the cabinet. Similarly, the EPA head typically comes from a environmental career background.

I suspect that we typically ignore the revolving door between government and the outside career except when it comes to finance and the military. We focus on these two because of how much decisions in these affect, or could affect, the lives of the rest of us and also because of the importance these two have in the economy. And there is a great deal of truth in this. But, would we want somebody who has no understanding of these to head these?

Perhaps this situation is because we do not have the parliamentary system, where the minister comes from the elected parliament members. And that system has its own sets of problems with ministers.

So, well, it is what it is. We are stuck with these situations far less than ideal because, dammit, we are stuck with democracy and we don't know how else to govern ourselves ;)

Ramesh said...

@Kiwi - I don't have a problem with a bureaucrat, or for that matter, anybody becoming a politician ; for a politician can only assume office on being elected. But the type of office he holds should not be in conflict with his past life.

Yes the politician businessman nexus in India is far too deep and often stinky.

@Sriram - Yes,there is the merit vs propriety issue in the US system. My view is that it is OK for people from professional life to enter government, for the same reasons you have outlined - talent. But I have a real problem with those who then go right back to industry. At the very least there must be a cooling off period for 5 years or so. If that dissuades some talent from coming in, then so be it - the price we pay for authenticity.

Sriram Khé said...

Five year cooling off period ... hmmm .... while emotionally I agree with an idea like that, intellectually I have issues with any restriction on an individual's participation in public service.
Private parties can engage in transactions where, for instance, the settlement can include not working for a competitor for at least X number of years. But, those are private contracts.
Working for the government is open to anybody who is constitutionally eligible. If the constitution does not prevent a person, then I am not keen on developing further restrictions.
Your comeback might be that the constitution is old, and was authored in a different era, and it needs some serious overhauling. I agree. But, revising is essentially what we do by going the Supreme Court route--every decision there is, in effect, an update to the constitution regarding the modern contexts.
Of course, people will disagree on the Court's decisions. But then people will disagree on a revised constitution too.
I tell ya, we are stuck with a remarkably screwed up system called democracy, all because the alternatives suck even more ;)

Anonymous said...

Another take from the New Yorker:
http://nyr.kr/18QrZ7b

accounting for royalties said...

I have just read the article on 'No Tim, No' and found that it is really informative.The topic is very interesting. Look forward to read more article on this topic.

Follow by Email

Blog Archive

Featured from the archives