Geithner moves to new home, but some question his temporary digs

Introduction

Treasury Secretary Timothy Geithner has finally moved into a permanent home after eight months in Washington, leaving behind some lingering questions about the rent-free arrangement he enjoyed with a college friend who was a former Wall Street executive and now a top official at a major international lender.

Geithner had been staying in a luxurious six-bedroom townhouse in the Kalorama neighborhood owned by Daniel Zelikow, the executive vice president of the Inter-American Development Bank. Zelikow previously served as a managing director at JPMorgan in New York. The no-rent arrangement, reported in The Washington Post last month with scant notice by other media, was approved by Treasury Department ethics lawyers before Geithner moved in, said Andrew Williams, a department spokesman.

“Dan has been a close friend to Secretary Geithner since they met at college more than 25 years ago,” Williams said. “The ethics rules allow a federal employee to receive a gift from a personal friend.”

Some ethics specialists outside of government agree with Treasury that the arrangement was not a problem. “As long as there is a friendship, I’m not sure I see a conflict,” said Jan Baran, a Washington lawyer. Baran said that federal law clearly allowed a senior official like Geithner to accept gifts from an old friend, including housing, under most circumstances.

But for others, Geithner’s living arrangement appears too cozy — in part because of the public debate already generated by Geithner’s choice to fill much of his inner circle with people linked to Wall Street.

Peter Bienstock, former executive director of the New York State Commission on Government Integrity, said Geithner’s living arrangement would “absolutely” have been a violation of state ethics laws in New York. He said he would urge Geithner to pay back rent to his friend. “It’s ridiculous that he brings all this scrutiny on himself — and the appearance of impropriety – over what could be a really nominal sum,” he said of Geithner.

Stephen Gillers, a law professor at New York University who writes on legal and government ethics, said the arrangement “looks just awful,” he said. “This is a real economic benefit to Geithner.’’

Elegant Address

Zelikow stepped in when Geithner, who took a pay cut when he left the New York Fed and who now earns $191,300 a year, joined the Obama Cabinet and needed temporary accommodations. Geithner and Zelikow met as freshmen at Dartmouth College in the late 1970s, and they remained close friends while working in influential Treasury Department posts in the 1980s and 1990s.

Geithner responded through a spokesman about the arrangement. Zelikow and the Inter-American Development Bank declined to comment.

Geithner rented out his old home in Westchester County, N.Y., for $7,500 a month after he had trouble selling it earlier this year for its $1.6 million asking price. Aides say that as Treasury Secretary in the midst of the worst economic downturn since the Depression, Geithner had many more important things to do than search for a new family home in the first months of the administration.

Zelikow’s home is located in one of the city’s most elegant neighborhoods. Next door is the home of the ambassador from the Principality of Monaco; Secretary of State Hillary Clinton lives nearby. Property records show that Zelikow bought the brick townhouse, which has a library, a lap-pool and three parking spaces, for $3.5 million in 2007.

As Treasury Secretary, Geithner is a member of the board of governors of the Inter-American Development Bank, which Zelikow joined after leaving JPMorgan; the development bank promotes economic and social programs in Latin America. While a frenzy of policy decisions faced the Obama administration in its first months overseeing the economy, Geithner broke away from Washington in March to travel to Colombia to attend the governors’ annual meeting.

After an extended search, the Treasury Secretary this month bought a home in the Maryland suburbs of Washington and moved in there with his family. A deed recorded last week and other property records shows he paid $950,000 for the four-bedroom home. The Treasury Department said Geithner obtained a mortgage “at market-value rates.”

Until he moved out of Zelikow’s house, Geithner was spending day and night – literally — in the company of former senior officials of the banks being overseen, if not bailed out, by the government. One top aide is Lewis Alexander, Citigroup’s chief economist until this spring. Treasury’s new legislative affairs director, Assistant Secretary Kim N. Wallace, who was confirmed by the Senate last month, was chief political analyst for Lehman Brothers in Washington during the Bush administration.

Inner Circle

Generating perhaps the most attention was Geithner’s announcement in January that his chief of staff would be Mark Patterson, a former lobbyist for Goldman Sachs. Among large financial firms, Goldman Sachs is under exceptional scrutiny in Washington, in part because so many of its former executives have held powerful jobs in government. Two of Geithner’s recent predecessors, Henry Paulson and Robert Rubin, have been chairman of Goldman. Geithner, a career government official, is close to both men and got his job at the New York Fed in part because of Rubin’s support.

As measured by donations from its employees, Goldman Sachs was the nation’s largest corporate donor to the Obama presidential campaign last year, just ahead of Microsoft, according to theCenter for Responsive Politics.

Patterson, a veteran of Capitol Hill who was a top aide to former Democratic senators Daniel Patrick Moynihan of New York and Tom Daschle of South Dakota, worked as a Washington lobbyist for Goldman from 2004 until April of last year. His hiring by Geithner was approved at the White House even as President Obama was imposing new rules aimed at blocking other lobbyists from joining the executive branch.

Williams, the department spokesmen, said the Obama administration was “well served to have people like” Patterson and Alexander “who have extensive experience in both the public and private sectors, particularly at this critical period for the nation’s economy.”

But Patterson is barred from dealing with many of the important policy issues because of the administration’s ethics rules and potential conflicts of interest – and that may raise some questions about his usefulness.

According to documents obtained by the Huffington Post Investigative Fund under the Freedom of Information Act, a memo sent to Patterson last February from the department’s general counsel’s office identified 10 policy issues that he could not involve himself in because they were part of his lobbying portfolio at Goldman. Among them were mortgage foreclosures, carbon-emission policies; proposals to limit pay packages to Wall Street executives, and the regulation of the complex financial instruments known as energy derivatives.

Patterson’s associates say he led Goldman’s lobbying efforts during the Bush administration to block federal rules to regulate the trading of energy derivatives, which allow buyers to bet on the future price of oil and other energy sources. Goldman has long dominated the multi-billion-dollar market.

‘I Wasn’t A Very Good Lobbyist’

In an interview, Patterson said he was pained by news reports suggesting that he might do special favors for his old firm in hopes of returning to work as a high-paid lobbyist. “It’s not a lot of fun reading my coverage,” he said.

His office calendars, obtained from the department under the Freedom of Information Act, offer no evidence of contacts between Patterson and Goldman Sachs or any involvement by Patterson in department issues in which Goldman has a particular interest.

His hiring, he said, had nothing to do with his work at Goldman. Instead, Patterson said, he and Geithner bonded when Patterson, a member of President Obama’s transition team, volunteered his expertise in Congressional affairs to help Geithner and other Cabinet nominees win Senate confirmation.

Geithner’s nomination ran into trouble when it was disclosed that he had failed to pay $34,000 in federal taxes from 2001 and 2004 while he worked for the International Monetary Fund.

As a member of Goldman’s Washington lobbying office, Patterson said, he helped arrange meetings for senior Goldman executives with members of Congress and their staff members on issues of interest to the bank, rarely involving particular pieces of legislation; he said he also provided guidance to New York-based executives on the swirl of political events in Washington.

Patterson said that his four years at Goldman Sachs rarely required him to become involved in direct lobbying.

In joining the Obama administration, he said, he sat down and added up the amount of time he had spent lobbying at Goldman, and it totaled less than 50 hours in his last two years at the firm; he said he could not point to a single piece of legislation that he was instrumental in helping pass or defeat. “I did virtually no lobbying,” he said. “You can write that I wasn’t a very good lobbyist.”

He said that he did so little lobbying that, after the Treasury Department’s general counsel reviewed his work at Goldman, the department decided Patterson would not need the special presidential waiver to join the government that other former lobbyists have needed.

Still, Patterson said he understood the appearance problem created when a former Goldman lobbyist was hired as the Treasury Department’s chief of staff in the midst of the economic crisis – “the optics are what they are” — and that he been diligent to cut off ties to Goldman.

He said virtually all of his time since arriving at the department has been involved in recruiting other senior officials to join the staff and in other personnel issues, not in policy discussions. He noted that no senior official has joined the department from Goldman Sachs.

But he said he was so frustrated by the bad publicity over his hiring that he was willing to do something extraordinary by Washington standards — make a public vow never to work again as a lobbyist.

At 47, Patterson might be expected to have several more turns through the capital’s revolving door between government jobs and lobbying. But when it comes to lobbying, Patterson said, his revolving door is shut.

“I’m not going to work as a lobbyist again,’’ he said. “I plan to continue working in the public sector until I retire or expire – whichever comes first.”

Philip Shenon is a former investigative reporter at the New York Times and author of The Commission: The Uncensored History of the 9/11 Investigation (2008).