George Stephanopoulos is reporting that H. Rodgin Cohen, a prominent banking industry lawyer, has "withdrawn from consideration" for the post of Deputy Treasury Secretary.
Even now, blog posts are being written bemoaning this latest catastrophe for Tim Geithner's Treasury department. Numerous press reports have informed us of the difficulties Treasury has encountered staffing up. Most blame the Obama administration's strict conflict-of-interest rules, or overblown worries about tax and/or nanny problems that Republicans might seize upon to block confirmation. It may be true that the Treasury Department's staffing issues are no worse or no better than those faced by previous administrations, but no one cares about that. We're facing the worst economic crisis in seventy years. Geithner needs help. Now.
But does the Treasury need H. Rodgin Cohen's help? Cohen isn't just a prominent banking lawyer -- he is the banking lawyer, the chairman of Sullivan & Cromwell, a law firm entangled with every major player on Wall Street. As a Wall Street Journal profile noted last October, "Over the past five weeks alone, Mr. Cohen and his team have advised Fannie Mae, Lehman Brothers Holdings Inc., Wachovia, Barclays PLC, American International Group Inc., J.P. Morgan Chase & Co. and Goldman Sachs Group Inc. in a blitz of mergers, rescues and cash infusions."
Not only does he know the landscape, he helped create the landscape.
Mr. Cohen is also in demand because he helped mold the financial system that is now under assault. He helped draft the rules that led to the emergence of powerful national banks, waged the first hostile bank takeover in the U.S. and lobbied, in the early 1990s, to expand the Federal Reserve's power to provide the emergency loans now being employed by the government.
So on the one hand, as one blogging finance lawyer noted recently, Cohen "would be a fantastic choice for any top government position, and Treasury would be lucky to have him. Few people in the world have a deeper understanding of the global financial system than Cohen."
Just the guy you would want in the Treasury Department, right?
Unless, of course, you feel that the banks already have too much influence on the Treasury Department.
If Cohen helped draft the rules that "led to the emergence of powerful national banks" but one of the financial system's greatest weaknesses is that banks have become too big to allow to fail, then Cohen could be seen as part of the problem, not the solution. And if you're worried about conflicts of interests, who could possibly have more conflicts of interests than a lawyer who has consulted on every major banking deal or banking catastrophe in the last couple of years? As a reader of Yves Smith's Naked Capitalism wrote:
We should operate from the assumption that Geithner will always surround himself with the most awful Wall Street cronies imaginable. He's totally captive to that ideology. This Administration is going to make Warren Harding's Administration seem like a convention of nuns by comparison.
Personally, I think that comment is absurdly over-the-top, but it does help illustrate the impossible situation that Geithner's Treasury Department is in. The people boasting the most familiarity with the complexities of the financial system are also the most implicated in its excesses and failures. A person like H. Rodgin Cohen might be both the first person we need and the last.