China will be happy with Geithner

After seven-plus years in Asia, I’m no longer startled by this question. It was posed to me yet again recently — this time by Kuala Lumpur taxi driver Sumit Kotari.

“What’s wrong with America is that it’s run by investment bankers, mostly from the same bank,” the 49-year-old Malaysian said. “How can Americans stand for it? Is Barack Obama from Goldman Sachs, too?”

No, I tell my driver. Yet I’ve stopped putting up an argument when faced with the common view that Washington is in Wall Street’s pocket.

The US$700 billion bank bailout, on top of the Federal Reserve’s charity, doesn’t help the perception. Neither does the fact that its architect, Henry Paulson, is a Goldman Sachs Group Inc. alumnus.

It has been reported in Asia that Neel Kashkari, assistant Treasury secretary in charge of the Troubled Asset Relief Program, worked for the same New York-based investment bank.

President-elect Obama’s decision to seek advice from other former Goldman Sachs bigwigs, such as Robert Rubin, also grabbed attention.

Even the guy helping choose a replacement for Timothy Geithner at the Fed Bank of New York came from Goldman Sachs. It makes one breathe a sigh of relief that Geithner, who will be the next Treasury secretary, doesn’t have Goldman Sachs on his resume.

The point here isn’t to pick on Goldman Sachs. Yet it is seen by many in Asia as the gold standard of investment banks. Its name also is a byword for the perception of incestuous ties between Wall Street and Washington.

Geithner isn’t untainted, having run the Fed bank that is essentially Wall Street’s connection to the U.S. capital.

Many complain that Geithner did little to head off the current crisis and then played a role in letting Lehman Brothers Holdings Inc. fail, deepening the turmoil.

Where Asia is concerned, there are three reasons why a Geithner Treasury Department may be more of an asset than a liability. One, he knows Asia well. Two, the Treasury’s role is about to change. Three, the U.S. is in a weak position and Geithner will come to the job knowing it.

China is a case in point. As Paulson’s tenure winds down and Obama’s team steps up, questions abound about the future of the talks Paulson started.

Last week, Zhu Guang-yao, an assistant Chinese finance minister, said the “Strategic Economic Dialogue” should continue.

The talks will survive, no question. The real issue is that Geithner may be better suited to oversee such discussions.

Geithner is less “ of Wall Street” than Paulson, who spent 32 years as an investment banker before joining the Treasury in 2006.

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