Geithner to Join Warburg Pincus. Thoughts?

Former U.S. Treasury Secretary Timothy Geithner, one of the architects of the federal government's rescue of the financial system, is joining private-equity firm Warburg Pincus LLC.

Mr. Geithner, who has spent most of his career outside the private sector, said in an interview he plans to start in March at the New York-based firm, known for its role in buyouts of companies including eye-care firm Bausch & Lomb Inc., luxury retailer Neiman Marcus Group Inc. and stadium concessionaire Aramark Corp.

Mr. Geithner has been credited with helping to slow the momentum of the financial crisis in 2008 and 2009, but also has been criticized as too soft on Wall Street banks at the time. He has said he did what he felt was best for the economy and financial markets, and that he views the 2010 Dodd Frank financial law, in which he had a strong hand, as an antidote to risk-taking on Wall Street.

At Warburg, he will serve as president and managing director, not the kind of figurehead or advisory positions that public-sector figures often land after government stints. Mr. Geithner, 52 years old, is expected to work on mapping the firm's strategy and management, investor relations and on matters related to the firm's investments.

"When they approached me, they clearly wanted me to play a substantive role in helping them manage the firm," he said. Citing the firm's global reach and "low-key" nature, he said Warburg is "culturally very compatible with what I was looking for."

Warburg Co-Chief Executive Charles Kaye said Mr. Geithner will be "absolutely a full-time member of the partnership. He will very much be here every day." Mr. Geithner will report directly to the co-CEOs.

The former Treasury secretary will join a long line of public servants going into private equity after government service.

Earlier this year, KKR & Co. tapped David Petraeus, the former general and Central Intelligence Agency chief, to lead an internal team focused on macroeconomic forecasting and public policy. Former Vice President Dan Quayle and former Treasury Secretary John Snow work for Cerberus Capital Management LP. Carlyle Group LP has enlisted many officials from the Bush and Clinton administrations, including former Secretary of State James Baker III, in advisory roles.

Executives at private-equity firms pool their money alongside institutional investors such as pension funds and wealthy individuals, then buy companies or pieces of them. The deals are typically done with borrowed money, which can enhance returns, but also can burden companies with debt. The investors aim to resell companies for a profit.

Fund executives can accumulate substantial wealth if the investments perform well. Closely held Warburg Pincus declined to discuss Mr. Geithner's compensation, but it said he would be a partner and invest in its funds.

In the 1970s, Warburg was one of the first buyout funds to raise outside money, and has long ranked as one of the largest. Lately it has been eclipsed in size by rivals including KKR and Blackstone Group LP, which have expanded into real estate, hedge funds and other businesses as they've gone public. Warburg remains a private firm focused on taking over or taking stakes in companies.

Mr. Geithner, who has two young-adult children, lives just north of New York City in suburban Larchmont. A Manhattan native who spent many of his formative years living abroad, Mr. Geithner and his wife bought their home when he was president of the Federal Reserve Bank of New York from 2003 to 2009. They moved back when he left Treasury in January, after four years.

Mr. Geithner has long considered a career in investing once his days in Washington ended. He has been reluctant to take a job with any banks, which he once regulated, and views private-equity firms and other investment managers as different from the institutions he oversaw as New York Fed chief.

Mr. Geithner had been weighing job options while writing an account of the financial crisis, due out next year.

In August, Mr. Kaye and Joseph Landy, Warburg's other co-chief executive, reached out to Mr. Geithner through a mutual acquaintance. A series of meetings at Warburg's Lexington Avenue headquarters and Manhattan restaurants followed, Mr. Landy said.

The Warburg job will be Mr. Geithner's first private-sector position since he worked early in his career for Kissinger Associates Inc., the consulting firm founded by former Secretary of State Henry Kissinger.

For most of his career he has focused on public policy, including during a stint with International Monetary Fund. At the New York Fed and later at Treasury, Mr. Geithner was a key economic adviser to President Barack Obama and helped design the government's response to the financial crisis, including programs to help rescue large institutions such as American International Group Inc. He faced sharp criticism over his role in allowing bonus payments to employees of AIG.

While at Treasury, Mr. Geithner designed several programs that relied on private-sector help to restart moribund financial markets. Those programs wound up reaping the U.S. Treasury—and the private-sector firms that participated in them—substantial profits.

Mr. Geithner has often said the Dodd-Frank law, which sought to rein in big banks and other financial institutions by bringing them under tougher oversight and regulation, would prevent much of the excessive risk taking that led to the financial crisis.

He also has staked out positions at odds with Wall Street, including agitating to raise taxes on private-equity and other firms' share of deal profits, known as "carried interest." That tax rate hasn't been increased. At Warburg, he will be a beneficiary of the lower tax rate on investment profits.

Mr. Geithner declined Friday to discuss carried interest taxation or any other policy issues. "I made a judgment when I left Washington I was going to leave these questions to my successors, and I'm going to stay true to that," he said.

Since leaving Treasury, Mr. Geithner hit the speaking circuit, fetching big fees to speak at corporate events, including Warburg's annual meeting in May.

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