Tim Geithner’s Selective Memory
By Al Lewis
Former Treasury Secretary Timothy Geithner is the latest character from the 2008 financial collapse to go on a book tour.
His new tome: “Stress Test.”
Mr. Geithner’s predecessor, Hank Paulson, did the same thing years ago.
Former Federal Reserve Chairman Ben Bernanke recently bagged a book deal, too. He reportedly got $1 million. He’s also giving speeches for $250,000 a pop.
These so-called public servants are getting millions to explain what they did to our futures. They desperately want the average person to understand that if they had not bailed out the very people who made fortunes causing the financial crisis, our economy would be worse.
Mr. Geithner takes pride in explaining that the $700 billion rescue he oversaw–known as the Troubled Asset Relief Program–has been repaid at a hefty profit to the U.S. taxpayer.
He ignores how TARP was paid back: The Fed lowered interest rates to nearly zero and injected trillions of dollars into the financial system. The Fed also allowed several TARP recipients to become commercial banks and borrow at this historically low rate. Why hold on to high-interest-rate TARP funds when you can bag zero-interest-rate federal funds?
Mr. Geithner was part of the team that fixed an economy riddled with shell games by deploying new shell games. The system, flush with funny money, has indeed stabilized. The stock market trades at new highs. And yet Americans seem condemned to an epoch of sluggish economic growth, low-paying jobs and enduring fears that the next crash is going to be worse.
The Fed, meanwhile, has no idea how to get out of the position it is in. It must eventually remove the trillions of dollars it injected into the financial system. And it will have to raise interest rates without shocking a debt-based economy.
So America is perhaps halfway through a lost decade, and Mr. Geithner is doing a victory dance.
He is now a managing partner at the buyout firm Warburg Pincus, where he’ll make millions doing deals in the low-interest-rate economy he championed.
This is a guy who didn’t pay all of his taxes until he learned he was being considered for Treasury Secretary. This is a guy who served as president of the Federal Reserve Bank of New York from 2003 to 2009 and failed to see the biggest crisis since the Great Depression coming.
Reviewers say “Stress Test” is worth reading for its richness in behind-the-scenes detail, but they note that it’s Mr. Geithner’s self-serving version of events.
Felix Salmon, senior editor of Fusion, calls Mr. Geithner an “unreliable narrator.”
He notes pages where Mr. Geithner brags of pushing back against bankers for their unprecedented financial risk-taking in a 2004 speech. Mr. Salmon pulled up the speech and found that Mr. Geithner had done no such thing.
“Geithner wasn’t warning his audience about the risks of shadow banking, ” Mr. Salmon writes, “he was extolling it.”
Sheila Bair, who served as chair of the Federal Deposit Insurance Corp. during the crisis, also couldn’t help but scoff in a review of Geithner’s book that she wrote for Fortune.
“He is reflecting the unspoken views of many on Wall Street where he is now employed,” she writes. “The system is still unstable, there will be another crisis, and yes, they will need to be bailed out again.”