Timothy Geithner’s Memoir Is One Big Coverup For His Own Colossal Failures
Former Treasury Secretary Timothy Geithner’s memoir hit bookshelves this week. Titled Stress Test: Reflections on Financial Crises, the book recounts the financial crisis and the White House’s response to it, but offers little more than a self-serving effort to polish the one-time member of the Obama administration’s legacy.
The “stress tests” Geithner placed on the big banks in return for the government’s $700 billion bailout, were made so easy they ended up proving nothing, other than the Treasury’s inability, or unwillingness to demand tough concessions from Wall Street.
Geithner launches a sustained and misdirected attack against progressives and economic populists on the Left. About Senator Elizabeth Warren (D-MA), Geithner writes, “Her criticisms of the financial rescue, if well intentioned, were mostly unjustified, and her TARP oversight hearings often felt more like made-for-YouTube inquisitions than serious inquiries.” He adds, “She was worried about the right things, but she was better at impugning our choices—as well as our integrity and our competence —than identifying any feasible alternatives.”
On no fewer than two dozen occasions, Geithner invokes the Bible to describe economic populists who wished for tough justice to be carried out against the Wall Street banks that crashed the economy. “The Old Testament view that the venal should be punished. The irresponsible shouldn’t be bailed out,” is how he mocks liberal critics such as Warren. He cites the Left’s appetite for “Old Testament vengeance,” “Old Testament justice,” “Old Testament impulses,” “Old Testament populism,” and “Old Testament cravings.”
All in all, Geithner’s memoir carries all the intellectual honesty and deep introspection of another White House memoir, Decision Points by George W. Bush, and that may be a little harsh on the former U.S. President.
An honest and objective evaluation of Geithner’s performance as Treasury Secretary can be found in Ron Suskind’s Confidence Men: Wall Street, Washington, and the Education of a President,which is an insider’s account of the Obama administration’s first term. This book clearly narrates how it was Geithner, along with Larry Summers, who subtlety manipulated and managed President Obama out of an opportunity to reform the financial services industry.
In the aftermath of the public and Obama’s furor over AIG’s announcement that it would disburse $165 million in bonuses to its executives, 13 CEOs of Wall Street’s biggest banks were summoned to the White House. It was in this meeting that Obama famously warned the respective Masters of the Universe, “My administration is the only thing between you and the pitchforks.” But that was it. “The thirteen bankers, and especially the half dozen titans from New York, returned to their corner offices that afternoon with very strong feelings about one man in Washington: Tim Geithner,” writes Suskind.
“The sense of everyone after the big meeting was relief,” said one of the bankers. “The President had us at a moment of real vulnerability. At that point, he could have ordered us to do just about anything, and we would have rolled over. But he didn’t—he mostly wanted to help us out, to quell the mob. And the guy we figured we had to thank for that was Tim. He was our man in Washington.”
In A Fighting Chance, Warren rips into Geithner for kowtowing to Wall Street again and again. “Millions of people were getting tossed out on the street, but the secretary of the Treasury believed that government’s most important job was to provide a soft landing for the tender fannies of the banks,” she writes.
The Wall Street crash of 2008 was a repeat of the crash of 1929. During the 1920s, commercial and investment banks had merged, thus creating hugely profitable conflicts of interest. Whereas FDR pushed for tough reforms of Wall Street and famously said, “I welcome their hatred,” Obama, led by Geithner, said, “How can I help?”
Everyone remembers FDR’s “we have nothing to fear but fear itself.” But very few recall the stern words that followed in his inaugural address: “Faced by failure of credit, they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.”
FDR knew the people’s confidence in the banks would need to be earned, rather than manufactured. So he created the FDIC, which would insure deposits in banks that adhered to strict rules and limitations. The Glass-Steagall Act gave deposit insurance to banks that agreed to operate prudently, and the Securities Exchange Commission was set up to look out for fraudulent trading practices.
It’s telling that FDR appointed Joseph Kennedy, who would go on to chair the SEC, to his inner circle to deal with the economic crises that stared down the nation at the time. Kennedy was a successful businessman who knew Wall Street from the inside out, and more importantly, had made all the money he would ever need, and thus was looking to move from the private to the public sector. In other words, Kennedy wasn’t looking to make friends on Wall Street.
Obama, however, chose Geithner, who had just turned 50 at the time of his swearing-in, and would be seeking a well-paid life on Wall Street at the end of his tenure with the administration.
Former Fed Chairman Paul Volcker, who was considered for Obama’s National Economic Council, had warned President-elect Obama that in order to stabilize America’s credit system, Wall Street’s great debt machine would have to be dismantled. “You have to deal with this business of some sucker gets a bad mortgage and the guy who sold it to him gets a commission, and the guy who sold it to that guy gets one, too. That’s just old fashioned fraud,” says Volcker. In summing up the position of Geithner, Volker says, “Now, the other view is treating everybody alike. They’re either angels or robbers. You can’t tell which, and there’s no point making a distinction between the banking system and the others. I think that’s just fundamentally flawed.”
At a meeting in December 2008, Byron Dorgan, a longtime Democratic senator from North Dakota, used direct language with the President-elect about his top economic selections, Geithner and Summers. “You’ve picked the wrong people,” he said to Obama. “I don’t understand how you could do this. You’ve picked the wrong people!”
As he seeks to polish his legacy, even Geithner himself has disqualified much of the nonsensical and inflammatory claims made in his memoir. For instance, Geithner claims the White House asked him to lie about Social Security and deficits. “I remember during one Roosevelt Room prep session before I appeared on the Sunday shows, I objected when Dan Pfeiffer wanted me to say Social Security didn’t contribute to the deficit,” Geithner writes in his new memoir. “It wasn’t a main driver of our future deficits, but it did contribute. Pfeiffer said the line was a ‘dog whistle’ to the left, a phrase I had never heard before. He had to explain that the phrase was code to the Democratic base, signaling that we intended to protect Social Security.”
But in an interview this week, Geithner refuted his own claim. “I was never, ever in the position where anyone in the White House asked me to do that. And of course, I would never have done it. But Dan Pfeiffer never asked me to do that,” Geithner told Bret Baier in an interview aired on Fox News.
Indeed, Geithner was the wrong choice, for he and Summers had contributed to the very financial disaster they were hired to solve. This resulted in leading Obama to miss a once-in-a-century opportunity to reform Wall Street. That’s how Geithner should be remembered.
— source alternet.org