Timothy Geithner, the former Treasury secretary (2009-13), believes in the forceful application of U.S. tax dollars when financial institutions are in crisis. It's a belief he holds proudly. In "Stress Test," Mr. Geithner makes a persuasive case that he is the man most responsible for the federal bailouts of 2008.
But Mr. Geithner insists that, time and again as the crises flared in 2008, he was the most consistent and tireless advocate for government aid to struggling firms. His core principle is that, during a crisis, the creditors of large financial institutions should not suffer any losses.
Secretary Geithner also describes the aftershocks of the crisis, including the administration’s efforts to address high unemployment, a series of brutal political battles over deficits and debt, and the drama over Europe’s repeated flirtations with the economic abyss.
In his book he makes special reference to a conversation that he had during a business lunch that took place on Sylt island (Black Sea) with German Finance Minister, Wolfgang Schaeuble at end of July 2012 on Greece. They discussed the option of Greece exiting the Eurozone. He writes that Schaeuble told him that there were a lot of Europeans that thought “throwing” Greeks out of the Eurozone was a possible and wanted strategy. He said that the idea Schaeuble had in mind was that with Greece being ousted from the Eurozone, Europe would become stronger and would “create a security wall” against troubled members. “I found his strategy scary” he writes and said that as soon as he returned to Washington he went straight to President Obama and expressed his deep concerns of the possible consequences of such an action. He even made a stop-over at Frankfurt to discuss the issue with ECB president Mario Draghi, who reassured that this would not happen. He also mentions that President Obama was “also deeply worried”.
In any case, his relationship with Merkel and the German block was always in question. There were a number of times they came into conflict.
“I found Schauble's plan for Greece scary in 2012
The first time Geithner realized the extend of the Greek crisis was in the February of 2010, at a G7 meeting that took place in Canada. He said that it was just then that he realized that the bailout cost for Greece was as high as the bailout cost US faced when Lehman Brothers collapsed.
“The sudden panic in Europe and the markets was shocking”. The discussion with European leaders at that G7 meeting was nothing but reassuring, he continues. Most Europeans complained about Greece at that time, however Geithner told them that they had to reassure the markets that they would not allow a bankruptcy of Greece or even the collapse of the whole banking system. Europeans were quite reserved in taking advice on how to handle “risky Greeks” by “Risky Americans” he writes.
As president of the Federal Reserve Bank of New York and then as President Barack Obama’s secretary of the Treasury, Timothy F. Geithner helped the United States navigate the worst financial crisis since the Great Depression, from boom to bust to rescue to recovery.
In a historically illuminating memoir, he takes readers behind the scenes of the crisis, explaining the hard choices and politically unpalatable decisions he made to repair a broken financial system and prevent the collapse of the Main Street economy.
This is the inside story of how a small group of policy makers—in a thick fog of uncertainty, with unimaginably high stakes—helped avoid a second depression but lost the American people doing it. Stress Test is also a valuable guide to how governments can better manage financial crises, because this one won’t be the last.
Stress Test reveals a side of Secretary Geithner the public has never seen, starting with his childhood as an American abroad. He recounts his early days as a young Treasury official helping to fight the international financial crises of the 1990s, then describes what he saw, what he did, and what he missed at the New York Fed before the Wall Street boom went bust.
He takes readers inside the room as the crisis began, intensified, and burned out of control
He takes readers inside the room as the crisis began, intensified, and burned out of control, discussing the most controversial episodes of his tenures at the New York Fed and the Treasury, including the rescue of Bear Stearns; the harrowing weekend when Lehman Brothers failed; the searing crucible of the AIG rescue as well as the furor over the firm’s lavish bonuses; the battles inside the Obama administration over his widely criticized but ultimately successful plan to end the crisis; and the bracing fight for the most sweeping financial reforms in more than seventy years.
Source: amazon, nyt, bloomberg
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