Review Kenneth Geithners Book on the Great Recession
The Hot Seat
He'south written a really expert volume — we might also get that out of the style, as so much else about Timothy F. Geithner remains unsettled. Geithner served as president of the New York Federal Reserve from late 2003 to 2008 and secretarial assistant of the Treasury from 2009 to 2013, and so sat near the centre of the American financial organisation as it prepared to self-destruct. He then had a courtside seat to the global catastrophe. He has rich material to work with, and he has contrived to preserve its freshness. His disability every bit Treasury secretary to explain himself, or his deportment, or the financial crisis, or his beliefs most financial reform, to the wider public will go out many readers, I suspect, feeling they are hearing his voice on these subjects for the first fourth dimension.
"I had always been a backstage guy," Geithner writes by mode of full general explanation, but referring specifically to his get-go, spectacularly unsuccessful, public speech every bit Treasury secretarial assistant. "I had spent my career behind the scenes. Ever since loftier schoolhouse, I had dreaded public speaking. . . . I swayed dorsum and forth, similar an unhappy passenger on an unsteady send. I kept peering around the teleprompter to expect directly at the audience, which apparently made me wait shifty; i commentator said I looked like a shoplifter. My voice wavered. I tried to sound forceful, just I merely sounded like someone trying to audio forceful."
Geithner is clearly more than at ease, and more himself, on the page than on the stage or the screen — which is, for an American public figure, both odd and charming. So much so that I finished his volume half wishing he had just skipped all of the public performances required of him as Treasury secretary and instead written out what he had to say and handed information technology to an actor — say, Denzel Washington — to perform. "Stress Test" has surprising virtues — for instance, the skill with which Geithner draws his hard-to-describe main character. He thinks of himself — and on the evidence it's hard to disagree with him — as a adequately ordinary person thrust into a cracking many extraordinary situations. His female parent was a card-carrying liberal; his father a Republican who spent his career working in nonprofits in poor countries, and who voted for Paw Romney in 2012 while his son was still in the Obama administration. The futurity Treasury secretary grew upwards everywhere and nowhere, a fleck like a military brat, and came away from his babyhood with a certain detachment from the American way of life: "At a local supermarket in suburban Virginia i summer, I was stunned to meet an unabridged aisle stocked with pet food. It seemed baroque in a world total of starving people."
Politically, Geithner was more or less born a left-leaning Republican and appears to have become a right-leaning Democrat. But his upbringing obviously left him with a resistance to political labels, or the demand for a tribe. As a student at Dartmouth in the early 1980s, he would have called himself a Republican, simply "without much conviction." He felt faintly hostile to the frenzy around him of right-wing student political activism. "Afterward The Dartmouth Review . . . published a McCarthy-style list of gay students on campus, I ran into a Review author named Dinesh D'Souza at a coffee store and asked him how information technology felt to be such a [expletive]."
In general, Geithner comes across equally the sort of immature person who had no particular idea of himself until the world forced him to have one. His lack of a need for self-definition — hinting at an unusual capacity, possibly, to live with incertitude — extended to his career. He manifestly didn't feel much personal ambition, at to the lowest degree in the beginning. Oddly, for a Republican Ivy League graduate of the 1980s — and even more than oddly for a future Treasury secretarial assistant — he plant Wall Street pointless and the business world faintly ridiculous. He had no particular interest in money. "I did endure one job interview with a direction consultant, whose offset question was about how I would turn effectually a small failing beer visitor," he writes. "I had no thought."
Afterwards going to graduate school in international studies at Johns Hopkins, he hopscotched a path into the world of of import people who float between the public and private sectors. His first square was Henry Kissinger, who gave him a task as an analyst at his consulting house. The square that inverse his life was Larry Summers, so a Treasury under secretary, who clearly saw in Geithner someone who would at to the lowest degree pretend non to exist intimidated by him. But this part of the Timothy Geithner story — his rise in the world of important people — remains a bit vague. I found myself wishing he had spent more than time exploring his magical transformation from charmingly bewildered young person to unsentimental pragmatist in a arrange, who airdrops with great potency into other people's financial catastrophes.
At any rate, the more or less perpetual global financial crisis that he helped deal with — the run on the Mexican peso, the run on Southeast Asian currencies, the Russian default and so on — plainly gave him his identity: crunch manager. He became one of the guys who kept their heads every bit others lost theirs, divers less past what he was than past what he was non: in trouble. Mervyn Male monarch, the erstwhile governor of the Bank of England, joked (and as Geithner quotes him joking): "Tim was present at all the crises. Just he didn't cause the crises. The crises caused him."
From the blank facts of the American financial crunch, many different narratives have already been spun. They can be classified by whom they blame: Wall Street bankers, feckless American debtors, government incompetence, the Chinese. "The key causes of this crisis were familiar and straightforward," Geithner writes. "Information technology began with a mania — the widespread belief that devastating financial crises were a thing of the past, that future recessions would be mild, that gravity-defying home prices would never crash to earth." The causes of the crisis, in other words, were the same old-fashioned madness of crowds and extraordinary pop delusions responsible for every panic dating back to the Dutch mania for tulip bulbs. The entire society — including all the big banks and some nonbank fiscal firms, similar the insurance visitor A.I.Grand. — simply ignored gamble.
The story Geithner goes on to tell blames everyone and no one. The crisis he describes might just also have been an act of God. Basically no 1 noticed what was happening within the financial system until after information technology happened. A few of the important people with a privileged view expressed concerns well-nigh the risks being taken, but nearly said nothing. Geithner counts himself in the minority. "I began asking questions well-nigh capital: Practise our banks really take plenty?" he writes, calculation, "I was more than worried than many of my colleagues, but I was not nearly worried enough." His office in the run-upwardly to the crisis was a bit like that of first mate on the Titanic, subsequently the ship has been put on irreversible autopilot, and the helm has gone off to drink with the rich guys in first class.
Once the ship hits the iceberg, Geithner becomes more central to the action. Habitation prices autumn, the hazard-takers are exposed every bit delusional and, in the ensuing panic, there's a run on the unabridged financial organisation. His chore, as he sees it, is to practice what he can to plug the hole, and to cram as many people as possible into lifeboats, without worrying besides much nearly appearances. But he is immediately faced with an appearance problem: Before he tin can save whatever women and children, he has to rescue the drunks in first class who owned all the lifeboats. "To solve a major financial crunch," he writes, "you have to practise things yous would never practise in normal times or even in a modest crunch. . . . What feels just and fair is often the opposite of what's required for a just and off-white upshot. Information technology's why policy makers more often than not tend to brand crises worse, and why the politics of crisis management are always untenable."
Interestingly, Geithner has piffling sympathy for those who wanted to see Wall Street bankers held accountable for whatever it was they had washed. "Onetime Testament vengeance" is his pet phrase for such moralistic sentiments, and he argues persuasively that if he had indulged them, the crisis would simply take caused more economical pain and suffering for ordinary people. He thinks it was a mistake, for example, to allow Lehman Brothers to fail in September 2008, and writes that he would accept prevented it if he could have. (He claims the Treasury and Federal Reserve lacked the authority to save it.) He says President Obama very quickly grasped the merits of ignoring the desire for vengeance, and didn't ask him to pursue another, more punitive strategy. As if to ensure that no one leaves confused most his point of view on all this, Geithner argues at the end of his volume that the only serious weakness of the Dodd-Frank financial reform measures is that they don't give the federal regime plenty power to bail out banks in futurity crises.
Geithner sees the government'south response to the fiscal crisis mainly as a neat success — though he of course understands that a lot of people don't hold with him. ("Nosotros did save the economy, merely we lost the country doing it.") He clearly thinks people ignore the facts and judge with feeling rather than reason. He himself is careful with the facts. For example, he points out several times that most people seem to believe that the Treasury'southward injection of capital into the financial sector price the taxpayer a fortune when in reality the investments yielded a projected profit of $166 billion. (But he doesn't mention that the jury is nonetheless out on the effects of the less overt but more expensive subsidies flowing from the Federal Reserve.) He finds it silly that many people believe Dodd-Frank changed nothing important. (All the same he never explains why the roughly v percent majuscule ratio information technology demands of the big banks is anything similar a magic number for bank prophylactic — and he does not mention the powerful case recently made by the economists Anat Admati and Martin Hellwig that the right number is at to the lowest degree 20 percent.)
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Geithner seems genuinely to believe that the details of the beliefs within the financial industry are largely irrelevant — that investors who bought subprime mortgage bonds merely suffered from the same misconceptions equally everyone else. Only he doesn't brainstorm to explicate why, if investors were then numb to risk, Wall Street went to such lengths to disguise that risk. Why did our financiers stuff and so many bad loans into incomprehensibly complex securities that even sophisticated investors were unlikely to sympathise, and and then pressure deeply conflicted ratings agencies to declare them risk-free? Subprime mortgage bonds, credit default swaps, collateralized debt obligation synthesized from those credit default swaps, the gaming of the rating agencies, forth with the screwed-upward behavior of financial elites that seem to me to lie at the heart of the financial crisis, Geithner deems scarcely worth mentioning. His job every bit fiscal crisis manager was in part the psychological manipulation of fiscal markets. It's odd how fiddling involvement he appears to have in the people who work in them.
Finally, he seems to believe that the American financial organization is now more than or less fully reformed. Those who retrieve the root crusade of the crisis was the bad incentives of financiers are unlikely to exist persuaded. They made vast fortunes from their colossal failure. At that place'southward no reason they couldn't or wouldn't try to neglect then well all over again.
Only that'southward the wrong note to terminate on. There's hardly a moment in Geithner'south story when the reader feels he is beingness anything just straightforward — a about-superhuman feat for someone who spent so much time in public life defending himself from careless and quack personal attacks. The decisions he made are easier to criticize than they are to amend upon. I dubiousness many readers volition put his book downwardly and think the man did anything but his best. On his feet he might have stammered and wavered. That in itself was ever a sign he was unusually brave.
Source: https://www.nytimes.com/2014/05/25/books/review/stress-test-by-timothy-f-geithner.html
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