Testing Stress Test
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The Tim Geithner legacy project â whichÂ began in January 2013Â â is entering its third phase: memoir release.Â Stress Test: Reflections on Financial CrisesÂ is out today. Phase one, receivingÂ a glowing reviewÂ from the president, and two,Â establishingfavorableÂ consensusÂ opinion, were completed before Geithner even left his role as secretary of the Treasury.
The third phase, according to Geithner himself, was supposed to be something different: he told Charlie Rose that he hadÂ no plans to write a book. But he did, and he talked to Andrew Sorkin about itÂ at great length. The NYTâs Neil Irwin crystallizes what he learned fromÂ the bookâs 580 pages, none of which isÂ particularly revelatory.
The WSJâs James FreemanÂ says âone of the themes in Stress Test is Mr. Geithner’s difficulty in understanding the health of large financial firmsâ. Freeman thinks that this failing is personal, not institutional.Â William BlackÂ likewise thinks that Geithnerâs biggest missteps were as a regulator, which is the hard part. Bailouts are comparatively easy: âBailing out banksâ, writes Black, âis not hard when a nation has a sovereign currency and the banksâ debts are denominated in that currencyâ.
Yves SmithÂ is critical of Geithnerâs attempt to rewrite the history of TARP and the actions that followed the asset relief program. âThere were plenty of other options for saving the system. The one chosen, that left the banks largely unreformed and no one of any consequence punished, was clearly just about the worst of the available options, unless, of course, you are, like Geithner, a bankerâ.
The book does contain a revealing anecdote about how Geithner viewed regulation within and among financial institutions.Â Geithner writesÂ that he was worried that former mentor Larry Summersâ influence on policy was driven by hedge-fund managersâ view of âbanks as dumb lumbering giantsâ.Â Matt LevineÂ points to Geithnerâs comment as evidence of how âsurprisingly hard [it is] to be against âthe financial industryâ; tightening restrictions on one area of finance tends to make another happyâ.
Brad DelongÂ thinks Geithner misses the point: regardless of who thought so, in 2008 and 2009Â banks really were dumb lumbering giants, and insolvent ones at that. DeLong hasÂ twenty questionsÂ Geithnerâs book should answer.Â Dan DaviesÂ does his best to respond. But the big unanswered questions remain the same: why the federal government wasnât tougher on banks inÂ during the crisis,Â why more wasnât done toÂ help homeowners, or stimulate the economy in 2009 and 2010? Weâll have to wait for the book tour. âÂ Ben Walsh
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