Former United States Treasury Secretary Timothy Geithner made an appearance on MSNBC’s “Morning Joe” on Wednesday to discuss the economic crisis and the Great Recession that transpired during his time in the Obama administration.
Geithner, who is now the president of private equity firm Warburg Pincus, said the U.S. government should have responded faster to the financial downturn which caused stock prices and financial institutions to collapse and hurt numerous industries, including housing and banking.
Although the former Treasury Secretary believes President Obama and his officials addressed the situation, Geithner believes it could have taken a lot more work “because the fire was burning too hot at that point.” However, he did say that it was a political bright spot because Republicans and Democrats put their differences aside and worked together to contain the situation.
“In retrospect, if we had full knowledge, full foresight at that time, I think what we should have done is to make sure at that point we could have escalated much more quickly to prevent the panic from spreading,” Geithner stated.
“We passed that test much better than other governments who sat there, were paralyzed by their politics, or played politics with the crisis. [It was] a pretty good moment for the U.S.,” added Geithner. “You could hear panic and fear in the voice of the leaders of the largest, strongest corporations of the world at that time.”
Geithner is in the midst of a media blitz to promote his new book “Stress Test: Reflections on Financial Crises,” an account of how policymakers worked to avoid a repeat of the Great Depression.
He also published an op-ed piece in the Wall Street Journal on Tuesday in which he defended the bailouts that the Bush and Obama administrations allocated to Wall Street. Geithner presented the case that without the bailouts then the U.S. would have plunged into a second Great Depression and the national economy would have faced a downturn worse than what transpired at the time.
The Federal Reserve and the U.S. government needed to intervene in the markets with “a massive injection of cash” to save the economy, though he did concede that the country still faces several problems, including unemployment and income inequality.
“What one has to do in a panic is the opposite of what seems fair and just,” stated Geithner. “In a financial crisis, the natural instinct is to let creditors suffer losses, let firms fail, and protect taxpayers from any risk of loss. But in a financial panic, a strategy based on those instincts will lead to depression-level unemployment.”
Not everyone believes in Geithner’s sincerity. Critics of the Fed argue that it was the policies of the central bank’s Alan Greenspan since the late 1980s that led to the inevitable crash. Fed opponents say that printing presses being kept on ultimately led to the speculation and leveraged trading methods. In addition, artificially low interest rates had induced the bubbles, inflation and toxic markets.
David Stockman, former Reagan budget director and bestselling author of “The Great Deformation,” once described Geithner like this:
“He has basically been a bag carrier for Wall Street – in fact, his shoulders are a little stooped. I don’t think he’s really fit to occupy the office he’s in. He has no real philosophy. I don’t see any evidence that he’s understood financial history or public policy going back decades and decades. It’s all seat-of-the-pants, make judgments on the fly: Try something, and if it doesn’t work, try something else…He might make a third-rate investment banker, but he certainly shouldn’t be Secretary of the Treasury.”
