Bill Black — Geithner’s Single Most Revealing Sentence

[Tim Geithner] did vastly more harm to the Nation as the President of the New York Fed than he did as Treasury Secretary. He was supposed to regulate most of the largest (and most criminal) bank holding companies – and failed so completely that he testified to Congress that he had never been a regulator and that the problem in banking leading up to the crisis was excessive regulation. His statement that he was never a regulator was truthful – but you’re not supposed to admit it, and you’re certainly not supposed to be proud of it. Geithner, Greenspan, and Bernanke are the three Fed leaders who could have prevented the entire crisis by being even modestly effective regulators....

Conclusion

The title of Geithner’s book that he wrote to settle these petty personal scores is a sad testament to his abject failure as a regulator while the NY Fed’s President. He relied on the delusion that banks would self-regulate themselves to safety and soundness through stress tests designed to ensure that even the most fraudulent bank could easily pass the faux stress test. In his book, Geithner was unable to present any action he took as an anti-regulator to warn the Nation about the three fraud epidemics, any effective action he took to stop those frauds, or any action he took to prosecute those frauds. He failed each of the three real “stress tests” that confronted him. Had he passed either of the first two tests we could have avoided the financial crisis. Had he passed the third test at least the fraudulent elite bank CEOs would have been imprisoned and their fraudulent proceeds confiscated so that it was clear that crime did not pay.

Bailing out banks is not hard when a nation has a sovereign currency and the banks’ debts are denominated in that currency. Bernanke, not Geithner, delivered the vast bulk of the real bailout that transferred the banks’ losses on the fraudulent assets to the Fed and allowed Geithner to claim that TARP was “profitable.”

Cronyism and corruption through and through. unless the people at the top are complete morons. But if they are morons, one wonders how so much money flows into their pockets.

New Economic Perspectives
Geithner’s Single Most Revealing Sentence
William K. Black | Associate Professor of Economics and Law, UMKC