Former U.S. Treasury Secretary Timothy Geithner says he regrets not pushing for stronger financial safeguards ahead of the devastating 2008 crisis, according to reported excerpts of his new book.
“Before the crisis, I didn’t push for the Fed in Washington to strengthen the safeguards for banks, nor did I push for legislation in Congress to extend the safeguards to nonbanks,” he writes in Stress Test: Reflections on Financial Crises.
Excerpts published online in the New York Times Magazine reveal his behind-the-scenes view of the Wall Street meltdown that rocked the global economy. The book will be published Sunday.
Geithner, 52, said that he disagreed with Larry Summers, President Barack Obama’s chief economic adviser, and other members of the administration who were pushing Obama for the nationalization of some embattled banks like Citigroup.
“If you want to go in, you better be sure there are WMD’s (weapons of mass destruction),” Lee Sachs, an assistant secretary of the Treasury, said during a meeting with Obama, Geithner recounted.
He also confided that he and Summers initially had opposed the Volcker Rule, which prohibits commercial banks from proprietary trading, writing that his support was “certainly political.”
Geithner left his post as head of the Federal Reserve of New York to serve as Treasury secretary under Obama’s first term (2009-2013).
He recalled that he was reluctant to take the job. On his third day in office he refused to make a brief statement in tandem with Obama criticizing Wall Street bonus pay, leaving Obama to do it.
“I did not view Wall Street as a cabal of idiots or crooks,” he wrote. “My jobs mostly exposed me to talented senior bankers, and selection bias probably gave me an impression that the US financial sector was more capable and ethical than it really was.”
“I feared that the tougher we talked about the bonuses, the more we would own them,” he wrote, “fueling unrealistic expectations about our ability to eradicate extravagance in the financial industry.”
Geithner noted he is most frequently seen as a banker even though his entire career has been in public service.
During his four years as Treasury secretary, Geithner oversaw the controversial $700 billion taxpayer-funded Troubled Asset Relief Program to bail out Wall Street’s biggest banks launched by the previous George W. Bush administration.
His tumultuous tenure included the fierce political battle in Washington over the government budget and the public debt crisis, which led to the loss of the United States’s prestigious AAA credit rating from Standard & Poor’s.
Since leaving office in January 2013, Geithner has become president of private-equity firm Warburg Pincus and spent the past year writing his book.
Yale University announced Wednesday that Geithner will deliver a series of lectures on the lessons learned from the 2007-2009 global financial crisis.
[Image via Agence France-Presse]