There is much that could have been added to my Sunday column on former Treasury Secretary Timothy Geithner. Interestingly, for all the publicized bad blood between him and former Federal Deposit Insurance Corp. Chairman Sheila Bair, both separately told me that Washington Mutual could not have been saved. I’m still not convinced — there was a healthy part of the thrift that JPMorgan Chase sure wanted — but there you have it.
Space didn’t allow me to get into how the titans of deregulation (Robert Rubin, Larry Summers, Phil Gramm, Jim Leach, etc.) opposed regulating the kind of dangerous derivatives that helped cause the near meltdown of the global financial system. They did a beatdown on Brooksley Born, chair of the Commodity Futures Trading Commission in the late 1990s, who wanted the CFTC to oversee these financial weapons of mass destruction. In his book, Stress Test, Geithner admits that Born’s warnings were “prescient.” Yet little has been done to rectify the situation.
A few comments emailed by readers (there was a huge response):
• The column “is an affirmation of the disconnect, duplicity, and manipulation of public trust by specifically chosen Wall Street insiders… Then there is Congress, an institution that has voted time and again to remove oversight and regulation from the markets. Capitalism became a glorious crap table for hedge funds and bankers, and the people who lost out were the average workers of this nation who try to make a living and pay their bills.”
• “One thread in the fabric which I wished drew more scrutiny is the part played in this this long slide by the widening acceptance of debt as a solution welcomed without fear or even apparent knowledge of history. All of the debt-increasing policies, public and private, contributing to this now nearly 40-year long trend have been blessed by the government, which having prepared the soup has been, as expected, reluctant to warn us concerning its potential impact on our nation. Mr. Geithner and his peers conceived, accepted, sliced and marketed the products whose vast dispersion lies at the base of our national mess. In the now 6-year long aftermath, stimulus, whether monetary or fiscal, meant to spur more consumer spending can’t seem to get enough traction to overpower the lingering fears extant in the country to which Sheila Bair has given the most powerful voice.”
• “There is something not quite right about the views of Geithner, Rubins, Summers, and the like. They belong to the upper class and I do not believe that the middle class or lower class is anything but an abstraction to them. They do not understand the lives or have deep empathy for those who struggle every day to survive financially. Then there is the average wealth of individuals serving in Congress. Bernanke now gives speeches for $200,000 or more.”
• “The people hurt by this crisis are many homeowners, ethical builders and financial institutions and their employees , and the U.S. and world economies. The people not adequately held accountable are unethical bank and financial institution managers and employees, and those lobbyists and others who seek to influence government to enhance their own greed and avoid accountability. We do not need another financial crisis. We DO need a federal government that knows, develops, and enforces an ethical, fair and responsible banking and financial economic system. And we need it soon.”
• “Tim Geithner has done an excellent job of framing the question of how he (and President Obama, [former Federal Reserve Chairman Ben] Bernanke, et al) should have addressed the problems that they faced in the financial crisis as a choice between what they did, as one option, and letting all the banks fail, as the other option. As you suggested in your column, this is a false choice and one that lets Geithner and his peers off the hook far too easily.”
• “Were you enjoying a now-legal pipe-full as you wrote the Geithner piece? For starters, why didn’t you ask him how a tax-cheat got to be Treasury Sec’y? If he had been an R, he’d have been fined and disgraced; as a D, I guess you get to preside over the IRS. And it’s not at all true that ‘no one noticed what was happening inside the financial system until after it happened.’ The Washington Mutual rats who grabbed the $ and ran (including their despicable Board) knew and, far more importantly, (Brooksley Born) warned Rubin, Summers, and Greenspan about derivatives and the rest of the Ponzi Scheme that was being played and was rebuffed but good…Even if you give these bums credit (I don’t) for ‘saving us,’ the ham-handed way it was done, including Bush’s part, was a disaster…as was and is Dodd-Frank…”
History is an argument without end. Nearly five years after the official end of the Great Recession, passions still run high. And the banks, to paraphrase the famous words of Sen. Dick Durbin regarding Congress, still own the place.