Timothy Geithner on his "terrifying days" at Treasury
When Timothy Geithner was offered the position of Treasury Secretary in 2008, he understood it would not win him any popularity contests: "I was pretty confident it was a no-win job," he laughed.
He would help navigate the worst financial crisis since the Great Depression. Geithner, to some, became a hero who saved the economy; to others, the villain who rewarded the banks.
Mason asked, "What would you say your worst day in the financial crisis was?"
"I had a lot of bad days. I had a lot of terrifying days."
For six years -- first as head of the New York Federal Reserve, then as Treasury Secretary -- Geithner would confront a series of rolling crises: the rescue of Bear Stearns, the collapse of Lehman Brothers, a spreading panic in the stock markets.
"Did you feel like you were, you know, the kid at the dike plugging a finger in one hole after another?" asked Mason.
"I tell the story that I went to see Paul Volcker on Saturday of the Bear Stearns weekend, and I walked into his apartment 'cause I wanted to tell him where we were. And he said, 'How's your finger?' I didn't know what he was talking about. But he was referring to the finger in the dike."
In his first television interview since leaving the Treasury last year, Geithner acknowledged he had not always made his case well.
"There were a lot of communications issues," said Mason.
"'Issues' is a nice way to put it," Geithner said.
"What would you call them?"
In his new memoir, "Stress Test," he tries to set the record straight:
"I think a lot of people still feel the banks should have been made to pay in some way, either in terms of restructuring, in less executive compensation, in some cases people should have gone to jail," said Mason.
"I think everybody feels that way," said Geithner. "And I think that's a totally understandable perception."
"But do you feel that way?"
"Well, you know, I feel like it's a complicated thing. You know, there was a terrible amount of abuse and fraud and bad behavior, and damaging and dumb things that people did in the crisis. And I think Americans definitely deserved a stronger enforcement response."
"But I want to know what you think. You saw this up-close better than anybody. Does it surprise you nobody went to jail?"
"It doesn't surprise me no one went to jail," said Geithner. "It doesn't surprise me."
What may have been immoral or unethical, he says, was not illegal.
Geithner has often been accused of being too cozy with Wall Street. A myth even developed that he'd once worked for Goldman Sachs.
A career public servant, he'd taken only a single Economics class at Dartmouth.
"What were you thinking you were gonna be when you grew up?" asked Mason.
"I didn't know what I was gonna be."
"Treasury Secretary was not on the list?"
"No risk of that!" he laughed.
Geithner, whose father worked for the Ford Foundation and USAID, had an itinerant childhood, living in India, Africa and Thailand. Eager to follow his father's path in public service, he'd join the Treasury Department where in the '90s he'd monitor financial crises overseas:
"It was great exposure to all the mistakes people can make," he said. "How fragile things are. How hard it is, once confidence breaks, to put it back together again. How devastating the damage is."
So as head of the New York Fed, when Lehman Bothers was on the brink of collapse in September 2008, he understood what was at stake: "We brought the leaders of Wall Street together in a room right there, and we basically kept them there for three days," he said.
Working with then-Treasury Secretary Henry Paulson, Geithner tried to find a buyer for Lehman, but failed.
"When you realized you couldn't save Lehman, what were you thinking?" asked Mason.
"Oh, I thought it was going to be terrible. And of course it was terrible. It was worse than we imagined, though."
The next day the stock market plunged 500 points.
"There is a perception on Wall Street," said Mason, "that you found a way to save Bear Stearns, you found a way to save AIG -- you could have found a way to save Lehman."
"I know that. In the Lehman case there was no willing buyer. In the end we worked very hard -- we worked really, really hard to try to make that happen."
That Fall, when President-elect Obama approached Geithner about succeeding Paulson as Treasury Secretary, his wife Carole, whom he met in college, strongly opposed it: "I really had a sense of dread about it," she told Mason. And, she added, it was worse that she could have imagined it would be.
The hardest part? "Having a person that you really love and care about being beaten up and criticized, when they are doing their best to solve a problem that had no easy answers," she said.
Geithner would become a lightning rod -- and TARP, the $700 billion rescue package he helped push through to save the banks, would take much of the heat.
Banks have paid back the loans with interest. But the cheap money they were lent allowed them to reap billions in profits, as homeowners struggled.
"These banks were still taking huge bonuses," said Mason.
"Oh, it was terrible, that was terrible," said Geithner. "It was outrageous and killed us."
"Did you get on the phone and say, 'Guys, I'm tryin' to help you survive and you're killing me'?"
"I said exactly that. I used those words. I said this is gonna kill us. I used some other words, too."
But Geithner argues that, even though it appeared the arsonists were being rewarded, the banking system had to be secured.
"You're basically saying homeowners were collateral damage," said Mason.
"No, I'm saying, in a financial panic, there is enormous collateral damage. They're deeply unfair and tragic in that context. So, the first imperative is to make sure you make the system stable -- not because you care about the banks or you want to protect them from their mistakes, but because if you let the lights go out, the system will collapse around them."
After a year at home in Larchmont, N.Y., writing his book, last month Geither (now 52) started a new job as president of the private equity firm Warburg Pincus.
"Some people could look at it and say, 'Well, he's going to Wall Street,'" said Mason.
"They could say that," said Geithner. "And I actually thought about that a lot. I was really worried about that perception, so I was not willing to go to an institution that we had regulated or that we'd rescued for exactly that reason."
His role in the worst financial crisis since the Great Depression will be debated for decades. History will judge Timothy Geithner -- and he knows it.
Mason asked, "Do you worry about defending your legacy?"
"I don't think there's any hope for my legacy!" he laughed.
"You don't think there's any hope of defending your legacy?"
"I don't know. It's not something you can worry about. I feel very confident that we made some very good choices and the best choices we could in the circumstances at the time. And I'm at peace with those decisions, even though I carry with me just all the burdens of the disappointment and the scars of the damage."
For more info:
- "Stress Test: Reflections on Financial Crises" by Timothy Geithner (Crown); Also available in Large Print Trade Paperback, Unabridged Audio Download and Unabridged Audio CD formats