An insider’s account of the crisis

Cover of Stress TestStress Test: Reflections on Financial Crises
By Timothy Geithner
Published by Random House (£25 – hardback)
(Buy at Amazon)

Other than former Federal Reserve chief Ben Bernanke, no one was more involved in the official response to the financial crisis than Timothy Geithner.

Bernanke’s right-hand man at the Fed from 2003 to 2009, he played a key role in the decision-making process as the credit crunch turned into a full-blown panic. President Barack Obama then chose him to be his Treasury secretary from 2009 to 2013.

During this time, he was attacked by all parts of the American political spectrum. Geithner’s memoir, Stress Test: Reflections on Financial Crises, gives his side of the story.

“He’s written a really good book,” says Michael Lewis in The New York Times. While Geithner found it difficult “to explain himself… to the wider public” in office, he “is clearly more at ease, and more himself, on the page”.

While he still firmly defends his decisions, and is critical of those who supported a more laissez-faire approach, “there’s hardly a moment in Geithner’s story when the reader feels he is being anything but straightforward”. Whatever their political views, Lewis doubts that “many readers will put his book down and think the man did anything but his best”.

Geithner is fair-minded, agrees John Berry in USA Today. In detailing his disagreements with Sheila Bair of the Federal Deposit Insurance Corporation, he is “careful to give her credit when he believes it is due”. The former Treasury secretary also explains each step of the crisis in “easy-to-understand language”.

Geither was “certainly effective”, concedes Edward Luce in the Financial Times. But “too much of this otherwise self-deprecating memoir is self-defence”. While Geithner believes that his critics overlook the fact that he spent nearly all his life in public service, this particular defence has been “undercut” by his decision to cash in on his career by going on to become the head of a private-equity firm.

Moreover, the reality is that “Geithner will be judged by how the system handles the next big crisis”. It is significant that even the author himself “does not sound very optimistic” about the future.

Not everyone agrees that his arguments are entirely honest. For example, James Freeman in The Wall Street Journal notes that Geithner justifies his role in the bailout of Bear Stearns in 2007 by arguing that “there were too many other firms that looked like Bear”. However, minutes of the key Fed meeting suggest that, at the time, Geithner believed that “they do not justify that concern”.

He also “comes across as someone very sure of his own intellectual capacities and too often irritated by the shortcomings of others”, says Stephen King in The Times. And the decision to go ahead with bailouts was made a lot easier by the fact that “there is no shortage of foreign creditors with deep pockets” willing to buy US debt.

“Manias and panics are inevitable features of capitalism,” says King. But it would be nice if this book had “spent more time wondering whether policymakers had themselves sometimes thrown too much fuel on the fire”.

• Stress Test: Reflections on Financial Crises, by Timothy Geithner. Published by Random House (£25 – hardback).

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