Academic journal article The Journal of Social, Political, and Economic Studies

A Preeminent Book on the Financial Crisis: Timothy F. Geithner's Memoir as Secretary of the Treasury

Academic journal article The Journal of Social, Political, and Economic Studies

A Preeminent Book on the Financial Crisis: Timothy F. Geithner's Memoir as Secretary of the Treasury

Article excerpt

The role played by Timothy Geithner as Treasury Secretary during President Barack Obama's first term was central to the U. S. government's response to the financial crisis. Before that, he had for eight years been the president of the Federal Reserve Bank of New York. All this gives Stress Test, a memoir of those years, an automatically preeminent place among the books about the Great Recession. A vast literature has developed about the crisis, written by the principal actors such as Geithner, some of secondary rank who occupied only a slightly less exalted place, and numerous academic and financial commentators.1

Geithner stepped down as Treasury Secretary in January 2013. It was from 2003 through 2008 - i.e., until his elevation to the Treasury position - that he was president of the New York Federal Reserve Bank. That bank is considered "first among equals" among those in the Federal Reserve, and has major responsibilities that include carrying out monetary policy, regulating the financial system, and handling the United States' payment systems. This means that Geithner had already been a key figure in U.S. economic policy for several years before his service in the Obama administration.

A surprising thing about Geithner is that, contrary to a widelyheld assumption, he was never an investment banker. He didn't come into the jobs we've mentioned from Goldman Sachs or any other Wall Street firm. In fact, it isn't altogether apparent from his book just what qualifications he had for the monetary-system positions he held, although he was superbly qualified for work in international trade. His upbringing and education gave him a wide knowledge of the world. Geithner's father's work for the U.S. Agency for International Development (USAID) involved taking his young son to Rhodesia, Zambia and India. Although the boy returned to the United States after the sixth grade, he wound up attending high school at the American School in Bangkok. It's worth noting that the same leadership qualities that must have led to his being entrusted with his later positions were soon evident to his peers, as was reflected in his serving as president of both his junior and senior classes. He majored in government and Asian studies at Dartmouth, and included some study at Beijing University during those undergraduate years. It's doubtful whether anyone was ever better prepared than he was to obtain a Masters in East Asian Studies and international economics at Johns Hopkins.

Before we examine what Stress Test tells us about his role in the financial crisis, it will be valuable to know where Geithner is "coming from" on politics and ideology. He says "I've always been pretty much pragmatic, suspicious of ideology in any form," which tells us more than it seems to: it doesn't really mean that he didn't have an ideology, but rather that he unconsciously received by osmosis the prevailing ideology common to educated people among his contemporaries. His mother, he says, was a "bleeding heart liberal," his father a "conservative Republican" who nevertheless in the 1980s directed the Ford Foundation's microfinance programs in Indonesia in which Obama's mother was a moving force, and voted for Obama in 2008. At Dartmouth, Geithner felt a "strong aversion" to the outspoken conservative student movement on campus; and later in life he found the ceremony inspirational in which President Obama signed the repeal of "don't ask, don't tell," a repeal that opened the U.S. military to service by openly-avowed homosexuals. He wasn't a socialist and didn't want (or effect) a nationalization of the banks, and says Obama wasn't, either. In fact, he saw Obama as "a moderate, market-oriented Democrat." Although "I didn't have a purist's faith in the genius of the free market," he favored global free trade and opposed protectionism. He says he has "been a straight-ticket Democratic voter since the Clinton years." He saw Obama as "my kind of candidate - liberal on social issues, moderate on economic issues, pragmatic above all. …

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