The Sunday May 18th New York Times carried two wonderful overviews of two current books on the financial crisis. If you are following this odyssey both articles are most worthwhile. Gretchen Morgenson’s Fair Game column, Geithner Staying on Script dissected Geithner’s Stress Test self-defense book with precision! In my view no reporter is better than Morgenson in getting to the bottom of complex financial issues and her article is enlightening and the conclusions on point. Writes Morgenson,
“Mr. Geithner does do some introspection. “I did not view Wall Street as a cabal of idiots or crooks,” he writes. “My jobs mostly exposed me to talented senior bankers, and selection bias probably gave me an impression that the U.S. financial sector was more capable and ethical than it really was.” That’s as close as he gets to saying that he was wrong to trust — not question — bankers he encountered.
A final flaw: In his book, Mr. Geithner boasts that the bailouts he helped design have been profitable to taxpayers. But his calculations do not take into account the cost of capital that the taxpayers extended to the banks.
“As for the oversight mistakes that he and his regulatory colleagues made, Mr. Geithner essentially says “We were human.” But this fails to address head-on the possibility that he was a captured regulator, a man locked into the mind-set of the very bankers he was supposed to oversee.”
The second article, written by Binyamin Appelbaum, The Case Against The Bernanke-Obama Financial Rescue, reviews a new book by Atif Mian and Amir Sufi titled House of Debt. The authors flatly accuse Timothy Geithner and Ben Bernanke of focusing only on preserving the financial system ( the banks). From Appelbaum’s article ”
“If you actually look at the argument that people like Mr. Geithner make, they almost always point to financial metrics like risk spreads and interest rates,” he said. “But if you look at the real economy, it just tends to come out in our favor.” Millions of Americans remain unemployed almost five years after the formal end of the recession.”
I have not as yet read either Stress Test or House of Debt. These two overviews are great previews and set the table for two more good reads on this complex subject, a story which has no ending.