On the Geithner Legacy by Mike Konczal

How Tim Geithner Saved the Banks—with Ben Bernanke's Help by Matt O'Brien

Sometimes I wonder if Dean Baker/Atrios/Matt Taibbi are right and we should have let the whole thing crash and burn thereby ridding us of the parasitic financial sector. I do believe that Obama should have flipped/nationalized Citigroup as he did with the auto makers.

I also believe that we won't get bailouts the next time around, so we'll see how it plays out.

Wall Street thanks you for your service, Tim Geithner by Dean Baker

Treasury Secretary Timothy Geithner's departure from the Obama administration invites comparisons with Klemens von Metternich. Metternich was the foreign minister of the Austrian empire who engineered the restoration of the old order and the suppression of democracy across Europe after the defeat of Napoleon. 

This was an impressive diplomatic feat – given the widespread popular contempt for Europe's monarchical regimes. In the same vein, protecting Wall Street from the financial and economic havoc they brought upon themselves and the country was an enormous accomplishment.
During his tenure as head of the New York Fed and then as treasury secretary, most, if not all, of the major Wall Street banks would have collapsed if the government had not intervened to save them. This process began with the collapse of Bear Stearns, which was bought up by JP Morgan in a deal involving huge subsidies from the Fed. 

The collapse of Lehman Brothers, a second major investment bank, started a run on the three remaining investment banks that would have led to the collapse of Merrill Lynch, Morgan Stanley, and Goldman Sachsif the Fed, FDIC, and treasury had not taken extraordinary measures to save them. Citigroup and Bank of America both needed emergency facilities established by the Fed and treasury explicitly for their support, in addition to all the below market-rate loans they received from the government at the time. Without this massive government support, there can be no doubt that both of them would currently be operating under the supervision of a bankruptcy judge. 

Of the six banks that dominate the US banking system, only Wells Fargo and JP Morgan could conceivably have survived without hoards of cash rained down on them by the federal government. Even these two are questionmarks, since both helped themselves to trillions of dollars of below market-rate loans, in addition to indirectly benefiting from the bailout of the other banks that protected many of their assets. 

Had it not been for Geithner and his sidekicks, therefore, we would have been permanently rid of an incredibly bloated financial sector that haunts the economy like a horrible albatross. 

Along with the salvation of the Wall Street banks, Geithner also managed to restore their agenda of deficit reduction. Even though the economy is still down more than 9 million jobs from its full employment level, none of the important people in Washington is talking about measures that would hasten job creation. 

Instead, the focus is exclusively on deficit reduction, a process that is already slowing growth and putting even more people out of work. While lives are being ruined today by the weak economy, Geithner helped create a policy agenda where the focus of debate is the budget projections for 2022.