The Patriot Post® · Geithner Says He Was Told to Lie During Financial Panic

It’s time for another Washington memoir, and up for the talk show circuit this time around is former Treasury Secretary and alleged tax cheat Timothy Geithner. His book, “Stress Test: Reflections on Financial Crises,” hit the stores this week, and he offers some juicy tidbits about how Obama administration officials put him in compromising positions. But he seems to spend most of the 500-plus pages justifying his actions in the early months of the 2008-2009 financial crisis.

Geithner has a lot to say about the banking system and the mechanics of investment institutions, but he has never spent a day working in one. With the exception of a three-year stint with Kissinger Associates, he has been working for the government and non-governmental organizations his entire career. He spent 13 years at the Treasury Department, where he got to know fellow liberal wonks Robert Rubin and Larry Summers. He then worked for the International Monetary Fund, and later was recommended by Rubin and Summers for the presidency of the Federal Reserve Bank of New York. It was in this post that Geithner came to the attention of the Obama administration and was picked to head the Treasury Department.

Geithner was on the job just a few days when he became exposed to the real politics of Washington. According to his book, he was approached by Obama aide Stephanie Cutter before a press gathering in the Oval Office. She wanted him to make remarks decrying executive bonuses at Wall Street firms. Geithner writes that he refused to do so, fearing that the government arbitrarily rewriting agreements with financial institutions and mandating payouts in the private sector would send the wrong message. That’s putting it mildly.

“I remember during one Roosevelt Room prep session before I appeared on the Sunday shows,” Geithner writes, “I objected when Dan Pfeiffer wanted me to say Social Security didn’t contribute to the deficit. It wasn’t a main driver of our future deficits, but it did contribute. Pfeiffer said the line was a ‘dog whistle’ to the left, a phrase I had never heard before. He had to explain that the phrase was code to the Democratic base, signaling that we intended to protect Social Security.” In other words, he was told to lie for political gain. Where have we heard that before?

Geithner recounts that he had difficulty grasping the stability of large financial firms. He didn’t see the mortgage crisis coming, but he defends bailing out financial firms. He rejects the moral hazard argument that the bailouts would merely lead to more risky behavior and undercut faith in the financial sector due to excessive government interference. Geithner also maintains that the government’s actions during the financial crisis prevented a far worse calamity. And yet “too big to fail” is now virtually institutionalized policy, while banks have grown bigger than ever.

His argument makes for little more than a nice excuse because it can never be proven – there is no alternate reality in which the government remained within its enumerated powers.

There will always be disagreement whether Geithner’s actions were good or bad for the country during a time of crisis, but six years later, we can be certain that the national debt is approaching $18 trillion, and the economy is experiencing near-zero growth. That and we now have a permanent template for greater government interference in the economy. Hardly proof of success.

For more background on the financial crisis, read Mark Alexander’s Economics 101: Crisis of Confidence.