Now Timothy Geithner, who was Treasury secretary for four of those six years, has published a book, “Stress Test,” about his experiences. And basically, he thinks he did a heckuva job.
He’s not unique in his self-approbation. Policy makers in Europe, where employment has barely recovered at all and a number of countries are in fact experiencing Depression-level distress, have even less to boast about. Yet they too are patting themselves on the back.
How can people feel good about track records that are objectively so bad? Partly it’s the normal human tendency to make excuses, to argue that you did the best you could under the circumstances. And Mr. Geithner can indeed blame much though not all of what went wrong on scorched-earth Republican obstructionism.
But there’s also something else going on. In both Europe and America, economic policy has to a large extent been governed by the implicit slogan “Save the bankers, save the world” — that is, restore confidence in the financial system and prosperity will follow. And government actions have indeed restored financial confidence. Unfortunately, we’re still waiting for the promised prosperity.
Much of Mr. Geithner’s book is devoted to a defense of the U.S. financial bailout, which he sees as a huge success story — which it was, if financial confidence is viewed as an end in itself. Credit markets, which seized up after Lehman fell, mostly returned to normal during Mr. Geithner’s first year in office. Stock indexes rebounded, and have hit new records. Even subprime-backed securities — the infamous “toxic waste” that was poisoning the financial system — eventually regained a significant part of their value.
Thanks to this financial recovery, bailing out Wall Street didn’t even end up costing a lot of taxpayer money: resurgent banks were able to repay their loans, and the government was able to sell its equity stakes at a profit.
But where is the rebound in the real economy? Where are the jobs? Saving Wall Street, it seems, wasn’t nearly enough. Why?
MAY 18, 2014