Hubbard, who is the Columbia University business school dean and a one-time candidate to lead the Fed, asked Geithner why the administration was not embracing Simpson-Bowles.
“Really, Glenn?” Geithner responded. “There’s a $2 trillion tax increase in there. When you guys are willing to raise taxes, we can talk about Simpson-Bowles.”
Geithner wrote that Hubbard responded: “Well, of course we have to raise taxes. We just can’t say that now.”
Hubbard has accused Geithner of lying and Geithner, through a spokesperson, replied that he wasn’t and his memory on the exchange was “crystal clear.”
First Response
Throughout the book, Geithner argues that government ought to be able to deal with financial crises the way it goes to war: all out and immediately.
Military, firefighting and first responder analogies are used constantly. He calls the county’s financial regulations a “byzantine mess,” where different agencies have oversight over different parts of the economy and over different financial instruments.
He also said the government didn’t have oversight on the various investment vehicles that caused the crisis and sold by the “14 families” (the 14 investment houses). He notes the Fed had oversight on only two of those firms.
His other big regret is that the country doesn’t know it has made a profit on the bailout. But through his inability to communicate what the government was doing and why, Main Street viewed it as saving Wall Street at taxpayers’ expense.
The biggest accomplishment, he wrote, is the “stress test” financial institutions must perform to insure they have enough liquidity on hand to weather bad financial storms.
Even though the U.S. is in better shape now than the rest of the world, Geithner wrote: “We did save the economy, but we lost the country doing it.”
“Stress Test: Reflections on Financial Crises” by Timothy F. Geithner. Crown Publishing. May 13; 580 pages.
William L. Haacker is an award-winning journalist and editor who has worked for various New Jersey newspaper, including Gannett New Jersey.