The most terrifying seat on a roller coaster is always the one right at the front, and no one has had a more stomach-churning perch from which to view the plunges, twists and turns of the financial crisis than U.S. Treasury Secretary Timothy Geithner. Now, with the wild ride levelling out and stability returning to the economy, the man whom hard-liners on both the left and right were calling a “disaster” a few months ago is being credited with helping put the U.S. back on track. When Warren Buffett declared the financial panic over this month, he said that Geithner, with Federal Reserve chairman Ben Bernanke, deserves “high marks” for how he handled the crisis.
Of all the predictions about the fate of the global economy made during the darkest hours of the financial crisis—“There will be blood,” the historian Niall Ferguson pronounced—few thought that 250 days later we’d be where we are today. America’s economy is growing again, unemployment is slowing and consumer confidence has rebounded from lows not seen in half a century. Through a barrage of stimulus spending and tough measures that forced troubled banks and automakers to restructure, Geithner ultimately succeeded in giving America some of its confidence back.
Not that you’ll hear much overt praise for him. These days, even winners must take their beatings. In fact, the only thing more volatile than stock prices over the last year has been Geithner’s public persona. A lot of that has to do with his unique history. In his previous job as chair of the New York Federal Reserve, he oversaw much of the soaring excess that got Wall Street into trouble in the first place. For instance, while Geithner raised concerns about risks posed by the red-hot derivatives market, which ultimately magnified the crisis, he took few steps to curb it. Then, when the credit crisis hit, he worked closely with the Bush administration to draft the response. He arranged for JP Morgan to take over the troubled investment bank Bear Stearns, and was instrumental in the decision to let another firm, Lehman Brothers, fail. He also worked with his predecessor, former treasury secretary Hank Paulson, and Bernanke to construct the US$700-billion Troubled Asset Relief Program (TARP). The measure gave financial support to banks, insurers and credit card companies, as well as the lending arms of GM and Chrysler. It went a long way toward easing fears of a systemic Wall Street collapse.
So when Barack Obama picked Geithner, then 47, to head the Treasury Department, many initially cheered the move—despite the revelation that Geithner had failed to pay US$35,000 in taxes to the IRS. But through much of the spring, calls for him to be fired became an almost daily event. Some critics blasted his plan to rescue the financial sector for not doing enough to punish reckless Wall Streeters, while others suggested his efforts to rescue struggling companies, particularly GM and Chrysler, were pushing the U.S. toward socialism. After it was disclosed that AIG, recipient of a US$170-billion bailout, was planning to pay huge bonuses to its employees, Geithner became the lightning rod for criticism, with more than half of Americans blaming him for the scandal.
Today, many still have fears about the weakening U.S. dollar and the staggering debt Washington has piled on to buy this recovery. Yet, as economic indicators shift from horrible to “less worse” to better, criticism of Geithner has been replaced with grudging praise. “He gets a high rating for really driving into the eye of the hurricane and taking bold actions in an aggressive way with very positive results,” says Brian Bethune, chief U.S. financial economist at IHS Global Insight. But, he adds, Geithner’s many early missteps at the New York Fed, and how he’s managed the government’s huge stakes in financial companies like AIG, hang over his achievements, even if they did involve bringing America closer to the end of the Great Recession. “It’s like the coach of a football team who at halftime is down 40 to nothing, and in the final seconds scores a field goal to come back and win.”
If the first draft of history hasn’t been kind to Geithner, the reality is historians will remember him less for what’s occurred until now, and more for what comes next. The financial system still needs fixing. But the time to undertake massive reconstructive surgery wasn’t when the patient was lying on the gurney with a sucking chest wound.
For now, Geithner and other senior members of Obama’s economic team have sewn up the wound and got the patient breathing on his own. And any way you look at it, that’s a win for Geithner, for America, and by extension, the rest of the world.