Stress Test By Timothy F Geithner

Imagine that for whatever reason people have grown careless about both borrowing and lending, so that many families and/or firms have taken on high levels of debt. And suppose that at some point people more or less suddenly realize that these high debt levels are risky. At that point debtors will face strong pressures from their creditors to “deleverage,” slashing their spending in an effort to pay down eur debt. But when many people slash spending at the same time, the result will be a depressed economy. This can turn into a self-reinforcing spiral, as falling incomes make debt seem even less supportable, leading to deeper cuts; but in any case, the overhang of debt can keep the economy depressed for a long time. Whatever the reasons, however, the stress test pretty much marked the end of the panic.

She refers to Geithner in her book as someone who always had her back, but whose main interest was to “foam the runway” for banks–make the crash landing as painless as possible and return them to profitability as quickly as possible. And this is where Geithner’s background does prove something. It’s possible he spent so long marinating in the rules of that game, that he couldn’t see anything past the stadium. Tim Geithner is one of few Beltway insiders I have ever followed on Youtube. He’s an awkward but strangely captivating public speaker, a humble but competent bureaucrat who rises above the political theater of Washington to deliver pragmatic solutions to our economic woes, most often in an exasperated monotone. Secretary Geithner pointed out in his book that Governor Volcker believes that the last useful innovation to come from the banking and financial services industry was the ATM. He has also pointed out that Warren Buffett believes that derivative securities are financial weapons of mass destruction.

Preview

Nothing would have made me happier than to see the banks fail, if it weren’t that we were all involved. The second thought that rivaled the “ordinary guy” theory was that he does has an extraordinary calm and one-or-two-steps-at-a time pragmatist mentality, a willingness to go “all in,” and a lack of interest in the trappings of wealth creation. I remember coming away from Robert Gates’ memoir thinking that only those that don’t want Retail foreign exchange trading the fame and fortune that comes with vaunted public service must be the ones chosen to serve. (Remember Sam Nunn? He did his duty, oh so well, but he appeared to hate the limelight.) And Geithner must be an impressive thinker and proponent of his thinking in person and in writing, despite or perhaps because of, his measured and sometimes turgid prose. He consistently had strong supporters and powerful mentors all along his path.

After Pierre Bourdieu, I veered off into Piketty, went through Rothbard, fun excursions into Flashboys and Tyler Cohen because I just had to, with lots of Pierre Bourdieu again because, well, I’m an educationist. In the same scenario, Id be $300,000 in the hole on Thursday and I simply dont have $300,000 to make up the difference.

  • In fact, we did have both the knowledge and the tools to fight this disaster.
  • But he doesn’t begin to explain why, if investors were so numb to risk, Wall Street went to such lengths to disguise that risk.
  • He and his team were convinced that “there would have been shantytowns again” if they mishandled the crisis.
  • Geithner describes his education at Dartmouth University and his graduate studies at the Graduate School of International Studies at John Hopkins.
  • So why was it so hard to organize an effective response to the 2008–2009 panic?
  • I read “On the Brink” by Hank Paulson the former Secretary of Treasury, “House of Debt by Alif Mian and Amin Safi, economist, describes the large amount of empirical research done since 2008.

About halfway through it became a ‘page turner.’ Having now read the notes AND acknowledgements, I realize that the book was very much a collaborative effort, in fact, you might say a book developed by a team. I am just a little bit — not sure what the right word is — jealous. I mean if I could bring in several people who served with me at various points of my 27 year Air Force career, I could probably write a fairly interesting book. Okay, jealousy aside, the more I got into the book the more I began to respect Tim Geithner, Hank Paulson, Ben Bernanke and Don Kohn.

Overview

While much of the detail might be considered tedious – seemingly a never ending series of crises & sources of impending doom – there are areas of great interest. First off, Geithner makes his case of why he was the right guy in the right place. In his view, only a committed pragmatist could have pulled it off. The popular nostrums of the left & the right wouldn’t have worked & would have been counter productive. Thus, the bailouts, the absence of prosecutions, and the emphasis on bailing out the fat cats.

He tells about his work in the International department working on helping countries with their financial crisis such as Mexico, Japan, Indonesia and South Korea. He says the lessons he learned helped him deal with the current worldwide financial crisis.

Responses To Review Of stress Test: Reflections On Financial Crises By Timothy F  Geithner

While we can’t guarantee fulfillment of a signed book pre-order, our authors are almost always able to sign extra books to fulfill such orders. You can still pre-order a signed book by one of our visiting authors. After being resold, the mortgages were then “sliced and diced” into tranches and then combined or repackaged by investment banks into exotic derivatives known as collateralized debt obligations . Those CDOs were thought by the rating agencies to be investment grade because they spread the risk of default over many different mortgages. The amount of trading in such securities reached an astonishing $530 trillion (that’s right,trillions) of dollars before the underlying mortgages began to defaulten masse. The banks, especially the investment banks, were thinly capitalized. In fact, we did have both the knowledge and the tools to fight this disaster.

Instead, at the clever suggestion of one of Geithner’s staffers, and after much arm twisting, the moribund firm was sold to J.P. The best guess is that Geithner was in fact unenthusiastic about stimulus and more or less hostile to mortgage debt relief. You can argue that a bigger stimulus plan would have failed to pass Congress; you can argue Stress Test: Reflections on Financial Crises that mortgage refinancing would either have proved impossible to implement or have provoked a huge political backlash. The truth is that we’ll never know, because the Obama administration never really tried to push the envelope on either fiscal policy or debt relief. And Geithner’s influence was probably an important reason for this caution.

It is obvious from the book the man did his best in an extremely difficult situation. Secretary Geithner also describes the aftershocks of the crisis, including the administration’s efforts to address high unemployment, a series of brutal political battles over deficits and debt, forex and the drama over Europe’s repeated flirtations with the economic abyss. Throughout the financial crisis, Tim’s ethics, competence, decision making ability and loyalties to the American public came frequently into question amidst massive bank bailouts and talks of moral hazard.

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At core, Tim Geithner was the ‘man with a plan’ or perhaps better said the man who was willing to take action. To these ends, he would be the first to acknowledge that he had an incredible amount of help from many very able and dedicated men and women at both the New York Fed and in the Treasury Department. Geithner’s story is also one of a pragmatist and a moral relativist. In fact, on more than one occasion his meetings with CEOs left him almost dumbfounded when he found out how naive they were as far as what was actually going on in their own institutions. Geithner, I think correctly, observes that money and bankers will always be like water trying to find its way around rocks.

Having the right credentials on paper is only part of the picture and I have seen multiple people who did not fit the typical role profile of a job become extremely successful based on who they are and their drive to succeed. I found Tim’s book to be both technically informative in terms of how the global financial system actually works, but also extremely enlightening in terms of what leading through high pressure and high stakes situations looks like on the global political scale. After the last few weeks, it clear we are in the biggest financial crisis in our generation. I read “Stress Test” a few months ago and there are several perspectives that are good to be remembered.

I doubt many readers will put his book down and think the man did anything but his best. Unfortunately this creates the opportunity for a political backlash, and this is exactly what happened.

Now I have read “Stress Test” by Timothy F. Geithner whose book unlike the prior books provides an insider’s view point of the crisis. I am sure that this will be a controversial book and people will take sides according to their personal belief and only a few people will read it for the facts without pre-judgment. Geithner served as President of the New York Federal Reserve from 2003 to 2008 and Secretary of Treasury from 2009 to 2013. Geithner starts the book with his childhood growing up in various countries as his father worked for the Ford Foundation. Geithner describes his education at Dartmouth University and his graduate studies at the Graduate School of International Studies at John Hopkins. He tells about his personal life meeting his wife getting married having children. But he spends most of the book on his employment at the Treasury.

That is because Geithner, Barack Obama’s first Secretary of the Treasury, is not a politician nor a Washington insider. The result is a refreshingly candid autobiography, full of personal anecdotes, self-criticisms, and criticisms of those that he had to work with in some capacity or another. Two thoughts competed for precedence as I listened to Geithner narrate the Random House audiobook production of his book. One was that he really is just an ordinary man in extraordinary circumstances.

Stress Test: Reflections On Financial Crises(book)

He does not emphasize the cupidity, imprudence, and stupidity that put those firms at risk. Nor does he dwell on the irony that all of the firms that required huge influxes of taxpayer money were particularly expert in avoiding taxes themselves, largely through the use of off-shore tax havens. And finally, he at no time considers the profound injustice of extending rescue measures to those with huge assets, while the majority of “average” Americans struggled with the repercussions of their actions. Stress TestIs Timothy Geithner’sApologiafor his handling of the financial crisis of 2008 as well as a recounting of his four years as Barak Obama’s Secretary of the Treasury and his previous three years as President of the Federal Reserve Bank of New York.

Those readers that are not as familiar with financial derivatives, risk management and other banking terms may have a tougher go at this. However, it is one thing to say that one can study Finance, it is another to say one has experience with Finance.

The process has been called a “Wall Street securitization Ponzi scheme” for good reason. Treasury Department to rescue foreign countries like Mexico and Thailand from default on sovereign debt when their governments found themselves in financial crises. That experience was to serve him well once he assumed significant responsibility with the Federal Reserve and later as Secretary of the Treasury. I like Geithner’s metaphor of a stress test—and his book is very much worth reading, especially for its account of the crisis. We can argue about how much of the blame rests with the Obama team, how much with the crazies in Congress who met every administration initiative, no matter how reasonable, with scorched-earth opposition. Furthermore, Geithner seems to want it both ways—to portray himself as a frustrated advocate of more debt relief, while at the same time asserting that such relief would have made little difference. And his eagerness to make the latter assertion leads him to engage in some demonstrably bad arithmetic.

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