NEW YORK (TheStreet) -- Former Treasury Secretary Timothy Geithner, in the midst of the 2008 financial crisis, maintains he didn't gift the banks a $185 billion credit line to make money for taxpayers.
Speaking with TheStreet's Jim Cramer Wednesday at a Barnes & Noble in Manhattan, Geithner delivered a series of unscripted comments that managed to sound fresh amid the media blitzkrieg surrounding the promotion of "Stress Test," his memoir about the actions of bankers, government officials and a skeptical public angrily consumed by the Great Recession.
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True to form, Geithner, 52, wore a dark suit, blue shirt, purple tie, black leather loafers (somewhat worn-down) and a digital watch. Some of the highlights:
- "In March of '09, the conventional wisdom in much of elite opinion was that we were going to lose $1 to $2 trillion on the direct cost of the financial rescue, not the cost of the loss of unemployment or wealth, but the direct cost of the financial rescue. But because we did a very forceful creative effort, the taxpayers are going to get a positive return ... and we didn't do it to make money for the taxpayer, we made money to prevent them from having mass unemployment."
- Regarding bank CEOs calling him as the financial crisis deepened in Fall 2008: "Anybody who was smart in finance at that point was scared to death. If you weren't scared to death at that point, you had no idea what was going on."
- "In financial systems in most places of the world that basic instinct -- which is to let the fire burn, let it consume the risk takers, put people in handcuffs, let firms fail -- that basic instinct is the right instinct. But in a financial panic what you have to do is the opposite of that. That's why it's so counterintuitive."
- "Panics are devastating. They're devastating in a way that's deeply unfair and it causes huge collateral damage to the innocent victims of crisis."
- "I think there is tremendous damage in this crisis. Worst damage to unemployment, business, housing, people's basic sense of security. Worst damage since the Great Depression. Enormous loss of confidence in government, deep lasting scars. You may not have seen it in the shape of bread lines and soup lines, but you can still see it today in people's sense of darkness."
- "The central vulnerability was this country over decades allowed a [financial system] to build up. It was very large. It was outside of -- and very risky -- outside of those protections that applied to the banking system. ... Think of AIG, think of GE Capital, think of the investment banks, think of Fannie and Freddie: together they accounted for more of the function of credit in the economy than almost all the rest of the banking system. There was no competent authority with the ability to constrain their risk taking."
- Talking about the Federal Reserve's responsibilities: "Citi, uh, definitely on us. ... The big thing that we missed ... was what would happen to the system in the event that a substantial fall in home prices precipitated a panic."
- "It was that lack of memory of panics, lack of experience with them -- created the seeds of the boom."
- "Financial systems in crisis are not like national security. We don't equip our presidents or central banks with standing broad authority to respond to existential threat. We don't do that because of concerns of moral hazard.
- Speaking to the criticism that he settled scores in the book: "No score settling."
- Responding to criticism that yields on 10-year Treasuries continue to fall despite Fed policy scaling back its economic stimulus program: "There's a tradition in public policy, which is not honored widely, which I will honor, which is when you leave these jobs you leave these choices to [your successors]."
- On whether he watched the Saturday Night Live skits that lampooned him: "I didn't watch any of that stuff. I was told about it," Geithner said with a smile on his face.
- "People looked at what we were doing, and what we were doing to people was inexplicable, unfair, unjust, because it looked like we were rewarding the arsonist. And they could not understand why that was necessary, why that was desirable. But that is also understandable because who among us had lived through a classic panic?
- Regarding career employees at the Treasury Department and Federal Reserve: "I wrote this book, in part, to honor what they did, because few Americans have any appreciation for the quality of talent you had in those institutions at that time."
- "Shareholders should bear the cost of [the financial crisis]. ... In addition to [the CEOs and executives], they should."
- On if reliving the financial crisis he would do it exactly the same: "Oh, yes I would have."
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-- Written by Joe Deaux in New York.
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