Friday, June 6, 2014

"Stress Test" Reviewed: Tim Geithner Is "A Grifter, A Petty Con Artist"

 Matt Stoller writes:

The most consequential event of this young century has been the financial crisis. This is a catchall term that means three different things: an economic housing boom and bust, a financial meltdown, and a political response in which bailouts were showered upon the very institutions that were responsible for the chaos. We will be seeing the fallout for decades. Today, in Europe, far-right fascist parties are on the rise, climbing the unhappiness that the crisis-induced austerity has unleashed. China is looking away from the West as a model of development. In the US, Congress is more popular than certain sexually transmitted infections* but little else, and all institutions of national power are losing their legitimacy. At the same time, the financial system did not, in the end, collapse, and there was no repeat of the Great Depression.

More than anyone else, it was then US Treasury Secretary Tim Geithner who shaped this response, and who bears praise, blame, and responsibility for the outcome. And finally, with the release of his book, Stress Test: Reflections on Financial Crises, Geithner is getting to tell his side of the bailout story.

Stress Test is an important book, because Tim Geithner is an important man. Economist Thomas Piketty may be explaining essential social dynamics of inequality, and Elizabeth Warren may be describing the need for Americans to get a break from the banks, but it is Tim Geithner who, for better or worse, actually shaped our institutional, legal, political, and economic dynamics at the moment when the system was most malleable.

That said, Geithner is not a popular man, and he knows it. “I never found an effective way to explain to the public what we were doing and why,” he writes. “We did save the economy, but we lost the country doing it.” He knows he’s never going to win the argument, he knows he can’t possibly convince people he did the right thing. Even his book tour is being described as an undertaking that "could have been worse." But he’s going to try to convince you anyway.

Stress Test is a fun, if long, book. It’s enjoyable, it’s charming, and it’s well written (or least well written by ghostwriter Mike Grunwald). It’s replete with simple and colorful anecdotes that explain the complexities of capital markets, without condescension and with a minimal amount of jargon. There are two parts to the book. The first is a set of arguments, told through his experiences during the crisis, about why bank bailouts are essential—the financial world according to Geithner. And the second is an autobiographical account of Geithner’s life.

I’ll address both of these, since they are intertwined. For as I read the book, and compared the book with what was written at the time and what was written afterwards, I noticed something odd, and perhaps too bold to say in polite company. As much as I really wanted to hear what Geithner had to say, I quickly realized that I wasn’t getting his actual side of the story. The book is full of narratives, facts, and statements that are, well, untrue, or at the very least, highly misleading. Despite its length, there are also serious omissions that suggest an intention to mislead, as well as misrepresentations of his critics’ arguments. As I went further into Geithner’s narrative, even back into his college days, I got the sense that I was seeing only a brilliantly scrubbed surface, that there were nooks and crannies hidden away. It struck me that I was reading the memoirs of an incredibly savvy and well-bred grifter, the kind that the American WASP establishment of financiers, foundation officials, and spies produces in such rich abundance....

But the book is more than just a set of arguments; it’s also an autobiography of a man. And while I was reading it, I kept getting the feeling I wasn’t learning the full story. I noticed oddities, a kind of set of shimmering ephemera which suggest that there was something the author was holding just out of view of the reader.

Geithner talks about his childhood growing up abroad, with high-powered family members who had advised presidents, and a father who was a senior executive at the Ford Foundation in Southeast Asia in the 1960s and 70s. At that time, the Ford Foundation was a pivotal instrument of US foreign policy, an important vehicle for anti-Communist efforts and heavily integrated into the financial and foreign policy establishment (the head of the foundation even set up an internal committee to organize incoming requests from the CIA). Yet Geithner portrays himself as a largely apolitical and directionless kid, a sort of ordinary person in unusual circumstances, with loving parents. It was an odd way to describe growing up cocooned in the foreign-policy elite. Geithner is far too smart to not have been able to observe what was going on around him, yet he is silent in the book on how he saw power up close at a young age.

At Dartmouth, Geithner portrayed himself an "unexceptional and uninspired student," finding economics dreary and political consulting boring. He didn’t even remember voting in 1980. Yet over Christmas break during his freshman year of college, he notes, he did a short stint as a war photojournalist along the Thai-Cambodian border for the Associated Press. It’s a short piece in the book, meant to describe one Christmas break. But I had to reread it several times, to make sure it was actually in there. I kept thinking, What the hell? Who does that? It’s not that it’s not true; it sounds like it is. But there’s more to this story than “Oh, I was a freshman in college and didn’t like studying, and then I did a stint as a war photographer over Christmas break and decided I didn’t want to be a photographer.” There’s something he’s not saying. He was not just a boring apolitical kid who didn’t notice very much about the world. Such people do not become photojournalists for a week over Christmas in war zones when they are 18.

And then there’s the mystery of how he managed to climb up the career ladder so quickly. He never really explains how this happens. He wasn’t a good student. He notes, as a grad student, that he mostly played pool. “During my orals, when one professor asked which economics journals I read, I replied that I had never read any. Seriously? Yes, seriously. But not long after we returned from our honeymoon in France, Henry Kissinger’s international consulting firm hired me as an Asia analyst; my dean at SAIS had recommended me to Brent Scowcroft, one of Kissinger’s partners.”

I’m sorry, but what? How does this just happen? And it goes on. One day, when Geithner was a junior Treasury civil servant, Treasury Secretary Lloyd Bentsen just called him out of the blue to ask his advice on a matter about which he knew nothing. Why? He doesn’t say—he’s just puzzled. Later on, he advances in Treasury without any real credentials in a department where a law degree or economics PhD is essential. Even Alan Greenspan eventually expressed surprise; he had just assumed Geithner had a doctorate. Power just always seemed to flow to Geithner, and he never says why. He knows why, of course—he’s an exceptional political climber. He just doesn’t say who was grooming him, why he ended up where he ended up, and what he paid to get there.

Read the entire review here.

(ht Rick Fitz)


  1. A good article but just so everyone is clear
    "From 2009 to 2010, Matt Stoller worked on the Dodd–Frank Wall Street Reform and Consumer Protection Act as a congressional staffer" So that explains the Lizzie Warren love which is exactly the problem for me. Its that age old problem for the proggies that the existing structure is to be kept completely intact, just with our people in charge who as we know are all on the side of the angels.

  2. LOL at this blather from Stoller: "...the kind that the American WASP establishment of financiers, foundation officials, and spies produces in such rich abundance."

    I don't know what world Stoller occupies, but it's certainly not the reality based one.

    1. yes let's pick on the small things and ignore the broader cronyism brought out in the article.

    2. But it's true. The establishment controls (or tries to) the world, and spies, foundations and finance are integral to keeping the uber weathy in the style to which they are accustomed.

    3. David Cay Johnston on the Perils of Our Growing Inequality
      Posted on June 6, 2014 by Yves Smith

      David Cay Johnston is a clear and lively conversationalist, and I anticipate readers will enjoy his discussion of his work over the last 20 years on inequality. Johnston stress that inequality is primarily a result of political and economic arrangements, including anti-trust policy and how much investment society and parents make in their children’s health and education. He also points out that shifts in who is in newsrooms (blue collar intellectuals have over time been displace by scions of the wealthy) has led to more flattering coverage of our elite-favoring status quo and neglect of its failings, like high levels of hunger.

      Johnston also discusses the role of the financialization of corporations and the changing and expanded role of limited liability corporations, specifically, that historically profit-making ones were regarded with great suspicion, and on explosive levels of executive compensation. This is a wide ranging discussion, and includes the rise of oligarchical thinking, the various policy choices that serve squeeze workers, governmental capture, and the loss of faith in democracy.

  3. Geithner should be selling used cars. Actually, he should be in jail.