From The Wall Street Journal:

Timothy Geithner, the former Treasury secretary (2009-13), believes in the forceful application of U.S. tax dollars when financial institutions are in crisis. It’s a belief he holds proudly. In “Stress Test,” Mr. Geithner makes a persuasive case that he is the man most responsible for the federal bailouts of 2008.

Some prefer to credit his Treasury predecessor, former Goldman Sachs CEO Hank Paulson. Others focus on the role of former Federal Reserve Chairman Ben Bernanke. But Mr. Geithner insists that, time and again as the crises flared in 2008, he was the most consistent and tireless advocate for government aid to struggling firms. His core principle is that, during a crisis, the creditors of large financial institutions should not suffer any losses.

In 2008, Mr. Geithner was president of the Federal Reserve Bank of New York and the first big test of his thinking was the March rescue of the investment house Bear Stearns. The firm, which was heavily exposed to subprime mortgages, had been planning to file for bankruptcy protection, and its regulators at the Securities and Exchange Commission were prepared to protect customer brokerage accounts. This was standard practice when securities firms failed. But Mr. Geithner intervened to give the firm short-term liquidity and arranged a sale to J.P. Morgan, a move that put U.S. taxpayers on the hook for some of Bear’s risky mortgage paper. And so the taxpayer safety net was stretched to cover not just commercial banks but Wall Street investment houses as well.

Read the original article here.

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