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One more interesting take on yesterday's Geithner profile comes from Ryan Avent of now-defunct Portfolio, who looks at the story's opening anecdote about guaranteeing bank debt in the early days of the crisis:
[T]his would not only have been a very smart and prescient move, but it might also have laid the groundwork for a much tougher bank policy? Guaranteeing all the bank debt was, of course, one of the key ingredients of the Swedish bank rescue so beloved by fans of nationalization. [Yves] Smith just assumes Geithner is looking to help his Wall Street buddies, but he might just as easily have been reading directly from the Swedes' playbook.Moreover, this move would have entirely changed the calculus in September. It would have made the government much more reluctant to let Lehman fail, which I believe we can agree would have been a good thing. Had they nonetheless decided that Lehman should be allowed to go down, in the knowledge that the government would have to make the debtholders whole, then we would have avoided most of the negative effects of the actual Lehman collapse. No money market fund would break the buck. No freeze in commercial paper markets would have resulted. And no emergency rush to TARP would have followed. Correspondingly, no intense fear of bank failures or nationalizations would have cast its shadow over all subsequent decisions.This should be getting more attention, and it should also be causing Geithner-haters to rethink what they think they know about the man -- about his timidity, subservience, and allegiances. But it's already clear that it won't.Ryan's analysis makes a lot of sense. One problem with armchair quarterbacking the response to the financial crisis is forgetting the context of each policy decision; at that time, early decisive action might have led to very different results. My take on the Times piece is here.On a related note, James Surowiecki has another useful analysis of Geithner critics:
But from a policy perspective, the Administration has not been tentative at all: in fact, it’s been unwavering in its insistence that, given current market and economic conditions, the risks and costs of nationalization outweigh the benefits. And its alternative strategy may be wrong, but that doesn't mean it’s ill-considered, or halfhearted.Thoughts?
-- Tim Fernholz
