By Simon Johnson
Speaking Thursday morning on the Today show, Treasury Secretary Tim Geithner insisted on two points:
1. If the bank rescue of 2008-09 had been handled in any other way – for example, being tougher on bankers – the costs to the real economy would have been substantially higher.
“again, what was the choice the president had to make? He had to decide whether he was gonna act to fix [the banking system] or stand back because it might be more popular not to have to do that kind of stuff, and that would have been calamitous for the American economy, much, much worse than what we went through already.”
2. The reform legislation currently before Congress would end all concerns regarding Too Big To Fail in the future.
“The president’s not gonna sign a bill that doesn’t have strong enough teeth.”
In 13 Bankers, we disagree strongly with point #1 (see this excerpt) and find point #2 so at odds with reality that it is scary. Friday morning, also on the Today Show, I have a brief opportunity to suggest a different narrative. Continue reading