In the evolving Annals of Timothy Geithner, Jo Becker and Gretchen Morgenson's 5,200-word epic detailing the treasury secretary's close ties to Wall Street and his inability to turn his early warnings about credit derivatives into decisive action is the fairest and most complete appraisal of the Obama administration's point man for dealing with the financial crisis that we have seen so far.
Still, it doesn't break a whole lot of new ground, except for that fact that at one point at the height of the crisis during the Bush administration, Geithner is said to have proposed that the government guarantee "all the debt in the banking system" -- something Geithner now seems to be denying.
The proposal quickly died amid protests that it was politically untenable because it could put taxpayers on the hook for trillions of dollars.
"People thought, 'Wow, that's kind of out there,'" said John C. Dugan, the comptroller of the currency, who heard about the idea afterward. Mr. Geithner says, "I don't remember a serious discussion on that proposal then."
My question: Just how "out there" was the proposal, really? Some proponents of outright bank nationalization have supported guaranteeing all bank debt as one part of the process. There's no easy answer here. Either you guarantee everything, or you have to decide which creditors take a hit and how much they take a hit -- something that, as we are currently seeing in the case of Chrysler, can be an extremely painful process.
The weakness of Geithner's proposal, however, is that it appears to have come without an assertion of control by the U.S. over the banks whose debt it would be guaranteeing. And that really is the worst of all worlds.
A second insight to be derived from the Times' big story: For Geithner, there's no escaping the reality that the financial crisis is his baby or, more accurately, albatross. From his time as president of the Federal Reserve Bank of New York to his leading role tackling the crisis during the last year of the Bush administration to his front-and-center responsibilities as the treasury secretary, he is the one man who has been present every step of the way. How it all ends will write the story of his career.
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