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MAGAZINE | NYT NOW

What Timothy Geithner Really Thinks

By ANDREW ROSS SORKIN MAY 8, 2014

This is kind of like a hearing, Timothy Geithner said, swaying

uncomfortably, face scrunched and hair perfectly tousled. Do you guys

always do it this way?

The former Treasury secretary was looking up from behind a long

desk at his audience a few dozen Harvard undergraduates, members of

Larry Summerss economics course, sitting in elevated rows of chairs and

staring back at him like senators at a Capitol Hill hearing. Geithner, 52, is

5-foot-9 with a naturally boyish look that he maintains in part by running

six miles several mornings each week. He looked hardly older than the

teaching assistants in the front row.

Early in his talk, Summers himself a former Treasury secretary (as

well as a former Harvard president and a director of Barack Obamas

National Economic Council) reminded his protg that many of the

students in the room probably had little idea of the role he played during

the 2008 financial crisis. There are many people in this room who were in

eighth grade when this was happening, Summers said, and soon enough a

number of students were summoning up Geithners Wikipedia page on

their laptops and iPads.

Geithner may have given hundreds of news conferences during his

four years as Treasury secretary, but he remains an awkward public

speaker, even if his audience consists of college students in hooded

sweatshirts. On this morning, as was the case many times before, his

responses generally coalesced around the plan that defined his tenure: the



wildly unpopular authorization of $700 billion in taxpayer money, known

as the Troubled Asset Relief Program, to bail out Wall Streets biggest

banks. To oversimplify it, and I think this was Jon Stewarts framing,

Geithner told the students, why would you give a dollar to a bank when

you can give it to an American? Why not give them a dollar to help them

pay their mortgage?

Six years later, this question still lingers in angry debates between

economists and in the political rhetoric of candidates (on both the right

and the left) and in the minds of many Americans who feel that the

inequality they hear so much about (and experience firsthand) is a direct

result of Geithners actions. There are those on Wall Street and in the

plutocracy who feel that Geithner is a hero who deftly steered the country

from economic ruin. To many ordinary Americans, however, he is

considered a Wall Street puppet and a servant of the so-called banksters.

And as much as Geithner hates to explain, he very much wants to be

understood.

When the housing bubble burst in 2008, Geithner was the president

of the Federal Reserve Bank of New York. Along with Ben Bernanke, the

chairman of the Federal Reserve, and Henry M. Paulson, the Treasury

secretary at the time, Geithner was charged with essentially saving the

economy from sliding into the abyss. The so-called troika devised the plan

to inject billions of the governments dollars directly into the banking

system, effectively turning taxpayers into shareholders of massive, failing

institutions. When he then ascended to Treasury secretary in 2009,

Geithner became the public face of an economic-recovery program that, in

Paulsons words, polled worse than torture. The far-left labeled him an

Ayn Rand capitalist, the far-right a socialist. Sheila Bair, the former head

of the Federal Deposit Insurance Corporation, called his appointment to

Treasury a punch in the gut. The Daily Kos, a left-leaning blog,

published a story titled, Why Tim Geithner Should Go to Jail. At the

White House Correspondents Dinner in 2009, even President Obama

joked that a goal of his second hundred days would be to house-train his



new dog, Bo, because the last thing Tim Geithner needs is someone else

treating him like a fire hydrant.

Through it all, Geithner has maintained that saving the banks was the

only way to protect the U.S. economic system and, by extension, its

taxpayers. I would say that theres lots of messiness and unpleasantness

and awkwardness and a lot of unjust collateral beneficiaries of our

rescues, he told the students at Harvard. No doubt about it. It would be

nice if it were otherwise. But there was a more salient point he wanted to

convey. People think we gave the banks this free gift of hundreds and

hundreds of billions of dollars, using the taxpayers money that we would

never see again, he said. People thought we would lose $2 trillion on our

financial rescues.

He paused and looked out at a crowd that, its safe to say, probably

did not fully appreciate how intense the anger around the financial

bailouts had been and how close the country was to the precipice of a full-

on depression. We are going to earn, all in, a couple hundred billion

dollars, Geithner said. And six years after the bailouts, the too-big-to-fail

banks and the insurance giant A.I.G. have since repaid the money they

took from the government. Even the rescues of Fannie Mae and Freddie

Mac, the mortgage-lending companies that once had to borrow $187.5

billion, have turned profitable. Much of the dominant view about the

strategy, Geithner said, is the inverse of the truth.

To clarify his perspective on all of that messiness and unpleasantness

and awkwardness, Geithner has spent the past year writing a book

Stress Test: Reflections on Financial Crises that will be published on

May 12. It is filled with revealing and sometimes gripping behind-the-

scenes anecdotes. Geithner acknowledges for the first time, for instance,

that he was initially at odds with Paulson and Bernanke over whether to

bail out Lehman Brothers in advance of the famous weekend meeting in

which they sought to find a solution before the firm collapsed. (I sensed

their advisers pulling them toward political expedience, he writes, trying

to distance them from the unpalatable moves we had made and the even



less palatable moves I thought wed have to make soon.)

Geithner also discloses that some members of the administration

talked openly about nationalizing some banks like Citigroup. (If you want

to go in, you better be sure there are W.M.D.'s, Lee Sachs, an assistant

secretary of the Treasury, said during a meeting with Obama in the

Roosevelt Room.) And Geithner discloses that he refused to fire Ken Lewis,

the chief executive of Bank of America, who was near retirement. (Tim,

Im trying to look out for you, Geithner reports Gene Sperling, a counselor

to him at the time, saying that he didnt owe Lewis any favors. If hes

going anyway, why dont you push him out?) He even concedes that he

and Summers were initially opposed to the Volcker Rule, the widely

popular regulation barring commercial banks from proprietary trading.

His support, he writes, was certainly political.

But Stress Test is also surprisingly personal. Geithner confides that

he actually didnt want the Treasury job in the first place and that he tried

on multiple occasions to resign, but Obama wouldnt liberate him. He is

also forthcoming albeit in the somewhat unemotional language of the

technocrat about his own regrets. (Before the crisis, I didnt push for

the Fed in Washington to strengthen the safeguards for banks, nor did I

push for legislation in Congress to extend the safeguards to nonbanks, he

writes. I wish we had expanded our housing programs earlier, to relieve

more pain for homeowners.)

Geithner likes to say that all the criticism and the second-guessing and

the vitriol directed his way never got to him. I try to pay no attention to

that, he told me over lunch one afternoon in New York. Almost

indignantly, he added, Our job was to fix it, not to make people like us.

Later, though, he softened and qualified the statement. Im human, and I

like to be liked, he said, even if I didnt expect to be liked in this.

Geithner has remained silent about his time at Treasury, but over

the past month, he and I met several times to discuss and debate his

tenure. Despite the wonky monotone he often projected during the worst

moments of the crisis, he is lively and quick-witted in person, and he has a



special proclivity for particularly graphic language. Over lunch at Caf

Centro, near Grand Central Terminal, he told me a story from a few

months earlier: I was crossing Lexington Avenue and some guy said,

Youre one of the Goldman [expletive] who ruined the country. Geithner

said he replied, Thanks for sharing. At another point, he cheerfully

relayed a story that also appears in his book about the time he sought

advice from Bill Clinton on how to pursue a more populist strategy: You

could take Lloyd Blankfein into a dark alley, Clinton said, and slit his

throat, and it would satisfy them for about two days. Then the blood lust

would rise again.

Little of this personality emerged when Geithner was in office. A

career public servant, whose work often took place behind the scenes, he

seemed an unlikely fit for a high-profile position in the Washington

fishbowl culture. When his name was floated for the Treasury job in the

fall of 2008, he was busy helping stave off, as the president of the New

York Fed, the collapse of Citigroup. Geithner had moved for work before,

during the 1990s from Washington to Tokyo and back to Washington

for jobs at the Treasury Department and now wanted to stay put in

Larchmont, N.Y., a comfortable suburb a half-hour from Manhattan. I

felt guilty that I was even thinking about relocating again, he writes in his

book. I had also promised Carole his wife that we would never

again live apart, not for anything, and I knew we couldnt move the kids in

the middle of the school year. Carole Geithner, a social worker and

author, was openly resistant to the idea of her husbands becoming the

next Treasury secretary. Carole didnt just have reservations, Geithner

writes. She was opposed.

When he was summoned in the fall of 2008 to see Barack Obama,

then a candidate, at a W Hotel in Manhattan, Geithner offered a series of

arguments to disqualify himself from the job: He looked deceptively

young; he had little media experience; and, he recalls, in a period of

turmoil and uncertainty, the public would want to see a familiar and

reassuring face in charge of the countrys finances. (Geithner, after all,



had spent his career with titles like deputy assistant secretary for

international monetary and financial policy.) Perhaps most crucial, he

writes, he told Obama: Ive been up to my neck in this crisis. Youre going

to have a hard time separating me from these choices if you ask me to work

with you. The implication was that by appointing Geithner, one of the

main architects of the rescue strategy, the president would essentially be

forced to endorse the bailouts, which could have negative political

consequences. He suggested to Obama that Summers or Robert Rubin, his

mentors, would be fitter for the job.

But Geithner and Obama had a somewhat natural rapport. Geithner,

like Obama, had an itinerant childhood. His father worked for U.S.A.I.D.,

and the family lived in India, Zimbabwe, Zambia and Thailand. In the

conversation, they discovered that Geithners father ran the Ford

Foundations Asia grant-writing program in the 1980s at the same time

that Obamas mother was at its office in Indonesia. It was a nice

coincidence, Geithner says, but it still didnt make him want the job.

That didnt stop Obama from inviting him for another meeting after

the election, this time in Chicago. On his way to meet with the president-

elect, Geithner bumped into Summers, whose name had also been floated

for the Treasury job, at OHare International Airport. I ran into Larry,

who was, Im pretty sure, in the process of checking the Intrade odds on

Obamas choice for Treasury, Geithner writes, referring to the online

market where investors bet on political outcomes. It was kind of awkward

for both of us. I told Larry I had not sought the job and had urged Obama

to choose him as secretary, which didnt really make the situation less

awkward.

On his way back to the airport after his meeting with Obama,

Geithner received a call from Rahm Emanuel, who had been appointed the

president-elects chief of staff. Emanuel wanted to know whether Geithner

would accept either the Treasury job or a job as the director of the

National Economic Council, a less-prestigious post, if one of them were

offered to him. I said I would not do N.E.C., but if you asked me to do



Treasury, I would do Treasury, he said that he replied. In Emanuels

telling, Geithner was not drafted into the job with such reluctance. Im

not here to disagree with Tim, he told me. He said he wasnt going to

lobby for the job or put a campaign on for it, but obviously, if asked, he

would serve. He was asked, and he did choose to serve, and in a role

reversal, Summers accepted the N.E.C. post.

The last part of his acceptance was breaking the news to his wife. I

remember the moment, Carole Geithner recounted to me. He walked in

the door, and I just saw it in his eyes. He couldnt tell me verbally, because

we had a friend visiting who just before said, I dont think you need to

worry, I really think its gonna go to Larry Summers. And we had to wait

till everyone went to bed, and he told me, but I could tell just when he

walked in. And theres this pit in your stomach. She added: Id already

had a taste of the fishbowl, and Id also seen other peoples relationships,

what happens to them when theyre in the fishbowl. So I really had a sense

of dread.

That dread materialized quickly. During his nomination hearing,

questions emerged about why Geithner had not properly filed his tax

returns in 2001 and 2002. Geithner, who after a career in Civil Service was

probably one of the least wealthy nominees in the history of the office, told

the senators that he used TurboTax to calculate his filings. The perception

that he was overmatched for the position was strengthened when he

responded to a congressmans question at a second hearing by saying: I

just want to correct one thing. I have never been a regulator, for better or

worse. The flub, his critics said, was revealing. Geithner had run the New

York Fed, whose job is to supervise and regulate financial institutions, at

the very moment when Wall Streets largest banks were gorging on debt

and packaging toxic assets.

Geithner likes to say that his initial reluctance to take the job gave

him an enormous amount of freedom once he had it. On his third day, for

instance, while heading to a meeting in the Oval Office, he was handed

talking points for a brief statement that he and Obama would make about



the latest Wall Street bonus numbers. Geithner looked over the talking

points, which were meant to express outrage, and decided he was simply

not going to make them. So he sat silently and let the president express

outrage for the two of them. There will be time for them to make profits,

and there will be time for them to get bonuses, Obama told the press.

Nows not that time. And thats a message that I intend to send directly to

them, I expect Secretary Geithner to send to them.

But Geithners refusal to condemn the bankers became a recurrent

theme during his time at Treasury. According to Bernanke, I didnt and

Tim didnt go very far in lambasting individuals in Wall Street, maybe

partly because we were more focused on the problem than on the politics.

Others, however, have suggested that Geithner was simply too cozy with

Wall Street. He had never worked as a banker himself, but he grew up

inside the bubble of elites. (Before going into government, his first job was

working for Henry Kissinger at Kissinger Associates.) He was tutored at

Treasury by Summers, who later worked for the hedge fund D. E. Shaw &

Company, and Rubin, who came up through Goldman Sachs and

eventually joined the board of Citigroup, where he has been blamed in

some circles for its taking on excessive risky debt that nearly caused the

firm to collapse. Each man played a significant role in deregulating the

financial industry in the 1990s by supporting the repeal of the Glass-

Steagall Act, which separated commercial and investment banking; they

also pushed to limit future regulation of derivatives.

This criticism that he was too close to Wall Street was also fueled by

the fact that Geithner, with his English spread-collar shirts and his

perfectly coifed hair, just looks like a banker. He often tells a story about

how Emanuels wife, Amy Rule, once told him at a dinner party, You must

be looking forward to going back to that nice spot you have waiting for you

at Goldman. During an April 2009 hearing about the financial-bailout

program, Damon A. Silvers, a panel member, seemed almost incredulous

that Geithner had never worked on Wall Street.

You have been in banking " Silvers said.



I have never actually been in banking, Geithner interrupted. I have

only been in public service.

Well, a long time ago. A long time

Actually, never.

Investment banking, I meant

Never investment banking.

Well, all right, Silvers conceded. Very well then.

What is certain, however, is that for all the malfeasance of the biggest

banks, Geithner had a predisposition that Wall Street, even as it was,

remained essential to the functioning of the U.S. economy in just about

every sector. I did not view Wall Street as a cabal of idiots or crooks, he

writes in Stress Test. My jobs mostly exposed me to talented senior

bankers, and selection bias probably gave me an impression that the U.S.

financial sector was more capable and ethical than it really was. During

his first few months in the job, Geithner fought with Summers, who felt

that his protg had become overly solicitous of the banks. Geithner

dismissed Summers as espousing the hedge-fund view. (Hedge-fund

executives tended to see the banks as dumb, lumbering giants, Geithner

writes.) He disagreed when Summers suggested to Obama that the

administration pre-emptively nationalize banks like Citigroup or Bank of

America or even to try to embarrass them into changing their

compensation structures. I feared that the tougher we talked about the

bonuses, the more we would own them, Geithner writes, fueling

unrealistic expectations about our ability to eradicate extravagance in the

financial industry.

Geithners stance often came off as aloof, or worse. For all the time he

spent focusing on how the financial industry functions, and for all his

knowledge of past crises, critics wondered how someone with his

experience could be surprised that some bankers might operate less than

ethically. In many ways, Geithners first year validated the reservations he

shared with Obama. His first public speech, as he described it, sucked.

(As he spoke, the Dow Jones began a near-400 point drop.) Geithner



offered his resignation, but Emanuel told him he had to stay. Given what

we were facing, three months into the administration, Emanuel told me,

finding a new Treasury secretary wasnt the solution. Instead, Emanuel

says he instituted a quick primer in politics for Geithner, holding a daily

meeting with him and Summers in his office to go over talking points and

strategy. We did that for about six to nine months. The answer was not

resigning; the answer was building.

The job, meanwhile, was exacting the personal toll that he feared it

would. Geithner, who lived at a friends house in Washington, tried

commuting to Larchmont for the weekends with the Secret Service in tow

(his code name: Fencing Master) but rarely made it. We did not see much

of him then, I can tell you that, Carole says. And when he was home, it

was for really brief times. When the family decided to relocate to

Washington, in the summer of 2009, John Oliver, then of The Daily

Show, reported on the familys unsuccessful effort to sell their home.

(Hold on. Timothy Geithner, the man responsible for getting us out of this

[expletive], cannot sell his house? Oliver said. Oh, God. He referred to

the home as a toxic asset.) Geithner told his wife that she might want to

tone down her media consumption. He discouraged me from doing it, but

I couldnt not, she said. I felt like, Well, our friends are reading this, and

people are reading this, and this is what they think about you.

Around this time, Geithner consulted his predecessor, Henry Paulson.

In recalling the conversation, Paulson says that Geithner confided to him

that Carole is not of this world. I remember that very well because he

might as well have been speaking of Wendy Paulsons wife. Theres a

fair amount of hypocrisy in Washington. Before a tough hearing, youll

sometimes have the congressional committee chairman say to you, I love

you, you da man! But when the cameras are on and the lights go on, theyll

rake you over the coals for the benefit of the voters back home. And while

you may learn to accept this and deal with it, understandably your wife

and your kids never do, you know? They take it more personally. After just

two years in Washington, Carole moved the family back to Larchmont.



Perhaps the main challenge that Geithner has found in selling his

argument is that to believe that the bailout truly worked, you have to

believe that the other side of the cliff would have been worse. This makes

his argument something of a counterfactual one, a hypothesis that will

always be open to interpretation.

As such, it has left him open to endless criticism that he was a prisoner

of cognitive regulator capture by Wall Street or suffered so greatly from

Lehman Syndrome that he became soft on the industry. Simon Johnson,

an economist at M.I.T., has argued that bailouts were necessary but

executed in the form of a great giveaway. He has compared Geithner to

Charles Maurice de Talleyrand-Prigord, the French statesman who

served the Revolution, Napoleon and the restored Bourbons

opportunistic and distrusted, but often useful and a great survivor.

Elizabeth Warren, the Massachusetts senator and creator of the Consumer

Financial Protection Bureau, has written in her new book, A Fighting

Chance, that Geithner believed the governments most important job was

to provide a soft landing for the tender fannies of the banks. Its an

opinion shared by Neil Barofsky, the former special inspector general of

TARP. He told me in an email that Geithner, Bernanke and Paulson

consistently put the interests of the banks over those who were supposed

to be helped, like struggling homeowners. While Barofsky acknowledges

that TARP undoubtedly helped save the system, he also says, it was

supposed to do so much more.

That remains Geithners fundamental problem. Even those who

concede TARPs success can find fault with it. Its impossible to know

whether the economy would have bounced back more quickly and we

would be closer to full employment now without the bailouts, since none of

us know what other policies would have been pursued, Dean Baker, an

economist and co-founder of the left-leaning Center for Economic and

Policy Research, has written. We do know that we would have been freed

of the albatross of a horribly bloated financial sector that sucks the life out

of the economy and redistributes income upward to the very rich. For that



fact, Timothy Geithner bears considerable responsibility.

Geithner waved off much of this criticism. The argument that there

was a way to somehow protect people without doing things that looked like

you were protecting the banks was deeply confused and mistaken, he

said, anger rising in his voice. And the accusation or the charge that our

motivations were to help banks is kind of offensive to the people who

worked with me and definitely to the president. But perhaps the more

stinging criticism comes from Bair, who has said that Geithner basically

made a gamble. Tim had no idea whether the governments money would

be lost, she told me. Taxpayers will never be adequately compensated for

the tremendous risks he took with their money.

I repeated the charge to Geithner. How could you be certain? he

said. Lets just go through the natural experiment. The British tried a

couple things that I think are good counterexamples. He referred to the

British governments lending targets, which were intended to show that

the bailouts were keeping credit flowing to regular people. Not to be

unfair to them, but those are largely fake, and they were sort of ridiculous,

because their economy was way overleveraged, too, and lending was going

to fall even in the best sort of circumstances. And did it help the British in

terms of taking some of the sting out of the public anger? No. Then he

brought up the British governments decision to cap executive

compensation. It wasnt really designed to change comp, Geithner said.

It was designed to create the impression that they were changing comp.

Did it significantly diminish the popular version of what they did and

make them more popular for doing it? No. Was it effective? No.

As for the argument that he didnt focus on the homeowners, Geithner

said thats a myth, too, listing TARP housing programs, a lending program

to state and local housing-finance authorities and the mortgage-

modification-guarantee program. But when I mentioned the passage in

Stress Test in which he regrets that he hadnt done more and asked him

to elaborate, he became feisty. Its kind of too unicorny to frame it this

way, he said. Because if you suspended disbelief and say: If we had no



constraints on resources or authority, could we have done more? If we had

no constraints on resources or authority, yeah, we could have done more.

And we could have done more, quickly. He added that if they had full

control over the government-sponsored enterprises and the Federal

Housing Administration, which insures many mortgages, absolutely, we

could have done dramatically more. He paused for a moment. But thats

not the real world. In the real world we had to act within the constraints

we faced and the limits of the authority we had.

Congressman Barney Frank, whose name is on the signature, if

limited, reform bill that emerged from the crisis, once said, You dont get

any credit for disaster averted. But Geithners explanation recalled how

almost pre-emptively he forfeited the public relations battles at Treasury.

When he had the chance to jump on popular issues, like supporting the

Volcker Rule, he declined, because he never believed that proprietary

trading led to the financial crisis. The big institutions that failed Fannie,

Freddie, Bear Stearns, Lehman and A.I.G. werent the types of banks the

legislation was designed to regulate, he told me. (He later changed his

mind on the Volcker Rule after he determined that it would help make the

Dodd-Frank reform legislation easier to pass. Still, he was happy to leave

the impression he was against it so as to make it more palatable to the

Democratic left, he writes.) When outrage erupted over A.I.G.'s decision to

give bonuses, Geithner said they had signed contracts, and the government

couldnt rip them up. These decisions lent credence to the impression that

he started with the idea of saving Wall Street instead of the people who

needed it most that he gave a dollar to the banks rather than the

homeowners.

Geithner is confident that the empirical data has already vindicated

his decision. And while there is some debate over how to calculate the

proceeds from the various bailouts TARP, the auto companies, the

F.D.I.C. programs and Fannie and Freddie, among others the evidence

is persuasive. ProPublica, the nonprofit investigative organization, which

keeps a tally of the bailout, puts the current profit at $32 billion. The



White House Office of Management and Budget estimates that Fannie and

Freddie will turn a profit of $179 billion over the next decade. (Critics

might contend that these figures dont include the costs of the stimulus or

the Federal Reserves quantitative-easing programs.) And regardless of the

math, a larger point is indisputable: While the returns were never the goal

saving the system was they are indeed evidence of its success and

support, to some degree, Geithners counterfactual argument. If the

system had been allowed to collapse or TARP had failed, there would have

been enormous taxpayer losses.

On some level, though, data cannot settle the argument. During our

time together, Geithner spoke about the collateral beneficiaries of the

bailout, by which he meant the inconvenient fact that certain investors and

institutions came out of the crisis better off. And for some, that is direct

proof of another counterfactual argument. To believe that the bailout

worked, they would argue, you would have to believe that the system itself

was worth saving in the first place.

For much of the past five years, Geithner has publicly been fighting

with the idea of too-big-to-fail, which implies that executives at the top

banks were willing to take on remarkable risks because they knew that the

government would ultimately bail them out, given the devastation their

collapse would bring. Geithner and Obama marketed the Dodd-Frank bill

as a way to end future bailouts. In 2010, right before the bill passed,

Geithner said, The reforms will end too-big-to-fail. Obama went further:

Because of this law, the American people will never again be asked to foot

the bill for Wall Streets mistakes. There will be no more tax-funded

bailouts, period.

But it is now clear that Geithner never believed his own talking points.

To him, too-big-to-fail and the so-called moral hazard, or safety net, that it

would create cant really ever be fully taken away. During his lecture to

Summerss class, one student asked a question about resolution

authority, a provision of the reform laws that is supposed to let the

government wind down a complex financial institution without creating a



domino effect. The question prompted Geithner onto a tangent about too-

big-to-fail. Does it still exist? he said. Yeah, of course it does. Ending

too-big-to-fail was like Moby-Dick for economists or regulators. Its not

just quixotic, its misguided.

Geithner paused for a moment. Can you design a system ever that

allows you to be indifferent to the failure of any institution, in any state of

the world? he asked aloud before answering his own question. You can

design a system, and I think we have, that allows you to be indifferent in

most states of the world: the five-year flood, the 15-year flood, the 30-year

flood, maybe even the 50-year flood, he said. But there are constellations

of storms, of panics, of fires that are so bad that its very hard to imagine

that you could be indifferent to the failure of the financial system.

One exception to that moral hazard, however, seems to be Lehman

Brothers. Some have speculated that Geithner, Paulson and Bernanke let

the bank fail in order to send a political message about their vigilance. The

troika have long said they were always in agreement to find a partner for

Lehman Brothers and were prepared to use government funds to make a

deal, as they had when they matched Bear Stearns with JPMorgan. All

have repeatedly said, under oath, that they tried to do all they could, but

that by late Sunday, Sept. 14, with no credible buyer (Barclays and Bank of

America, Lehmans two last suitors, dropped out), an analysis of Lehmans

assets indicated that they couldnt legally lend money to the company.

Yet in Stress Test, Geithner reveals a crucial tactical rift between the

three men going into that weekend. Geithner writes that he was worried

that Paulsons public insistence that there would be no taxpayer bailout

was being driven by politics, not pragmatism, and that he believed that a

no bailout message could undermine the governments further ability to

pursue a rescue if one were needed. Instead, Geithner preferred to send the

impression that a bailout might be available, if necessary, which could

have made the bank more desirable to a suitor. Well never know if that

would have saved the bank, and Geithner wont play that guessing game,

either. Later, he writes: These disagreements did not turn out to be



consequential. Hank and Ben would have the courage to change course

and do what needed to be done.

When I ran the earlier passage by Paulson, he paused for a moment.

While we discussed and sometimes debated tactics, we were unified in

our resolve to avoid the failure of systemically important institutions and

that certainly included Lehman Brothers, where we worked hard right up

until the end to prevent a failure, he said. In his own account of the

financial crisis, On the Brink, Paulson explained why he was so insistent

that the public believe there was no bailout coming. The New York Fed

would be inviting Wall Street C.E.O.'s for a meeting, and we didnt want

them to arrive thinking that we would be there waving a government

checkbook.

Bernanke suggested they were very much on the same page, but he

made another point regarding the popular opinion about Lehmans

failure. Ironically, the conventional wisdom now is that it was obvious

that Lehman should be saved but that the Fed and the Treasury went

ahead and made the big mistake of letting it go, he told me. The truth is

actually quite the opposite. Conventional wisdom at the time was

overwhelmingly in favor of letting Lehman fail, but Tim, Hank and I were

very much convinced that we should do everything possible not to let it

fail. But then of course we ran out of options.

In January 2013, Geithner was finally liberated. He had been

pressing Obama to let him step down since 2010, suggesting replacements

like Erskine Bowles and Hillary Rodham Clinton. At one point, during an

event at the White House, Obama resorted to taking Carole aside and

trying to persuade her to have her husband stay. I wasnt an easy person

to be convinced, she recalls. I mean, I knew it was kind of a hopeless

cause that if he needed to stay, he needed to stay but I was not easily

convinced. And that was probably a little surprising to the president.

After much back and forth, Obama eventually appointed his chief of

staff, Jack Lew, to the job. Geithner returned to Larchmont as an empty-

nester, in the same house he could not sell, where he has spent the last year



writing his book, working out of the Council on Foreign Relations and

giving speeches for six-figure sums. While he claims he is through with

government, he still maintains an intimate relationship with Obama, who

was rumored to have recruited him to succeed Bernanke as chairman of

the Federal Reserve.

When I asked him about it over lunch, Geithner originally glossed over

the point, as if he declined the post. But as lunch continued, he stopped

himself. You didnt ask me whether I didnt say that I declined it, I just

said I was not interested in it. Just to clarify. When I asked if he officially

declined, he responded: I didnt speak to that question, I was just saying

that I didnt. You said that you you phrased my thing as if I had

declined. I wasnt interested.

Geithner admitted that he struggled over what to do next. He didnt

want to go back into government, and he wasnt inclined to go into

academia, but he worried about the optics of going into finance. I think

the perception problem first of all its very damaging to me as I was

trying to do some tough things, and I think its kind of very damaging to

the country at the moment because it sees this basic loss of faith in

government, he said. I thought the only thing I could really do about that

was to make sure I didnt go work for a bank or a firm that wed regulated

or that wed rescued directly.

Last month, Geithner officially began a new job as president of a

modestly sized private-equity firm, Warburg Pincus. It may not be

investment banking, but its possibly finances second-most-vilified

industry, given how Mitt Romneys Bain Capital experience played out in

the 2012 presidential campaign. Its very unlikely that Geithner will be

using TurboTax anytime in the near future, though; he is likely to make

millions if not tens of millions of dollars over the next decade if he stays in

the business.

As we spoke, it became clear that this new job was one Geithner

actually wanted. The private sector is what most people do for a living,

he said. I thought that the possibility some people would criticize me for



not staying a public servant was not a good reason not to go try and learn

something new. It was also clear he had finally learned some public

relations pointers from Treasury.

On a Saturday in late April, I called Geithner for the last time to talk

about the Volcker Rule and a few personal facts. (Im almost 5-9, just

below 5-9. 5-8-and-, something like that. You can round down, you can

say 5-8. Im relatively secure in my height.) He told me he was enjoying

his new job and that he was preparing to take a flight to Asia later that day

for work.

I asked if the job meant that he had finally given up socialism, which

his more severe detractors had accused him of, and embraced capitalism.

No, he said, with a laugh. I wouldnt claim that yet.

Andrew Ross Sorkin is a financial columnist for The Times, co-anchor of CNBCs Squawk Box andthe author of Too Big to Fail.

Editor: Jon Kelly

A version of this article appears in print on May 11, 2014, on page MM26 of the Sunday Magazinewith the headline: 'Up To My Neck In This Crisis'.

2014 The New York Times Company

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