From our studios in new york city, this is charlie rose. Tim geithner is here. He was treasury secretary untilent obama from 2009 january 20 13. He became the longestserving economic advisor. He was a Constant Force through the financial crisis. As president of the new york fed, he helped rescue bear stearns. Theas at the bottom of response to the fall of lehman brothers. He writes about that experience and much more in this book. It is called stress test reflections on financial crisis. I am very pleased to have tim geithner back on this program. You see it differently, what you went through, because you have had the benefit of time . I do not think there is enough distance for me to see it dramatically differently. I would like to claim i had more distance. I wrote this very quickly. The crisis really peaked about four years ago. I was still very close to those decisions. Back although obviously, i made some mistakes, we got some things wrong i feel very good about the coordination to protect the public. Helpingo be part of make those judgments. I try to write candidly about these in the book. I think the most important , initially,affected the depth of the crisis and the strength of the recovery, or the use. We were late to figure out how to marshal enough Financial Force to prevent this panic from really hurting the economy. That is because we went into this crisis with very weak tools. No standing set of authority to act, for example, to independently rescue any big firm, to prevent the damage from spreading the economy. Although ultimately been figured out a way to do it, to marshal a powerful creative set of financial tools to break the panic, it took us a while. We were late in doing that. That is one reason this crisis was so damaging. On the other side, as we were coming out of that, we had cooled the fires of the financial crisis and were trying to get the recovery stronger. The country just moved too approacho embrace an to austerity that sucked a lot out of the recovery. It is a recovery weaker than it should have been. We were unsuccessful in trying to convince the congress of the virtue of existing program of infrastructure or more generous targeted tax cuts, so that we would have a stronger recovery than we did. Those 2 you could call them failures of policy were the most consequential ones. Not just in the magnitude of the crisis. Peopleyou surprised so saw it coming . So few people realized how overleveraged we were. This is the thing about financial crises. I like the way you framed the question. The reason we had such a devastating crisis was because we had this long period, people od fort the quiet peri the great moderation. Prices were rising. There was no memory of financial panic. There was this basic level of confidence. Called manias, panics, and crashes. Minsky said stability breeds instability. People became more confident that the risk of a bad recession was very low. House prices would never fall. A were willing to lend more money and borrow more money. It was the absence of memory of crisis that helped feed that. In that sense, it is not surprising. To have a really devastating systemlike this, a vulnerable to panic, you have to where peopleeriod lose the memory of crisis. More specifically, we had this riod where after the Great Depression our Financial System outgrew the constraints that had been placed after the Great Depression. 2007ve you an example, in those have been changed. They have. In 2007, banks banks were very risky. But banks at that point were maybe 40 of credit to the economy. A huge amount of the rest of the credit was provided by a set of largely unregulated financial institutions. It were doing things that banks typically do. It were borrowing other peoples money and lending it to financial assets. Our system was vulnerable to panic because of the deep change over time. It left us with a system very prone to panic. Toolss one reason why our , as i said, were so weak initially. He did not go into the crisis with this broad framework of protections that you need to protect economies from damage. Did people because they their memory did not have the time in which they did not believe that homes were a good investment, because they always had been so whether there was this is the room overleveraged. I remember saying, what could go wrong . A banker said, we are to overleveraged. Too much stuff is on credit. When i was at the new york fed i went to the new york fed in late 2003. With my colleagues there, i sat around tables like this, and kept looking at this basic question. Do banks have enough capital . Do we think they have enough capital . We looked at what would happen if house prices fell. How large would the losses be . It was not just hypothetical. Unless you force people to say, what would happen what if there was another Great Depression . What would happen . Most people would say, we learned our lesson. It is not possible. Losses that was large enough to shake the foundations of our system was so inconceivable. We started the early stage of stress testing. The policy response was so decisive. We started the early stage of that in 20062007. We would go to banks, investment banks, and say, you need to plan for a darker world. You need to build in greater cushions against a risk of severe financial crisis. They were dismissive, because they thought it was inconceivable we would experience a crisis long enough to shatter confidence in the system as a whole. That is sort of inherent in the behavior that leaves you vulnerable. Theasked for canaries in coal mine. You could observe those owner abilities. You could sort of fourier about whether the system was becoming too fragile, to risk a panic. You could see them, but it was very hard to lean against them. What was going on . A lot of them i think they would be honest. A lot of them took on risks they did not understand. May be members of the board did not understand. Of course. If you say to people in that market, in that period of excess confidence, if you said, i am going to go buy protection, build a cushion of resources against that risk, people would have said, you are crazy. That is way too conservative. In 2008. E are you are looking around, and everything is happening to you. What was the worst moment . You said, all bad moments. Saw, which has often been discussed, bear stearns. Bear stearns told you what . Let us go back a little further. This crisis started at the end of july, in 2007. The when we could see world could not see what looked like a financial run on Financial Systems. Just like the movie its a wonderful life, where people are lined outside Jimmy Stewarts bank. You could not see it, because it was in the modern financial world, and you could see it on screen but not in the streets. It gradually gained momentum. The weakest institutions, the ones that were most exposed to the leadingught by edge of that run, bear stearns being the largest of them in the United States. 2008, they were just people were pulling money out of them as fast as they could. No bank can survive that. As air minder, to describe why we have such a panic in the bearm at that time stearns was an investment bank. It had no framework of comprehensive safeguards imposed against risk. Early on, you said to me the thing that struck you most was how fragile the system was. Finance is inherently risky. If you look at what has caused huge damage to economies over time, it ish of the not war and peace, although that is terribly damaging. It is the trauma that comes when Financial Systems fall apart. Treasury,n up in the watching the failures of Financial Systems across emerging markets in the 90s. I had repeated exposure to that basic lesson, which is, Financial Systems are inherently fragile. If panic gets momentum, it can be terribly damaging. People think the Financial System is somehow divorced from the economy, onward from it. That is not really the right way to think about it. We do not like to admit this, but the Financial System is like the power grid. It is like the lights. To mix metaphors, it is like oxygen to the body. That turns off, the damage to peoples livelihood is immediate, powerful, and traumatic. That is with the Great Depression showed us. Tell me how you saw lehman brothers. Did you realize the consequences if there was not the ability to find someone some way to arrest it . What was the dominant mindset of the country at that time . Weeks before lehman, the overwhelming consensus in washington, the elite opinion it is a natural human view. These guys have taken all these risks. They should bear the consequences. You should let them fail. We do not want the governments protecting them from that. That moral hazard conviction, which is completely understandable, and should guide , that reached fever pitch in the days before lehman. After hank paulson convinced congress to give him authority to help rescue the housing market, the risk to fannie and freddie going into that weekend, people were like, that is it all stop no more taxpayer money, taking risk. The political people in washington, the general view was, we do not want to see the fed do another bear stearns. They thought the biggest risk we faced was moral hazard. They were mistaken. The biggest risk was a panic that would cause the Great Depression, and that had huge momentum. And paulson and ben bernanke and i, we were completely committed. Worked very well together. We debated lots of things, but overwhelmingly were on the same page. You couldned hear the pressure they were advisersitically from to try to stand back and not step in preemptively and prevent more failure. Ultimately, i think we were completely on the same page, and we worked pretty well. In thek enormous risk service of protecting people from the risk of a great recession. Was there an idea, we have to say to the wall Street Community , i am not here to rescue everybody. You do not want People Living with the expectation they can expect the taxpayers how powerful an argument in your own mind was that, in terms of the decision not to rescue . The paradox of the crisis. It had no relevance in lehman. We had no willing buyer. Financial crisis they are not Like National security. We do not equip the president of the United States or the United States or the central bank with a standing power to protect the country immediately from existential threat. We do it in wars, for obvious reasons. But in the financial crisis, we do not do that. We do not want markets to live with the expectation we will protect them. We went into this crisis with very limited tools. If there had been a willing buyer for lehman, we would have had better options. Clearly. That is fundamental. Partly because the world was so fragile them, and lehman proceeded to have so much risk we had no willing buyer. So at that point, we had no option. Ultimately, president bush and hank paulson went to the congress and said, we need bigger firepower. We had no mature strategy. Our basic common strategy was, in the absence of a willing buyer, no good options to save lehman or protect the system from lehmans failure. Back now, saying, i still believe we had no options . I very much believe that. Do you believe, looking back, that maybe if we had gone to the United Kingdom and convince the regulators there that they ought bankt berkeley parkway Barclays Bank do this i am assuming you did not talk to them and say, we need you to let these guys do this, it has otherwise lehman is going to fail. That friday night, we brought together the leaders of the people running the largest firms in the world, together at the new york fed, sitting around the table with hank paulson. Thing one of the bankers said in that meeting, which was the correct thing, was to say, this is not just about lehman. This is about merrill lynch, aig. The perception was, they were all going to fail by monday or tuesday if nothing was done. If they had failed, the rest of the system would teeter over. In retrospect, people look at lehman as the spark of it the fire. Not quite true. The fire had a lot of momentum. It just accelerated dramatically at that time. What would have happened if you had saved lehman . Would there have been another case of aig . What do you do about merrill and the other investment banks . There is no solution to our crisis. There is no plausible to possible story to say somehow it would have been ok. The biggest two decision points come with lehman and the creation of tarp. Those are the big decisions. You would think that with all of the firepower in that room, you would think they could figure out a way. We have to do something guys. Time you and you get together and by lehman. We physically locked them in a room for a long time to try to work this through. Just listen back. Remember, at that point, the world was falling apart. The sort of strange thing about this crisis it still was not really visible to people. But if you were within the Financial System or running a major company, you could see the World Running away from you. You knew the country was coming close to the edge of the abyss at that time. It would be one thing if you had a growing economy, people not worried about a recession, and a Large Investment Bank that managed itself to the edge of failure. At that time, you have lots of strong institutions. Peopleh the collapse and in retreat, it was hard to make the case that somehow, if you twisted enough arms and forced them to come in and by lehman, that they would be leaving themselves stronger rather than weakened because of that. We spent a bunch of time in the anticipation we would have a willing buyer, trying to get a consortium of investment banks. Credit,e, to their willing to say, we will take a bunch of that risk, but it did not work without a willing buyer. My view was, if there was a willing buyer, but the fed had to take some of the risks to make that happen, that wouldve been a good thing to do, like in the bear stearns case. At that was harder in the lehman case, because the world was so much more fragile. You watched aig and the rest of it. Was there a moment in which you said, we are at this moment as close as we ever are to this Financial System collapsing . Lehman, two weeks after what is called lehman weekend people worried about morgan stanley, goldman, and everybody. It was an existential moment. We believed, and i think we were right, that what was going to happen in the absence of effective action from the government was the complete failure of large parts of the Financial System. Money market funds were already experiencing trillions of dollars of business were experiencing massive runs. The commercial paper market, businesses making real things across the country depend on to finance themselves, was shutting down. You are seeing the failure of the core of the Financial System. Hank paulson said we were three days away from atms not working. Three days away . Like three days away. Three days away. Buying gold and talking about burying it in their backyards because of the expectation they would have to rely on that. What did europe and asia say . In some ways, it was worse around the world. Very strong country. The panic we experienced was being replicated around the world. Trade finance stopped, just like this. Immediately. In some ways, that made our crisis much harder, because with the world much weaker, and the world fading as we were wrestling with our crisis then comes tarp. Know, people look at this and say the problem was you had this for the Financial System, and the other view is that the bad guys got away with it. They set the fire and we took care of them. How do you see them now in terms becauseer you created, of your mindset, because of where you had been, because of the people you knew, that there of rescuing the Financial System . Have listened to these debates in retrospect, a lot. I have not yet heard a plausible argument that there was a better option available to us, or a more effective strategy for protecting the average person in america, relative to what we did. What we did in those weeks after tarp authority and after president obama was elected it was creative and hermetic, and it was unpopular and offensive to many. But it was remarkably effective against decades and decades of history, in trying to design a set of things to protect people. We did not do it to protect the bankers. We did it because there was no other option to avoid the risk of mass employment mass unemployment. That is with the Great Depression taught us. That is what every major financial crisis had illustrated. Because we did what we did, however unpopular, we were able to protect the average person, the innocent victim, from the risk of much greater losses. You rewrite tarp. , tarp was what you might say an unpleasant, substantial grant of Discretionary Authority in an president , tohe try to make sure he could move quickly enough to save the system from collapse. , couldld ask yourself you have done a more elegant thing . It is possible. Tell me about confidence in a crisis. It is everything. If you leave people with the fear that they have to behave on the expectation that they are going to face depression level unemployment, they will make that inevitable. Because they will take money out of the bank. Or, if you are a business, you will fire everybody. If you are a bank, you will cut loose everybody in the big defensive retreat. Those actions feed on themselves and produce the reality you are trying to avoid. You have to break that vicious cycle, break that incentive to run. You have to break the incentive to defend yourself. Crisis, what is rational for the individual, what is rational for you and i individually, is collectively deeply irrational and damaging. There is no way to break that in a panic, except for the government and the central bank taking a lot of risks the market will not take. There was talk about nationalizing banks. Even larry summers. I do not know that larry was a great personal advocate. It was a risk we would have to do substantial nationalization all stop the title is stress test. That is the strategy we adopted to try to bring capital into the Financial System, to force them to hold capital against the risk of Great Depression and minimize the chance that he taxpayer would have to own all that risk. If after the stress test, we disclose the losses, bank by bank, if they were unable to raise the capital from the private markets, we were able to put public capital into those institutions, and for many people that would look Like Nationalization. There was a risk we would have to nationalize if the strategy was not as effective as we thought. To an extent greater than we anticipated, we put out this level of transparency and disclosure. , with alldible enough the other force we were deploying, that private capital came in and we did not have to put in a bunch more taxpayer money. People who questioned tarp, Elizabeth Warren and others who questioned it, do you think there is a misconception about you, in terms of the question they raise . Obviously, one of the misconceptions is, he had a tie. Formerly worked at goldman sachs. It is hard to talk people out of that. It is true that treasury had a succession of leadership, not continuous, but people who came from goldman sachs. People look that what we were doing and it looked as though we were rewarding the bad guys. Why is that necessary . It must be because they have some interest. Or that is their mindset. They see the world that is really what it is. They look at the world through the eyes of a central banker, because that is what they did. That is what they know. Atou, you could argue the fed or treasury, you are dealing with important financiers around the world. Therefore, you see a world and you have a mindset that is reflective of the people. True. Maybe that is a reasonable perspective, but let me give you the alternative. Growing up,ife watching financial crises happen outside the United States, watching how damaging they could be, watching people play with the hope they could sit back, hope the fire burns itself out. Watching them act in a way where they are not prepared to take any risk. Watching politicians scared of the natural aversion. Watching the impact that had on the people of those countries. Watching how fragile systems are. That was the dominant lesson people should learn from financial crises. Let me give you another perspective. This is one thing i greatly admire about president obama. He had around him a pretty justse mix of people, not his political advisers, but people on the economic side from the left, not just the center. Leader, what he did to us it was clearly my job to come with a recommendation of what we should do. He subjected those proposals to pretty brutal internal debate. In thearound the table roosevelt room for a lapsed time, i think eight hours. We did this over weeks and weeks. We sat down and i presented our options and recommendation. He asked a lot of questions. And he sat there and watched my criticize. Debate, course, what was great about him is, he was not paralyzed by that. He could see my view is when b is no plan. You may not like this plan, but tell me what you are for. Tell me, why is it you believe your idea, your criticism, your concern what is the policy you are going to embrace . Whyd you think that would be more effective . Ultimately, what happened is, none of those ideas, alternatives, however well motivated these people were good intentioned, principled people. What happened was, in that terrible period of bad choices, there were no alternative ideas that could survive. No idea could survive 30 minutes with this group . The president , to his enormous credit, he sat there and wanted people to have that debate, because he wanted to make sure he as president was not in a position of being vulnerable to whatever limitation was brought to the table. In that environment, you have to choose. You have to make a choice. What most politicians do not to act is to act. The u. S. Is a very strong country. We are very lucky. Most politicians sit there and say, i do not want to protect those guys. I do not want to take any risk. Maybe it will burn itself out. When you have a system that fragile, that ballmer bull to vulnerable to panic where thepalpable countrys attitude was, and you could feel it. This basic instinct people hand is, why should we help the arsonists . That what the president was saying . The president was worried about the substance of what was going to work, and he was very aware of the damaging politics. Did bill clinton tell you, when you went to ask him what to said, you might go out in the alley and let Lloyd Blankfeins slit Lloyd Blankfeins throat. Later, the bloodlust would return. It would only be a temporary satisfaction. A point. Making this guided the president s instinct in the crisis. My instinct. The moral obligation of those governing was first to try to figure out how to land the plane in a way that protected as many lives as possible. The plane is on fire. The cockpit is full of smoke. You have this moral imperative to try to safely land the plane. You can figure out at that point how to hold people accountable, try to figure out how to reform the system. The best leaders have that instinct, even if it sounds counterintuitive. There is also this. There were people in the room, people who believe this. It is not worth saving. They did not. In the room. Its not just in that room. If you read about the debates in the fomc, a lot of people came into this crisis i am trying to be charitable. Upamong the things that come in big debates about the future of capitalism and all of that something is wrong. Illusion, and i think it is an illusion, that the interest of the average of to bependent independent of and protected from the failure of the Financial System. And it is just the idea that there was some immunity of the average person to a failure of a system they were part of. The Great Depression is the best counter example we have of the embrace of that strategy. In the Great Depression, among other things, the people presiding over the country at that time decided they would let massive thing failure across the country happen. Not step in to prevent that. That was the markets doing its work. That was just. You were going to run in new york i had the capacity to send you on this mission. Tell me how you can fix the system. Or is there much more we need to do to make sure that this system of this prodemocracy is as good an economic and Financial System as we can have . Let us do the Financial System first. That is where a lot of the focus of this it is understandable. That is wall street. Provide the capital for business around america. In my view, and i think the evidence supports this, the Financial System today is a much more stable system then it was in the decades before the crisis. Because of awareness of what happened . I will give you the list. We allow it is not that people do not remember this. We allowed a lot of failure to happen. In some ways, we crushed or let the markets crushed the weakest parts of the system. A lot of that has been washed away for the crisis, or washed away by the actions we took in the crisis. Institutionsrced to raise massive amounts of capital, so they could withstand a greater storm in the future. What the stress test did was say, you have to go out and get capital so you could survive a Great Depression. Not an average recession, but the Great Depression. That is the law globally for financial institutions. We also applied those constraints on risktaking much more broadly across our system. In 2007, i told you banks were these40 of credit. Safeguards were applied. We have better tools now to have amessy failures, to for large banks. You want to design the system not so there is no failure. You want the system to be able to withstand the consequences of failure. We are much closer to having the capacity than we have been for a long time as a country. We have a lot of things to worry about in the United States. Stability ofut the the Financial System very close. Confident reasonably this will or will not happen again . We are vulnerable. You cannot ban it. You cannot prevent it. The reforms we have put in place a doddfrank they are powerful set of reforms against the basic risk. Let me talk to you about the problems that are not captured by reform. They have not reformed the Housing Finance system. We can take time to do that. That is not done yet. In the populist fever of the aftermath of the crisis and the rescue, congress did take away the authority the fdic had that we used, to sheila bairs great credit, to provide emergency guarantees they took away that authority. That is a dangerous thing to do. Politicians in the crisis, as we saw, are reluctant to act quickly enough and fast enough. They like to see the damage before they are scared enough. That is a controversial mistake. Issome ways, the fire system a little weaker than it was before the crisis. Risk in finance tends to migrate around the constraints. Even though these constraints are applied more broadly, as people become more confident, risk will find its way around these things. It is a forever war. It is never over. You cannot necessarily rule out too big to fail over the long run, because you do not know what might happen that might make it necessary to do something in order to save a larger good. Im i right about that . Washe Great Depression, it a failure of small banks across the country that caused the mass panic. Hopefully, they do not come except once in the century, where you cannot be indifferent. As a concern,l you should always be worried about moral hazard. It should never go away. People who say we have solved it, we should worry about it. It is relentless. I was in metric a better position today than before the crisis. Let me go back to tarp. Did it work . The return proved that it worked. What is your example . I think it is important to recognize that people focus on tarp because it looks unjust, but it was just a piece of what the government did effectively. The fed was aggressive. The fiscal stimulus, the president supported. In relative terms, very important. Emergency programs, very effective. It was the Sweetest Things we did that ultimately made our outcomes better than they otherwise would have been, better than most countries were able to produce. Again, not that popular. A little messy. But very effective. President obama. Someote you, i think, at point in 2013, when you were leaving, and basically said, Alexander Hamilton would be proud. Am i right about that . That is a kind of gracious, undeserved fair enough. I am not making the choice. Why would he say Alexander Hamilton and you . We were both human. He could have said james madison. I am interested in hamilton. You spent a lot of time with this man. You probably know him as well as most people in his cabinet. Newer with him through the biggest crisis of his administration. Give me a measure of him and how he saw you. Your story is replete with times he suggested that maybe someone was better able to do this job, that you should quit. And the stories replete of him kind of figure out a way to keep you, even lobbying your wife when the decision was either there or about to be there. I tried to talk you out of it from the beginning. Rahm emanuel comes back and says this was not like a draft. He was there because he was interested. Let me tell you the history of this. I do not think i talked about this until my second meeting with the president. When then candidate senator emanuel talked to me, he said, i might need to come to washington. I said to him, you should not do that. Needed toview that he understand that i would come with a lot of baggage and limitations. But i also felt, if i had done my best to explain those to him, he was aware of them, he checked me out, and he still decided he wanted to ask me to do it, i felt i had no choice. I felt like at that point, country in crisis, your president asks him asks you to come work for him you knew it would be no picnic. My wife was against it. Definitely proud to be asked. I believed in the cause. It was what i had done all my life. If he asks me, i was can be completely committed and see it through. And i got a chance to do that, which was such a great privilege to me. I am going to try to pin you down. Did he ask you, would you be interested in did he ask you, what was the line the president used when he ask you about succeeding ben bernanke . That is kind of between me and him. You slip away from that. Did he want you to be chairman of the fed . Or did you, knowing you had other things you wanted to do, say, i need to do other things . I did not want to do it. Generally, throughout the conversations, i did not want to do that. I felt i had my time in public life. I would say, we are the United States. There is a lot of talent. I have had more than my share of jobs. If he had offered it, you would have taken it . I do not want to leave you that impression. Lead meu not want to that impression because you do not want it to come from you . I just want to be accurate. I was very clear with them, from the beginning, that i did not want to do that. They had lots of good choices. That is basically saying, do not pick me. I do not want to do it. That is correct. It did not come to the point of saying i learned you have to be preemptive. Moment, just a couple of other critics of this. Bob gates has told me and has written about that he thought the resident showed extraordinary leadership. And had the power of it inquisitive mind and inquisitive mind. He would go back to the aid and say, what do you think . Were you impressed with his management . Command of the consequences . Gates is very eloquent. I have huge admiration for the president. I saw him over a long time, it in a huge diversity of problems, albums that had no good solutions. He was tremendously impressive as a decisionmaker. He wanted to get deep without getting into the weeds. Deep enough so that he could understand the choices. He wanted to send wanted dissent. He wanted people to tell him where he was off. Those are great strength. Im not be paralyzed by those things. In the military, this question comes up with respect to afghanistan. He was concerned about the options offered him. Isnt there another option . Said how do we asked the right question . How do we figure it out in a better way . People said, why do we want to save the system . Let them fall, and we will figure out a new way. Other people said, guys in her is right. We have to save the system. The president is right. Paulson is right. But we do not like the way the executed the saving. Remember, president obama was not president when tarp was passed, and when the decision was made by that group of people in the fall of 2008 to deploy the great financial strength of the United States in that unique way. Those were not his choices. These are huge issues. A left huge issue. What the president faced, when he came to office, in some ways was a greater challenge. I described this in the book. The government of the United States had guaranteed, provided capital investments, on a massive scale. It was trillions and trillions of dollars of commitments to the system. The economy was still falling off the cliff. He had to come in fresh and say, you have done all that massive financial risk. The economy is still terrible. What is it going to take to solve that . He went through an incredibly exacting process of strategy with that team of advisors over the course of the transition and the months that followed, to try to figure out what should be the next wave of strategy. The things he supported, the , and the Creative Things we did, the stress tests, alongside what the fed did those things ultimately were decisive in pulling things around. And he was excellent in the rigor and depth of examination he brought to those choices. He forced a diversity of opinion. He subjected every recommendation to that basic test. Is that my only option . I want better options. Say,d not sit there and lets not decide. He was willing to decide, which you have to be able to do. Laden,e was on osama bin issues of national security. There are those who have said to me, at least one, who said to me, and maybe this conversation proves them wrong, if in fact he , why isnt hedoes proud of you . I am very proud. Why isnt he proud . Are you . I am very proud. Ateel very comfortable and peace that in that moment, with so much at stake, we made the best of our authority. And what is the best evidence of that . You asked me, how should you judge this . Thedo we make money from tax friendly investment . The s l crisis cost the government 3. 5 of the income of the country in one year to solve the crisis. What is the right test . We got the economy going again within six months. They went from falling at a 90 yield rate in six months. We restored much of the lost value of savings. We got millions of americans back to work much, much more quickly. Those are the tests. Some people would argue that the unemployment numbers that lingered as long as it did was a negative test. You can say, let us go to that question. Why has employment not been stronger, and unemployment come down not come down faster . The answer is in two things. Is, the government will decide to bring deficits down too quickly. It cut spending too deeply, to savagely. About one percentage point of gdp and growth out of the economy for three delicate years after the crisis. Very damaging. The deficit had to come down, but should have come down much more gradually, so people had , inbenefit of jobs infrastructure, as teachers. Fors did anybody go to jail the decisions made in this catastrophic impact on peoples lives . Amount ofas a huge fraud, predation, abuse, misleading financial risk. I think americans deserved a really strong enforcement response to that. People look at the scale of fines, the number of people who went to jail they look at that today and still think i think this is the dominant perspective. They say, it was not enough. I think i understand that, but i did not get to make those judgments. If the prosecutors had the right incentives, enormous public pressure, it was their job to figure it out. They would have loved to have seen the evidence. Quickly like to follow the evidence. I will not speak for them. I did not get to make those judgments. What do they say . They say, it was hard. It was complicated. A lot of the stuff that was damaging was not illegal. It was a big fraction of the system that was the wild west, no rules. They have to be guided by the evidence of lawbreaking behavior. Bad, itaws were weak or was their prerogative to prove that. It got they get to make those judgments. You think that prosecutors could not find laws broken, and nobody had to go to jail . I am not saying that. They should be working hard at it, and they are working hard at it. We did something that was as important in many ways as creating a strong enforcement response. We changed the rules of the game. That, in thes Practical Impact over time, will make americans much less vulnerable to that risk. With respectable parole, people change their minds. You, for example. And what could come out of doddfrank. And the volcker rule. They ended up in a good place. Is messy. But at its core, very powerful, very important. They will endure for a long time. Did you leave anything else out . Anything too interesting to tell, looking like you had assassination in your eyes or something . I had to tell the story of our decisions. At i wanted to frame them in discussion of the substance of craft, pretty neglected craft, which is how to fight financial fires more effectively. Try to write a comprehensive history of every conversation. I tried to write a story about this neglected, consequential craft of how to build better firefighting capacities for financial crisis. When you read this and other people who write memoirs of their time in government, how often it is a story of people. It is. There are some remarkable people making judgments. And not knowing i tell the story about how there is a central banker in india who gave me a book in 2007, i think, maybe early 2008, a book by a tool go one day a you know. E, who he said, this is the best book you can read about central banking. About decisions without being able to see the consequences, the catastrophic risk on either side. Huge mistakes. You have to know you cannot wait for certainty. You are going to make mistakes. You have to decide which mistakes are the most catastrophic to make. Which are the most easy to correct from. That is the discipline you have to learn. If you try to wait for perfect knowledge, husband tenure risk husbanding your risk, you will end up with nothing. What is that phrase . Perfect can never be the enemy of good. Do not make the perfect the enemy of the good. Huxley book is called the book is called stress test reflections on financial crisis, timothy geithner. Thank you for joining us. My pleasure. This is taking stock for tuesday, may 13, 2014. I am pimm fox. Haley barbour discusses the decaying foundation of the u. S. In politics and infrastructure. We will tell you how a legal settlement involving kellogg has a natural Food Industry talking about its foundation. Details ahead. 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