One afternoon in the summer of 2008, as the financial system was careening towards the abyss that would send the United States into the worst economic emergency since the Great Depression, Timothy F Geithner - then president of the Federal Reserve Bank of New York, and later, President Barack Obama's Treasury secretary - tried to lighten the mood in his office with "an impromptu contest for the best metaphor for what was happening."
Among the phrases suggested that day were: the wheels are "coming off the bus", the engines are "falling off the plane" and "the rivets are coming off the submarine". There were comparisons to wildfires and earthquakes, "cancer and contagion, sweaters unravelling and boulders rolling down a hill". (And this was before the collapse of Lehman Brothers in September accelerated fears into an extreme panic.)
It wasn't until he saw The Hurt Locker, the Oscar-winning film about a bomb disposal unit in Iraq, Mr Geithner writes in his new memoir, Stress Test, that he found something that really captured what "the terror of those days" felt like for insiders trying to contain the unspooling crisis: "the overwhelming burden of responsibility combined with the paralysing risk of catastrophic failure; the frustration about the stuff out of your control; the uncertainty about what would help; the knowledge that even good decisions might turn out badly; the pain and guilt of neglecting your family; the loneliness and the numbness."
Stress Test conveys in visceral terms just how precarious things were during the crisis, just how frightened many first responders were, and just what an achievement it was to avert a major depression. Stress Test does not provide any big new revelations. The book attempts, rather, to explain why Mr Geithner and his colleagues made the choices they did - something Mr Geithner acknowledges he "never found an effective way" of doing at the time.
Mr Geithner says he understands why the American public was outraged that some of the arsonists who had set the financial fire of 2008 were getting bailouts and bonuses, but argues that "a lot of firms that didn't deserve saving still needed to be saved" because, in his view, their implosion could have set off another series of tumbling dominoes.
Of the collapse of Lehman Brothers, Mr Geithner says he does not think the government could have rescued it "without violating the legal constraints placed on the Fed". He also writes that "we hadn't chosen to draw a line" with Lehman as a corrective to moral hazard, but instead "had been powerless" to prevent "a catastrophic default".
He similarly tries to explicate or defend controversial decisions made as Mr Obama's Treasury secretary. Though outrage over the decision of American International Group to pay out $165 million in bonuses was understandable, Mr Geithner says: "I did not believe I had any legal basis to stop contractually promised payments, and I thought the public relations value of trying to intervene would pale in comparison to the damaging spectre of the US government trying to break a private contract."
In the same chapter, Mr Geithner denies allegations made by the journalist Ron Suskind (in the 2011 book Confidence Men) that he ignored or slow-walked presidential instructions to develop a plan to restructure many of the large, troubled banks, starting with Citigroup. "The President understood the risks of lurching into a pre-emptive nationalisation strategy," Mr Geithner writes, "and he never told me to pursue that path."
In this book, Mr Geithner, with an assist from Michael Grunwald of Time magazine, demonstrates he can discuss economics in an accessible fashion, making the situation the country faced in 2008 and 2009 tactile, comprehensible - and harrowing - to the lay reader. He also gives us a telling portrait of himself as "the most worried person in the room" - the administration's Eeyore, who in the early days of 2009 (when so many in the White House were still high on the idea of hope) felt "weary and dark", explaining in meetings "why the awesome new ideas weren't that awesome, and how the storm we were sailing into was even worse than we thought".
Despite the nimble writing here, sceptical readers will argue that Stress Test skirts many questions raised by critics of the Obama administration's handling of the economy and the financial crisis. The book tends to underplay the larger, unresolved problems in the American economy (from large deficits to long-term unemployment) while overstating the importance of regulatory changes the administration oversaw.
Students of the causes of the cataclysm of 2008 may also question Mr Geithner's reluctance to examine the role played in the run-up to that crisis by the anti-regulatory policies of his former mentors Lawrence H Summers and Robert E Rubin and the low-interest, easy-money policies of the Fed under Alan Greenspan.
Among Mr Geithner's regrets: he wishes he "had persuaded Congress to create more authority for the Fed and the Treasury in the financial reform legislation" and that "we had expanded our housing programmes earlier, to relieve more pain for homeowners". He writes that he and his colleagues went into the Great Firestorm of 2008 with an inadequate toolbox, and adds that he hopes lessons from 2008 "won't have to be rediscovered in the fires of the next crisis".
STRESS TEST
Reflections on Financial Crises
Timothy F Geithner
Crown Publishers; 580 pages; $35
Among the phrases suggested that day were: the wheels are "coming off the bus", the engines are "falling off the plane" and "the rivets are coming off the submarine". There were comparisons to wildfires and earthquakes, "cancer and contagion, sweaters unravelling and boulders rolling down a hill". (And this was before the collapse of Lehman Brothers in September accelerated fears into an extreme panic.)
It wasn't until he saw The Hurt Locker, the Oscar-winning film about a bomb disposal unit in Iraq, Mr Geithner writes in his new memoir, Stress Test, that he found something that really captured what "the terror of those days" felt like for insiders trying to contain the unspooling crisis: "the overwhelming burden of responsibility combined with the paralysing risk of catastrophic failure; the frustration about the stuff out of your control; the uncertainty about what would help; the knowledge that even good decisions might turn out badly; the pain and guilt of neglecting your family; the loneliness and the numbness."
Stress Test conveys in visceral terms just how precarious things were during the crisis, just how frightened many first responders were, and just what an achievement it was to avert a major depression. Stress Test does not provide any big new revelations. The book attempts, rather, to explain why Mr Geithner and his colleagues made the choices they did - something Mr Geithner acknowledges he "never found an effective way" of doing at the time.
Mr Geithner says he understands why the American public was outraged that some of the arsonists who had set the financial fire of 2008 were getting bailouts and bonuses, but argues that "a lot of firms that didn't deserve saving still needed to be saved" because, in his view, their implosion could have set off another series of tumbling dominoes.
Of the collapse of Lehman Brothers, Mr Geithner says he does not think the government could have rescued it "without violating the legal constraints placed on the Fed". He also writes that "we hadn't chosen to draw a line" with Lehman as a corrective to moral hazard, but instead "had been powerless" to prevent "a catastrophic default".
He similarly tries to explicate or defend controversial decisions made as Mr Obama's Treasury secretary. Though outrage over the decision of American International Group to pay out $165 million in bonuses was understandable, Mr Geithner says: "I did not believe I had any legal basis to stop contractually promised payments, and I thought the public relations value of trying to intervene would pale in comparison to the damaging spectre of the US government trying to break a private contract."
In the same chapter, Mr Geithner denies allegations made by the journalist Ron Suskind (in the 2011 book Confidence Men) that he ignored or slow-walked presidential instructions to develop a plan to restructure many of the large, troubled banks, starting with Citigroup. "The President understood the risks of lurching into a pre-emptive nationalisation strategy," Mr Geithner writes, "and he never told me to pursue that path."
In this book, Mr Geithner, with an assist from Michael Grunwald of Time magazine, demonstrates he can discuss economics in an accessible fashion, making the situation the country faced in 2008 and 2009 tactile, comprehensible - and harrowing - to the lay reader. He also gives us a telling portrait of himself as "the most worried person in the room" - the administration's Eeyore, who in the early days of 2009 (when so many in the White House were still high on the idea of hope) felt "weary and dark", explaining in meetings "why the awesome new ideas weren't that awesome, and how the storm we were sailing into was even worse than we thought".
Despite the nimble writing here, sceptical readers will argue that Stress Test skirts many questions raised by critics of the Obama administration's handling of the economy and the financial crisis. The book tends to underplay the larger, unresolved problems in the American economy (from large deficits to long-term unemployment) while overstating the importance of regulatory changes the administration oversaw.
Students of the causes of the cataclysm of 2008 may also question Mr Geithner's reluctance to examine the role played in the run-up to that crisis by the anti-regulatory policies of his former mentors Lawrence H Summers and Robert E Rubin and the low-interest, easy-money policies of the Fed under Alan Greenspan.
Among Mr Geithner's regrets: he wishes he "had persuaded Congress to create more authority for the Fed and the Treasury in the financial reform legislation" and that "we had expanded our housing programmes earlier, to relieve more pain for homeowners". He writes that he and his colleagues went into the Great Firestorm of 2008 with an inadequate toolbox, and adds that he hopes lessons from 2008 "won't have to be rediscovered in the fires of the next crisis".
STRESS TEST
Reflections on Financial Crises
Timothy F Geithner
Crown Publishers; 580 pages; $35
©2014 The New York Times News Service