Here's a walk down memory lane that's worth taking, even if it makes your blood pressure spike a little: Three years ago Tim Geithner was in the position of having to explain why the Federal government wasn't going to nationalize the nation's failing banks. In 2009 many people expected that to be part of the government's bank rescue plan.
Only three years. It seems so long ago, doesn't it?
In 2009 there was a very compelling argument for a Federal takeover over these failing institutions, which had been so negligently (and very possibly criminally) mismanaged could no longer survive on their own. And while nationalization wasn't the only course worth considering, this snapshot from our national past reflects the gravity of the crisis caused by bankers.
It's also a useful reminder of the extent to which bank CEOs failed to pass even the most basic test of executive competence - namely, not destroying your own corporation.
Three years ago bank CEOs expected that the Administration would take firm measures against them as it rescued and restructured their institutions. That would have been the logical thing to do. After all, an entire set of corporations has failed spectacularly, shattering the global economy and forcing taxpayers to provide them with hundreds of billions of dollars in rescue money.
But no, Geithner told reporters, there were no plans to nationalize these failed, collapsing institutions. Instead Geithner said he was beginning a process he described as ""efforts taken to date to improve transparency and accountability." What else was in the news in early-to-mid 2009?
Three years ago journalists were reviewing Geithner's work history as head of the New York Federal Reserve, and noting some rather dramitic shortcomings in his performance there, like his failure to spot impending doom at Citigroup . That's like being the astronomer on asteroid watch who misses the fact that our planet is about to be struck ... by Jupiter.
Widespread concerns about Geithner's coziness with Wall Street were even being reflected in the comments of nonpolitical observers like Christopher Whalen of Institutional Risk Analytics, who was troubled by his relationship with Goldman Sachs.
Economics and law professor William K. Black was even more blunt in his assessment of Geithner's plans three years ago, saying that Geithner was continuing predecessor Hank Paulson's "policy of violating the law." As Black wrote in February 2009:
"The law mandates that the administration place troubled banks, well before they become insolvent, in receivership, appoint competent managers, and restrain senior executive compensation (i.e., no bonuses and no raises may be paid to them). The law does not provide that the taxpayers are to bail out troubled banks."
But three years later most of those banks' leaders are still in place. Bankers have continued to receive enormous bonuses and raises, despite the fact that Geithner was insisting that the bank bailouts came with firm conditions for the fortunate recipients.
But Geithner insisted things would be different. Here's what Geithner told Jim Lehrer in June 2009:
"You will see conditions to make sure that the support generates more lending than what would have been possible, that the support does not go to pay dividends or excess compensation, to make sure that the conditions come with the kind of changes in the structure of the entity necessary to make them stronger going forward, and they provide accountability.
"You will see conditions to make sure that the support generates more lending than what would have been possible, that the support does not go to pay dividends or excess compensation, to make sure that the conditions come with the kind of changes in the structure of the entity necessary to make them stronger going forward, and they provide accountability."
Since then we've seen three years of soaring bank profitability, as too-big-to-fail banks used bailouts and Federal Reserve largesse to recapture a disproportionate share of the nation's profits, while becoming even more dangerously oversized than ever. We've seen three years of runaway bonuses, thanks to the US taxpayer. We've seen three years without the institutional restructuring that Geithner promised.
And we've seen a three-year lending drought, especially for the individuals and small businesses that are so critical to economic growth.
Here's another exchange with Lehrer, in which Geithner explains that of course the government will not give money to bankers without expecting something in return:
GEITHNER: The government gets an ownership stake in the company proportionate to the level of assistance we're providing.
JIM LEHRER: Just like anybody else would if they bought stock, right?
TIMOTHY GEITHNER: Just like anybody else would if they get stock.
Needless to say, it never happened, and instead we've been given implausible tales that suggest the taxpayer "made money" on the TARP bailout.
Sure, Geithner was talking tough in those days, telling Lehrer:
"I am deeply offended by the quality of judgments we've seen in the leadership of our nation's financial institutions. They've caused a very damaging loss of confidence. Financial systems require confidence; they're built on confidence. They've created a deep hole of public distrust and anger, which is enormously damaging."
That's true of those bank executives, of course. But so's this: With one or two exceptions, they all still have their jobs.
In 2009 Geithner told Lehrer that bank executives "have a huge obligation to try to restore ... basic trust and confidence," adding that "we're going to make sure they do it by making sure that our assistance comes with conditions that will help restore confidence in the American people... "
"We're going to do things that are going to help get credit flowing again," Geithner said, adding: "Nothing we do for banks is for banks. It's all for the benefit of the people that depend on banks -- the businesses, the families, the students -- that require credit in order to do things that are important to their future."
But three years ago it was also being reported that Geithner prevailed over other White House officials, making sure that banks would have no limits on the bonuses they could pay out with taxpayer rescue money, no restrictions or requirements on how they spent the taxpayers' rescue money, and no requirement that failed bank CEOs would be forced to pay for destroying their own institutions and shattering the world economy - not even by losing their jobs.
Geithner was talking tough:
JIM LEHRER: (A)re the bankers and the banking industry, have they gotten your message now? Do they realize there's a new world here for them?
TIMOTHY GEITHNER: They will, Jim.
Why dredge up the aggraving stories and frustrating quotes of yesteryear? Because the past is prologue. As we'll see in Part 2, Geithner continues to protect too-big-to-fail bankers. "Immunity" is defined as "the state of being protected from something" - and bankers are even been protect from their own incomptence.
And that's not even the worst of it. This is: On the criminal front, Geithner continues to insist that bankers did nothing illegal in the run-up to the crisis - despite a mountain of evidence to the contrary, and despite that fact that he pushed a deal that brought a number of criminal investigations to a premature end.
(Coming up - "Geithner's World, Part 2: Guilt and Innocence")