Pity poor Tim Geithner’s wife. He tells us in the morning Wall Street Journal about her ”bewilderment while reading another story about people in the financial world or their lobbyists complaining about Wall Street reform or claiming they didn’t need the Troubled Asset Relief Program [TARP].”
Does Wall Street have no memory, she wonders. She recalls the panicked midnight phone calls that her husband received during 2008 when, as head of the New York Fed – the “fire department for the financial system,” Geithner had to deal with the panic caused by failing companies like Bear Stearns, AIG and Lehman Brothers, which had taken on too much unregulated risk.
Amnesia – forgetting the lessons of the past -- led to the 2008 crisis, Geithner writes. “We cannot afford to forget the lessons of the crisis and the damage it caused to millions of Americans. Amnesia is what causes financial crises. These reforms are worth fighting to preserve,” he concludes.
Washington and Wall Street shouldn’t forget the lessons of the recent past? Did the man get here yesterday? Forgetting the past – or perhaps a better phrase for it is ignoring the past – is Washington’s and Wall Street’s favorite pastime.
For examples, let’s start with the latest legislative travesty snaking through the halls of Congress. The Republicans promised before the 2010 election that they would not attach extraneous measures to must-pass bills, a way to pass controversial measures or special interest provisions without hearings or scrutiny.
Yesterday, the Senate failed to pass an amendment that would exempt organizations with moral qualms from providing contraception in their health insurance plans. The amendment was offered to the must-pass transportation bill.
How about promises to balance the budget? We have four Republican candidates all promising the get the nation’s fiscal house in order by cutting taxes and cutting spending. They call President Obama the biggest budget buster in American history. Never mind that no recent Republican president including Ronald Reagan has balanced the budget after making similar pledges, and that every reputable think tank in Washington says the plans from this year’s Republican hopefuls will substantially increase the national debt.
Geithner’s amnesia regarding the recent financial crisis is rather remarkable in its own right. Does he not recall how, as a top official at Treasury in the late 1990s, he participated along with Lawrence Summers, then Treasury Secretary and later President Obama’s top economic adviser, in crushing efforts by Brooksley Born at the Commodity Futures Trading Commission to rein in derivatives and make the trades more transparent?
A few years later at the New York Fed, he was essentially the system’s second highest ranking official after Alan Greenspan. Though the Fed had oversight over home mortgage lenders, neither he nor Greenspan did anything to stop the evisceration of lending standards that led to the proliferation of bound-to-fail subprime loans to vulnerable borrowers.
Geithner’s wife shouldn’t be surprised in a city where Wall Street lobbyists are seeking to eviscerate the Dodd-Frank reform bill that both lobbyists and politicians have selective memories regarding the recent financial crisis. After all, amnesia almost always starts at home.