Stress Test: Reflections on Financial Crises by Timothy Geithner
Updated: Apr 2, 2019
Written by the former US Secretary of the Treasury, Stress Test is a must read for anyone in a management role. I'll be honest I didn't know how much of an influential person Geithner was in regards to America's Politics and economics; this alone is reason to try to understand his viewpoint.
Stress Test is a recap of how Geithner was involved in the financial crisis of 2008 and how he helped steer through it. He also recounts his four years as Barack Obama's Secretary of the Treasury and his previous three years as President of the Federal Reserve Bank of New York. The financial crisis created the worst economic recession since the Great Depression of the 1930's it was caused by hundreds of thousands of risky mortgages. Property loans were made to borrowers with no realistic hope of repaying them back. In short it was like a Ponzi scheme started by lenders.
The first things Geithner did was get statutory authority to infuse money into the firms at risk of bankruptcy. they received authority with the Troubled Asset Relief Program ("TARP"), which authorised the treasure to either purchase so called "toxic" assets or to invest directly in the capital of troubled firms.
Geithner’s panacea to the financial crisis was the stress test. This is essence was auditing the major commercial and investment banks to measure the potential effects a crisis would have on its capital. The test found most of the institutions to be solvent AND liquid, and the financial crisis passed with the influx of private money.
He seems unbothered by the fact that his critics see him as the servant to Wall Street, while of Wall Street and the right see him as a socialist. He does imply however that neither side could possibly be correct.
While he tries very hard to claim he and Paulson, Bernanke, and Summers were not in the pocket of Wall Street and big businesses, he refrains from explaining any of the ties among them and the top banks and investment firms.
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