What Did Geithner Know?

Treasury Secretary Timothy Geithner may be leading the government’s effort to rescue banks, but did he play a role in their self-immolation? Things like this aren’t encouraging: “Although Geithner repeatedly raised concerns about the failure of banks to understand their risks [as head of the Federal Reserve Bank of New York], including those taken through derivatives, he and the Federal Reserve system did not act with enough force to blunt the troubles that ensued. That was largely because he and other regulators relied too much on assurances from senior banking executives that their firms were safe and sound, according to interviews and a review of documents by The Washington Post and the nonprofit journalism organization ProPublica.” Among the review’s findings are that Geithner found in 2006 that banks “could not properly assess their exposure to a severe economic downturn and were relying on the ‘intuition’ of banking executives rather than hard quantitative analysis … The Fed did not use key enforcement tools until later, after the credit crisis erupted.”