How Geithner's Plan Worked

The unpopularity of Treasury Secretary Timothy Geithner makes it easy to overlook a simple fact: His plan to rescue the U.S. economy worked. “My basic view is that we did a pretty successful job of putting out a severe financial crisis and avoiding a Great Depression or Great Deflation type of thing,” he tells The New Yorker’s John Cassidy, who was skeptical of the plan to subject banks to “stress tests” and take toxic assets off their hands. “We saved the economy, but we kind of lost the public doing it.” At the time, many critics wanted the Obama administration to nationalize banks, and Geithner now defends the decision not to. “That would have been a deeply transforming policy mistake,” Geithner says. “The country would have suffered for decades. We’d have spent hundreds of billions of dollars more that we didn’t need to spend, and would have been stuck in those institutions for years.” Why then is he so unpopular? “[Policymakers] screw up financial crises because the politics are horrible, and that deters action. They are slow and late and tentative and weak because they are scared to death of the politics. But sometimes a policymaker has to say, I’ll take pain now against pain later.”