“Sometimes government programs that seem flawed at their launch turn out to succeed against all expectations. No, this is not a post about the Affordable Care Act — I still think that will prove to be an unsustainable fiscal train wreck. I have in mind the Obama administration’s Financial Stability Plan to continue the bank rescue, kicked off in a speech by Timothy F. Geithner as Treasury secretary just over five years ago, on Feb. 10, 2009.
“Mr. Geithner sought to explain how the new administration would carry on with the job of stabilizing still-fragile financial markets. The Bush Treasury, at which I was a senior official, had intervened to support money market funds, banks, General Motors and Chrysler, and the American International Group insurance company (for which TARP money was used to restructure the Federal Reserve’s loan). The Federal Reserve and Federal Deposit Insurance Corporation had taken a range of vital and innovative actions to stanch the crisis, and staff members from the Treasury and Fed were developing a program to address credit market strains that were hindering business and consumer lending.
“Even though Mr. Geithner had made key contributions to the financial rescue programs while in charge of the Federal Reserve Bank of New York, it was natural to expect the recently inaugurated President Obama to put his own stamp on the program, especially when many Americans were understandably discomfited at the idea of the bank rescue in the first place. Indeed, the president himself had built up expectations just a few days earlier that his Treasury chief would provide “a new strategy to get credit moving again.”
“The Geithner plan aimed to assure investors of bank stability, to cleanse bank balance sheets of remaining illiquid assets such as subprime mortgage-backed securities, and to encourage new lending to businesses and consumers. In broad strokes, this had the makings of an appropriate response to the problems facing the financial system, in large part by continuing and building on the efforts already under way that had succeeded in arresting the panic of September 2008.”
Read full NY Times blog post here