Stress Test, Timothy Geithner, Crown, 2014. I was excited and bored with Geithner’s tome covering the financial crisis. The first half of the very one book is riveting as it covers the period while Geithner was at the New York Fed, working with Hank Paulson, and then at the Treasury, as he helps cope with the financial crisis. After reading specific books about the crisis and the various failed firms (Bear Stearns, Lehman, WaMu, etc), and Paulson’s own book (On The Brink), I am not sure I spotted much new in terms of unpublished facts. What was riveting was to relive the situation and the pressure and the near disaster we all could have experienced. The authors’ physical presence and his background to his thinking at the time is well worth the read.
But as the crisis generally abates, and Geithner moves into the second half of the book, the Treasury Secretary starts to shift his dialog from economic and monetary towards political policy. I didn’t buy this book for any political overview to the crisis and so I was caught out.
Geithner argues that President Obama is a “market oriented Democrat” (news to me) and that Republican obstinacy alone prevented progress on many fronts from being achieved (no reference to Democrat intransigence). He even argues, upon reflection, that the policy of many years to continuously water down the requirements needed to shell out mortgages to families that could not afford them, was not a cause of the crisis, but a result of the mania. I believe his view is wrong and his perspective ignores the timing of the facts. The causes of the bubble are many and varied, but some reach back 15-20 years. In the second half of the book there are some good parts (too few), politically neutral, regarding Europe and the situation of the ECB.
I would read the first half of his book. The author’s experiences and analysis of the crisis are chilling, and not political. After about page 311 I would start to speed read to the end (page 543) since this half of the book is slanted left of center and starts with the authors’ explanation for the cause of the crisis. He happens to (somewhat correctly) explain the power of manias. But he suggests that the mania is the cause of the crisis and fails to explain what put in place the elements that made the mania possible. For that, read Paulson or Gasparino.
Oh, and one Dragon is laid to rest too. It becomes clear that the US Government could have saved Lehman. After all that hot air about how there were no rules allowing the Fed or Treasury to save Lehman, Geithner explains all the rule bending they did for everyone else (“exigent conditions”). They (whoever ‘they’ refers too) could have saved Lehman. For a number of reasons partially explained in the book, ‘they’ didn’t. Partially recommended, just: 6 out of 10.