WASHINGTON — Treasury Secretary Timothy Geithner said Thursday it’s “deeply unfair” that some financial institutions that got taxpayer- paid bailouts are emerging in better shape from the recession than millions of ordinary Americans.
He acknowledged public outrage over that and said people watched with disdain as Washington protected the banks and investment houses whose risky bets caused the crisis, even as the national unemployment rate was soaring to double-digit levels for the first time in a generation.
But in a nationally broadcast interview on NBC’s “Today” show, Geith ner also argued that President Barack Obama had no choice when facing a financial crisis but to support then-President George W. Bush’s “unpopular” bailout plan.
Geithner said the other option was to “stand back” and do nothing, “and that would have been calamitous for the American economy.”
Geithner was president of the Federal Reserve Bank of New York at the peak of the crisis. The New York Fed managed bailouts that included the $182 billion rescue of insurance giant American International Group.
The near-failure of AIG and the failure of investment bank Lehman Bros. in September 2008 sparked a credit crisis throughout the financial system. As investments lost value and more borrowers defaulted, banks did not know which potential borrowers were safe bets. Lending was nearly halted.
The government responded with a sweeping effort to get credit flowing again. The centerpiece was the $700 billion bailout known as the Troubled Asset Relief Program. Billions of dollars were injected into the biggest banks to shore up their balance sheets and restore confidence to the markets.
“What happened in our country should never happen again,” he said. “People were paid for taking enormous risks. It was a crazy way to run a financial system.
“It’s the government’s job … to do a better job of restraining that kind of risk-taking.”
The Geithner interview was broadcast Thursday on NBC’s “Today” show.
