Exclusive - Timothy Geithner Extended Interview Pt. 5

  • Aired:  05/21/14
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Timothy Geithner describes the difficult reality that constrained the Obama administration's ability to address the financial crisis. (10:21)

AND YOU SAID IT YOURSELF, THEARROGANCE OF THESE INDIVIDUALS

THAT HOUSING PRICES FOR SOMEREASON AGAINST ALL OF HISTORY

WERE NEVER GOING TO COME DOWN,LIKE THE TULIP BOOM, IT WAS

NEVER GOING TO COME DOWN, THEARROGANCE OF THOSE INDIVIDUALS

THAT CAUSED THIS IN THE FIRSTPLACE HAD TO BE REINFLATED.

>> IT WASN'T REINFLATED.

>> Jon: GIVING THEM THAT MONEYDOESN'T -- LET'S VIEW IT AS

LIQUID.

THEY ARE NOW -- LIQUIDITY IS THETHING.

SO NOW THEY ARE OLD AND WRINKLY.

OH, LOOK AT ME!

LOOK AT ME!

I'M AN OLD MAN!

I DON'T HAVE ANY LIQUIDITY!

(LAUGHTER)AAAHHH!

I AM YOUNG AGAIN!

BRING ME MY COLLATERALIZEDSECURITIZATIONS AND I WILL

REINFLATE MY BUBBLE!

(APPLAUSE)HOW IS THAT NOT WHAT WE DID?

THEY HAVE YET TO PAY ANY PRICEFOR IT.

FORGET ABOUT OLD TESTAMENTJUSTICE, THEY HAVEN'T PAID

NEW-AGE JUSTICE FOR IT YET.

>> I'M AGREEING WITH YOU, IT'SUNFAIR.

I'M AGREEING WE DIDN'T GIVE AMEASURE OF JUSTICE AGAINST THAT

BUT I AM COMPLETELY CONFIDENTTHAT THE ALTERNATIVE STRATEGY

THAT WOULD HAVE BEEN MORECOMFORTABLE TO YOU AT THE

BEGINNING, YOU WOULD HAVECHEERED US AND LOVE US FOR WOULD

HAVE BEEN DEVASTATING TO THEPEOPLE YOU'RE MOST WORRIED

ABOUT.

NOW, YOU DON'T ACCEPT THAT, YOUDON'T AGREE WITH IT --

>> Jon: NO.

-- BUT -->> Jon: AND THE REASON I DON'T

AGREE WITH IT IS BECAUSE IT'SNOT -- I MEAN, IN HINDSIGHT,

IT'S 20/20, BUT THIS IS NOWBEING LOOKED AT BY ECONOMISTS

USING QUANTITATIVE ANALYSIS ANDDATA THAT IS NOT -- I THINK YOU

CAN SHAKE YOUR HEAD AT IT,BUT --

>> YOU WOULDN'T WANT TO INVOKETHAT BECAUSE THAT'S A PERILOUS

FOUNDATION TO THE ARGUMENT.

BUT YOU'RE RIGHT THE STUFF WEDID WILL BE CHEWED OVER FOR

DECADES, NO DOUBT ABOUT IT.

>> Jon: NO QUESTION. AND I'MSURPRISED HOW RESISTANT YOU ARE

TO EVEN THE POSSIBILITY THATPRINCIPAL REDUCTION

OR REFINANCING ON A MUCHLARGER SCALE --

>> NO, YOU'RE MISTAKEN.

THE PRESIDENT -- I WAS FOR DOINGPRINCIPAL REDUCTION, FOR DOING

MORE MASSIVE REFINANCING.

>> Jon: BUT YOU TESTIFIED TOELIZABETH WARREN THAT WOULD BE

UNFAIR.

YOUR DEPUTY SAID THAT WOULD BEMORAL HAZARD.

>> THERE IS GOOD WRITTEN RECORDOF THIS, OF US LAYING OUT THE

CASE. >> IN YOUR BOOK.

>> NO, NO, NOT IN THE BOOK, INPUBLIC RECORD.

>> Jon: I HAVE A GOOD RECORD OFHOW I SAVED EVERYTHING!

IT'S RIGHT IN HERE ON PAGE 52!

(LAUGHTER)(APPLAUSE)

>> WE LEFT A GOOD WRITTEN RECORDIN OUR OFFICE OF OUR TRYING TO

MAKE THE CASE TO FANNIEAND FREDDIE THAT THEY SHOULD

DO PRINCIPAL REDUCTION, AND THEMSAYING TO US NO, WE'RE NOT

GOING TO DO IT YOU CAN'TMAKE US DO IT.

THAT'S TRUE.

WE DID DO MASSIVE REFINANCING INTHAT CONTEXT.

WHAT I'M SAYING IS YOURDISAPPOINTMENT WITH THE SCOPE OF

WHAT WE DID IN HOUSING IS NOTBECAUSE WE DIDN'T THINK IT WOULD

BE BETTER TO DO. OFCOURSE WE THOUGHT IT WOULD BE

BETTER, BUT IT WAS BECAUSE WEWERE OPERATING WITHIN A SET OF

CONTSTRAINTS THAT WE COULDN'TRELAX.

NOW YOU CAN SAY WE WERE INEPTNOT TO RELAX THE CONSTRAINTS --

>> Jon: I DON'T THINK IT WASINEPT. I THINK, HONESTLY,

THEY WENT TO HELL ANDBACK TO GET THE MONEY THEY

NEEDED TO SAVE FROM A DEPRESSIONTHE BANKING INDUSTRY.

THEY DIDN'T GO TO HELL AND BACKAND DO THE SAME FOR HOUSING, AND

I THINK THAT THAT IS WHAT IS THEMOST UNFORTUNATE THING ABOUT

THIS.

>> I AGREE WITH THAT.

AND LET ME TRY A LITTLEDIFFERENTLY.

OKAY?

PRESIDENT OBAMA, OKAY, HE HADAROUND HIM THE BEST HOUSING

PEOPLE IN THE COUNTRY -- SHAUNDONOVAN -- MICHAEL BAR, THESE

ARE VERY TALENDTED PEOPLE. HEHAD PRETTY

TALENTED FINANCIAL PEOPLE,PROGRESSIVE ECONOMISTS AND THE

RIGHT INCENTIVES AND HE WASWORRIED ABOUT THE SAME THING AND

PUT ENORMOUS PRESSURE ON THATGROUP OF PEOPLE, ENORMOUS

PRESSURE.

>> Jon: BUT THE PROGRESSIVEECONOMISM DIDN'T WIN THE DAY IN

THAT ARGUMENT.

YOU WOULD BE HARD PRESSED TOTHINK THEY.

>> IN THE SEATS OF THECOUNSEL WITH HIM AT THE TABLE --

>> Jon: DO YOU REALLY HAVE AROUND TABLE?

DOESN'T ANYONE SIT THERE AND GOTHIS IS AWFULLY EVIL FEELING.

THEY REALLY SIT DOWN AT AROUND TABLE AND TALK ABOUT THE

WORLD LIKE THAT?

>> IT WASN'T A ROUND TABLE.

>> Jon: IS IT LIKE THE WORLDIS THERE AND THEY SPIN IT AND

THEY'RE LIKE, HMM...

BRING ME BOLIVIA! (LAUGHTER)

>> WHAT I'M SAYING TO YOU ISTHEY HAD THE RIGHT INCENTIVES

AND WERE WORRIED ABOUT THE RIGHTTHING.

HE WANTED TO DO AS MUCH AS HECOULD.

SO YOU'RE SAYING, WHY WAS THERESULT DISAPPOINTING?

BECAUSE HE RAN AGAINST THEBRUTAL CONSTRAINTS OF REALITY

WHICH IS WE DID NOT HAVE THERESOURCES OR THE AUTHORITY TO DO

A MORE POWERFUL JOB ALONGSIDETHOSE THINGS.

IT WOULD HAVE BEEN GREAT IF ITWERE OTHERWISE, IT WOULD HAVE

BEEN BETTER, IT WOULD HAVE MADEA BIG DIFFERENCE, BUT IT WAS NOT

POSSIBLE IN THAT MOMENT.

BUT, AGAIN, LET ME JUST SAY --LIKE, HE WAS A PROGRESSIVE

DEMOCRAT ELECTED A AT TIME WHENALL HIS INSTINCTS WERE LIKE

YOURS IN THAT CONTEXT AND HE HADREALLY TALENTED HOUSING PEOPLE

AROUND HIM, TOO.

SO ASK YOURSELF THE QUESTION,HOW COULD IT BE POSSIBLE THAT

LEVEL OF CREATIVITY YOU SAW INTHE RESCUE OF THE UNJUST WAS NOT

BROUGHT HERE?

YOUR EXPLANATION IS YOU SAIDWELL, WE HAVE NO IDEA WHAT WE

WERE DOING OR HE WOULD HAVE -->> Jon: NO, HERE'S WHAT I

BELIEVE -->> BUT THE REALITY IS WE RAN

AGAINST THIS BRUTAL SET OFCONSTRAINTS WHICH WE TRIED TO

RELAX AND COULD NOT RELAX THEM,AND THAT'S UNFORTUNATE --

>> Jon: I BELIEVE THE REASONTHAT IT HAPPENED THIS WAY --

IS NOT BECAUSE PEOPLE ARE INEPTBUT BECAUSE THERE IS A CERTAIN

CAPTURE BY THE FINANCIALINSTITUTIONS -- THE FINANCIAL

MARKET IS NOW 8% TO 9% OF OURGDP WHEN IT USED TO BE 4,

AND THESE COMPLEX DERIVATIVESHAVE DRIVEN A MIRAGE

BUBBLE OF PROGRESS ANDECONOMICAL -- MANUFACTURING IS

11% OF OUR ECONOMY,USED TO BE 27%.

FINANCIAL IS NOW 24% OF OURECONOMY.

WE ARE UPSIDE DOWN FOR A COUNTRYTHAT SHOULD BE HEALTHY AND

FUNCTIONING.

THAT'S WHY I THINK WE LEANTOWARDS THE BANKS --

>> I DON'T AGREE TOWARD THAT ANDI DON'T THINK THAT'S FAIR TO

THEIR INTENTIONS OR MOTIVES.

>> LET ME TRY IT DIFFERENTLY.THE STUFF THAT YOU LIKE,

THAT YOU THINK WOULD HAVEBEEN BETTER IF WE'D DONE ON A

LARGE SCALE, SOME OF WHICH WETRIED, SOME OF WHICH WE DIDN'T,

IT WAS DISAPPOINTING. IF WEHAD DONE THAT THE WAY YOU

DESCRIBED, THE BANKSWOULD HAVE LOVED IT.

THEY WOULD HAVE BEEN CRAZYABOUT IT.

SO DON'T ATTRIBUTE THAT FAILUREOR THAT DISAPPOINTMENT TO A SET

OF STEPS THAT THE PEOPLE INSIDETHAT ROOM THAT THIS NEW

PRESIDENT BROUGHT TO OFFICE ATS7 THAT TIME, DON'T ATTRIBUTE THAT

FAILURE TO THOSE PEOPLE WERESOMEHOW SITTING THERE TRYING TO

FIGURE OUT -->> Jon: THEN I DON'T KNOW WHAT

TO TRIBUTE IT TO.WHAT CAN I ATTRIBUTE IT TO?

>> YOU ATTRIBUTE IT TO THECRUSHING REALITY OF THE

CONSTRAINTS IMPOSED ON US WHICH

IS WE DID NOT HAVE THE AUTHORITYOR RESOURCES TO DEVOTE TO

HOUSING ON THIS SCALE, THOUGH WETRIED, AND THE PRESIDENT TRIED

TO LEGISLATE MORE, BUT HE GOT NOSUPPORT FOR IT, COULDN'T RELAX

THE CONSTRAINTS.

WITHIN THE SCOPE OF THECONSTRAINTS, WE HELPED MILLIONS

OF PEOPLE.

NOT ENOUGH, BUT MILLIONS OFPEOPLE.

>> Jon: OKAY.

HERE'S WHAT I'LL SAY -- I FELLASLEEP 30 MINUTES AGO

(LAUGHTER)(APPLAUSE)

SO I DON'T KNOW -- I'M NOTEXACTLY SURE WHAT'S HAPPENED,

BUT I FEEL LIKE WE BOTH WOKE UPNAKED AND BRUISED IN AN ALLEY.

(LAUGHTER)I GIVE YOU CREDIT.

YOU KNOW, I SAT NEXT TO DONALDRUMSFELD FOR A LONG TIME TALKING

ABOUT THE IRAQ WAR.

>> THIS CAN'T BE GOOD.

>> Jon: NO, IT IS GOOD.

>> THAT IS DEEPLY UNFAIR.

>> Jon: NO, IT IS NOT.

I'LL TELL YOU WHY -->> I SHOULD STOP YOU.

>> Jon: YOU'RE TROUBLED ANDYOU'RE SEARCHING FOR ANSWERS AND

YOU'RE REFLECTING ON WHAT YOUDID AND I DISAGREE WITH YOUR

CONCLUSION ABOUT JUST HOW TIEDUP YOU GUYS WERE BECAUSE I THINK

THERE'S AN AWFUL LOT OF POWER,WHEN A GOVERNMENT AND A FED CAN

OPEN UP A WINDOW AND JUST GIVEAWAY MONEY FOR FIVE YEARS TO

BANKS, I THINK THERE'S AN AWFULLOT YOU CAN DO WITHIN STATUTORY

LIMITS WHEN YOU HAVE CHECKS THATYOU'RE WRITING THAT ARE THAT

LARGE.

THAT BEING SAID, AT LEAST WHEN ILOOK BEHIND YOUR EYES, THERE IS

SOMETHING MOVING BACK THERE.

AND WHEN I LOOKED INTO HIS EYES,AFTER THE IRAQ WAR, HE WAS

LITERALLY, LIKE THIS, LIKE THISWAS FUN.

I WAS THINKING ABOUT INVADING

ANOTHER COUNTRY.

WANT TO HEAR ABOUT THAT?

(LAUGHTER)IT'S COMPLICATED AND I DON'T

WANT TO IMPUGN THE PEOPLE THATARE DOING THERE.

AND I APPRECIATE YOU HAVING THECONVERSATION. AND YOU'RE RIGHT.

I HAVE VERY SET BELIEFS ON IT.

HOPEFULLY THEY ARE OPEN TOARGUMENTATION.

I DON'T KNOW HOW COMPELLING ANARGUMENT IT IS TO SAY THIS WAS

THE ONLY THING WE COULD HAVEDONE.

>> NO, I WAS PRETTY HONEST ABOUTWHAT WAS MESSY, WHAT I REGRET

AND WHAT OUR MISTAKES. I TRIEDTO BE HONEST ABOUT THAT.

>> Jon: THE CENTER FOLD SPREADIS WORTH THE PRICE.

(APPLAUSE)LET ME ASK YOU A QUESTION, DOES

IT FEEL GOOD TO TALK ABOUT IT?

IS IT CATHARTIC IN ANY WAY OR ISIT, LIKE -- OR IS IT -- OR IS IT

STRICTLY LIKE, YES, I AMFULFILLING MY CONTRACT TO THE

BOOK COMPANY?

LIKE, WHAT DOES IT FEEL LIKE?

>> ACTUALLY, I KIND OF THINKIT'S AN IMPORTANT ARGUMENT TO

HAVE.

>> Jon: YES!

AND I LIKE HAVING IT.

(CHEERS AND APPLAUSE)>> Jon: HERE'S THE ONE THING I

DON'T KNOW -- I HONESTLY HAVE NOIDEA HOW WE EDIT THIS.

SO I'M GOING TO SAY, LIKE,TIMOTNY GEITHNER, THANK YOU SO

MUCH!

(APPLAUSE)THERE IS SO MUCH ON THE WEB

RIGHT NOW ON THIS, I DON'T KNOWIF WE BROKE THE WEB OR NOT, BUT

THE BOOK IS CALLED "STRESSTEST."

TIMOTNY GEITHNER WROTE IT.

HE WAS THE SECRETARY OFTREASURY.

IT'S A VERY INTERESTING READ.

I ACTUALLY SAY THIS, IT'S AREALLY WELL-WRITTEN BOOK AND

EASY TO UNDERSTAND, AND YOU CANYELL AT CERTAIN PAGES IF YOU

WANT.

(LAUGHTER)BUT THANK YOU SO MUCH FOR

STOPPING BY AND SPENDING ANINORDINATE AMOUNT OF TIME WITH

US.

TIMOTNY GEITHNER, THANK YOU FORBEING HERE.

(APPLAUSE)

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