Exclusive - Timothy Geithner Extended Interview Pt. 1

  • Aired:  05/21/14
  •  | Views: 180,111

"Stress Test" author and Former Secretary of the Treasury Timothy Geithner describes the terrible panic that surrounded the 2008 financial crisis. (5:42)

>> Jon: WELCOME BACK.MY GUEST TONIGHT

HE WAS THE UNITEDSTATES SECRETARY OF TREASURY

FROM 2009 TO 2013, HIS NEW BOOKIS CALLED "STRESS TEST,"

REFLECTIONS ON FINANCIAL CRISES.

WELCOME TO THE PROGRAM TIMGEITHNER!

(CHEERS AND APPLAUSE)HOW ARE YA?

LOOK AT THIS THING.

LOOK AT THIS THING.

LOOK WHAT I HAD TO CHOKE THROUGHOVER THIS PAST WEEK!

>> IT'S EXCELLENT. IT'SEXCELLENT.

>> Jon: IT IS EXCELLENT.

"STRESS TEST."

HERE'S WHERE I THINK WE SHOULDBEGIN.

IT SEEMS WHAT THIS BOOK SEEKS TODO IS CLARIFY A PERCEPTION

DIFFERENCE.

THE PERCEPTION ON YOUR END ANDMAYBE THE GOVERNMENT'S END THAT

THE BAILOUTS WORKED AND WERE THERIGHT THING TO DO AND THE

PERCEPTION ON, LET'S SAY, THEOTHER END OF PEOPLE WHO THOUGHT

THAT IT WAS THE WRONG THING TODO AND DIDN'T WORK.

SO LET'S TAKE THAT.

LET'S START WITH YOURPERCEPTION.

IT'S LIKE AN OPTICAL ILLUSION.

YOU SEE THE THING WHERE ONEPERSON LOOKS AT IT AND THEY SEE

A PRETTY GIRL AND YOU FLIP ITAND THE OTHER PERSON LOOKS AT IT

AND SEES AMERICA GETTING(BLEEP).

SO LET'S FIGURE THAT OUT.

(LAUGHTER)WHAT IS YOUR PERCEPTION OF THIS

CRISIS AND WHY WE BAILED OUT THEBANKS THE WAY WE DID?

>> THERE'S ONLY ONE REALITY.

>> Jon: ALL RIGHT.

>> OKAY.

IT WAS A TERRIBLE FINANCIALPANIC, AND THE ONLY OPTION, THE

ONLY RESPONSIBLE, JUST, MORALTHING TO DO IN THAT CONTEXT IS

TO PROTECT PEOPLE FROM THE RISKOF MASS UNEMPLOYMENT, WHICH IS

WHAT HAPPENS IN FINANCIALPANICS, UNLESS GOVERNMENTS STEP

IN AND TRY TO MAKE SURE THEYKEEP THE LIGHTS ON.

>> Jon: SO THIS WAS ABULWARK -- YOU HAVE DESCRIBED IT

AS THERE WAS A PLANE GOING DOWN,THE ARSONISTS WERE ON THE PLANE,

IT WAS ON FIRE -->> IF IT WAS JUST THE ARSONISTS,

YOU COULD LET THE PLANE CRASH,IT DIDN'T MATTER.

>> Jon: I SEE.

>> THE PROBLEM WAS, THERE WERE ABUNCH OF INNOCENT VICTIMS ON THE

PLANE WITH THEM --

>> ON THE PLANE WITH THEM,THAT'S THE AMERICAN PEOPLE.

WE'RE ON THE PLANE WITH THEM.

>> AND YOUR FIRSTOBLIGATION IS TO FIGURE OUT HOW

TO LAND THAT PLANE SAFELY.

>> Jon: I SEE.

>> THAT'S NOT YOUR ONLYOBLIGATION BECAUSE, ONCE YOU DO

THAT, YOU'VE GOT TO GET THEECONOMY GROWING AGAIN, YOU WANT

TO TRY TO MAKE PEOPLEACCOUNTABLE FOR THE MISTAKES

THEY MADE, FIX THE SYSTEM SO ITDOESN'T HAPPEN AGAIN, BUT THE

FIRST OBLIGATION IN THE PANIC ISTO MAKE SURE YOU DO WHATEVER IT

TAKES TO PROTECT THEM FROM WHATWE SAW IN THE GREAT DEPRESSION

WHICH WAS 25% UNEMPLOYMENT ANDBREAD LINES FOR A DECADE. AND IF

YOU, IN THAT CONTEXT, YOU HAVETO DO THE OPPOSITE OF WHAT

SEEMS INTUITIVE AND FAIR.

YOU HAVE TO MAKE SURE THATYOU'RE PREVENTING PEOPLE FROM

RUNNING FROM THE SYSTEM, THESYSTEM FROM COLLAPSING.

>> Jon: YOU DON'T WANT THESYSTEM TO COLLAPSE.

>> WE DON'T DO IT FOR THE BANKSOR THE BANKERS.

>> Jon: RIGHT.

>> YOU DO IT TO PROTECT THEMFROM THEIR MISTAKES.

>> Jon: HERE'S WHERE I GUESSTHE PERCEPTIONS BEGIN TO SHIFT,

BECAUSE I THINK THAT'S ACOMPELLING CASE, THAT YOU'RE

BEING TOLD THIS ECONOMY IS GOINGTO CRATER AND THAT EVEN THOUGH

THE ARSONISTS ARE ON THE PLANEWITH US, WE HAVE TO LAND THE

PLANE.

THEN IT FELT LIKE YOU TOOK THEARSONISTS OFF THE PLANE AND GOT

THEM A MASSAGE AND A STEAKDINNER.

(APPLAUSE)(LAUGHTER)

SO THE PLANE HAS NOW LANDED ANDOUR CLOTHES STILL SMELL LIKESMOKE.

>> IT'S WORSE THAN THAT.

THEY WENT AND BOUGHT THEMSELVESA MASSAGE AND A NICE DINNER

>> Jon: ON US.>> ON US, ON US.

>> Jon: BUT WE CONTINUED TO --

>> AND THE COUNTRY WASSTILL BURNING.

>> Jon: THAT IS CORRECT.

AND CONTINUES TO THIS DAY TO LAGBEHIND IN RECOVERY IN LARGE PART

BECAUSE THE HOUSING MARKETHASN'T REALLY COME BACK.

WE HAVE THESE 8 TO10 MILLION HOMES STILL

UNDERWATER AS THEY CALL IT.

>> ACTUALLY, ACTUALLY JUST ONCOMPARISON, THE WORLD'S HAD LOTS

OF EXPERIENCE WITH FINANCIALCRISES,

THIS IS NOT LIKE A HYPOTHETICALTHING, IT'S TRAGIC.

>> Jon: NO, IT HAPPENS OVER ANDOVER.

>> IT'S DEVASTATING.

IF YOU LOOK AT THE RECORD OFTHIS ECONOMY, AND IT'S STILLVERY

HARD AND THERE IS STILL A LOT OFTRAGIC PAIN LEFT OVER FROM THIS

STUFF, BUT THE RECORD OF THISRECOVERY IS VERY GOOD AGAINST

THE LAST CENTURY OF COUNTRIESCOMING OUT OF THESE CRISES.

>> Jon: NOT FOR UNEMPLOYMENTNECESSARILY.

IT SEEMS VERY GOOD FOR THEBANKING SYSTEM AND THE DOW.

>> IT DOESN'T MATTER WHAT ITMEANS FOR THE BANKING SYSTEM.

WHAT MATTERS IS DID THEECONOMY GET GROWING AGAIN AND

DID YOU GET PEOPLE START TO COMEBACK TO WORK.

HOW QUICKLY DID THAT HAPPEN?

>> Jon: DIDN'T THAT LAG BEHINDOTHER RECOVERIES?

>> NOT AGAINST RECOVERIESFOLLOWING FINANCIAL PANICS LIKETHIS.

>> Jon: ARE YOU TALKING ABOUT1929.

>> NO, NOT JUST 1929, BUT IF YOULOOK AT THE RECORD OF -- WE HAD

A BUNCH-EMERGING MARKETS FALLOFF THE CLIFF IN THE '90s.

ALMOST GREAT DEPRESSION-LIKEOUTCOMES.

SO, IF YOU LOOK AT ABROAD MEASURE OF THOSE

THINGS. NOW THAT'S NOT TOSAY IT'S GOOD ENOUGH.

IT COULD HAVE BEEN SUBSTANTIALLYSTRONGER AND IT WASN'T STRONGER

MOSTLY BECAUSE WE HAD A LITTLEPREMATURE FEVER OF AUSTERITY IN

THIS COUNTRY AND FISCAL POLICYTURNED TOO TIGHT TOO SOON, CUT

SPENDING PRETTY SAVAGELY WHENTHE ECONOMY WAS STILL PRETTYWEAK.

>> Jon: WITHIN IN THE PUBLICSECTOR.

>> IN THE PUBLIC SECTOR IN THEGOVERNMENT AND THAT SUCKED A LOT

OF GROWTH OUT OF THE COUNTRYWHEN WHAT WE NEEDED WAS MORE

ACCELERATED LONGER.

>> Jon: I WANT TO TALK TO YOUNEXT ABOUT THE PERCEPTION THAT

THOSE WHO FEEL THE BAILOUT WASUNFAIR AS BEING POPULOUS

RAMPAGERS VERSUS THE REALITY OFTHE UNFAIRNESS OF IT.

WE'LL BE BACK WITH SECRETARYGEITHNER AFTER THE BREAK RIGHT

AFTER THIS.

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