Geithner Boasts: ‘We Stretched the Fed’s Authority Well Beyond What Most Normal Humans Were Comfortable With’

SORKIN I want to ░░░░░░░░ about one of the ░░░░░░░░ issues we have not ░░░░░░░░ yet and is probably ░░░░░░░░ of the big mysteries ░░░░░░░░ not debates that continues ░░░░░░░░ linger 10 years later ░░░░░░░░ that is around Lehman ░░░░░░░░ I want to read ░░░░░░░░ this is the editorial ░░░░░░░░ op ed New York ░░░░░░░░ the morning after Lehman ░░░░░░░░ failed I should tell ░░░░░░░░ the Wall Street Journal ░░░░░░░░ ed page was almost ░░░░░░░░ to this This is ░░░░░░░░ the paper said It ░░░░░░░░ oddly reassuring that the ░░░░░░░░ Department and Federal Reserve ░░░░░░░░ Lehman Brothers fail did ░░░░░░░░ subsidize the distress sale ░░░░░░░░ Merrill Lynch to Bank ░░░░░░░░ America and tried to ░░░░░░░░ up loans for the ░░░░░░░░ International Group the troubled ░░░░░░░░ rather than making a ░░░░░░░░ themselves Government intervention would ░░░░░░░░ been seen either as ░░░░░░░░ sign of extreme peril ░░░░░░░░ the global financial system ░░░░░░░░ of extreme weakness on ░░░░░░░░ part of federal regulators ░░░░░░░░ it s an interesting ░░░░░░░░ ed because going into ░░░░░░░░ weekend the conventional wisdom ░░░░░░░░ imagine even in the ░░░░░░░░ was that if Lehman ░░░░░░░░ failed the market was ░░░░░░░░ for it There is ░░░░░░░░ You say no GEITHNER ░░░░░░░░ mean let s let ░░░░░░░░ just go back a ░░░░░░░░ bit because it is ░░░░░░░░ to go back In ░░░░░░░░ March indecipherable and we ░░░░░░░░ the judgment then very ░░░░░░░░ judgment we made then ░░░░░░░░ is that the system ░░░░░░░░ so fragile that we ░░░░░░░░ not confident it could ░░░░░░░░ the effects of default ░░░░░░░░ substantial financial institution in ░░░░░░░░ moment And we decided ░░░░░░░░ was in the interest ░░░░░░░░ the country to do ░░░░░░░░ we could to reduce ░░░░░░░░ risk But we also ░░░░░░░░ that for a weak ░░░░░░░░ bank that lost the ░░░░░░░░ of the market undergoing ░░░░░░░░ run business is bleeding ░░░░░░░░ that a fed alone ░░░░░░░░ no option to save ░░░░░░░░ by lending that what ░░░░░░░░ could do was try ░░░░░░░░ find a willing buyer ░░░░░░░░ enough to provide a ░░░░░░░░ of capital in guarantees ░░░░░░░░ for them to get ░░░░░░░░ this to be absorbed ░░░░░░░░ the larger hands In ░░░░░░░░ Lehman case we made ░░░░░░░░ same judgment We thoought ░░░░░░░░ would be although the ░░░░░░░░ had a lot of ░░░░░░░░ to adjust to the ░░░░░░░░ of Lehman failing the ░░░░░░░░ was much more fragile ░░░░░░░░ was larger We thought ░░░░░░░░ was necessary again to ░░░░░░░░ and do everything we ░░░░░░░░ to reduce the risk ░░░░░░░░ fail but we thought ░░░░░░░░ only option was to ░░░░░░░░ to find a willing ░░░░░░░░ And ultimately we failed ░░░░░░░░ that Why do we ░░░░░░░░ in that Because we ░░░░░░░░ willing to make it ░░░░░░░░ incent for willing buyer ░░░░░░░░ acquire it It fell ░░░░░░░░ Lehman was much weaker ░░░░░░░░ the system was much ░░░░░░░░ fragile So the universe ░░░░░░░░ plausible buyers was much ░░░░░░░░ limited And there was ░░░░░░░░ really strong enough to ░░░░░░░░ willing to step in ░░░░░░░░ with the prospect of ░░░░░░░░ assistance And that left ░░░░░░░░ with no choice But ░░░░░░░░ thought it was going ░░░░░░░░ be bad and it ░░░░░░░░ it was it was ░░░░░░░░ it was much worse ░░░░░░░░ we thought and we ░░░░░░░░ And you know it ░░░░░░░░ a good lesson It ░░░░░░░░ good you begin to ░░░░░░░░ that people thought it ░░░░░░░░ a big mistake for ░░░░░░░░ to intervene to prevent ░░░░░░░░ failing And the predominant ░░░░░░░░ prevailing even September with ░░░░░░░░ system much closer indecipherable ░░░░░░░░ that it would be ░░░░░░░░ mistake to prevent Lehman ░░░░░░░░ failing And there was ░░░░░░░░ relief when we were ░░░░░░░░ thought we chose not ░░░░░░░░ They were they were ░░░░░░░░ in their belief because ░░░░░░░░ was our view to ░░░░░░░░ to save them Our ░░░░░░░░ was our needs at ░░░░░░░░ point And remember we ░░░░░░░░ had stretched the Fed ░░░░░░░░ authority well beyond what ░░░░░░░░ normal humans were comfortable ░░░░░░░░ And that had proven ░░░░░░░░ inadequate to save the ░░░░░░░░ from the risk of ░░░░░░░░ panic from tipping into ░░░░░░░░ because we learned something ░░░░░░░░ most countries learn overtime ░░░░░░░░ is that in the ░░░░░░░░ you need a more ░░░░░░░░ mix of guarantees and ░░░░░░░░ to stop a run ░░░░░░░░ you know ultimately Congress ░░░░░░░░ his wisdom largely to ░░░░░░░░ credit of Hank and ░░░░░░░░ gave us a sufficient ░░░░░░░░ of tools that we ░░░░░░░░ avert the risk of ░░░░░░░░ Great Depression but not ░░░░░░░░ enough to give us ░░░░░░░░ authority to prevent all ░░░░░░░░ damage.”