Busted: Bankers and The Global Economy

March 29, 2009

Geithner Admits Fed Role in Economic Collapse

geithner charlie roseThe Obama administration wants to add a glimmer of hope to the global fiscal crisis that started with corrupted U.S. corporate policy and banking investment greed. Despite efforts of many to put lipstick on the ongoing economic recession and remove blame from corporate bankers and government, in a recent interview with Charlie Rose, Tim Geithner admitted

“a deepening recession. You’re seeing the recession intensify here and really around the world. You know it started here, but the world is sort of catching up. That’s putting more pressure on business and the financial system as we see it. We start with this deepening recession, intensifying housing crisis, a deep fiscal hole in the financial system that’s in some ways very damaged. Parts of it are working well, parts of it are still very damaged. It’s going to take a lot to work through this. Again, we start with a — just a deep mess. It is our obligation to clean it up and to fix it…”

“I want to be clear. Again, we start with a mess, a deep mess, made worse by the deepening recession. And these things are pitting on themselves. And it’s very important for people to understand, it’s going to take some time to work through this. But what I want people to know is that we’re going to do what’s necessary to get through it. And these things will get traction. They will start to help unfreeze things, and they will help lay the foundation for recovery.”

“They (the Fed) projected that optimism in the future and that created the conditions where people took more risks than they should have, and they, frankly, didn’t pay enough attention to the possibility that when this ended, came apart, that the consequences would be as damaging as they did. Now, I spent almost every day from the first time I walked into the New York Fed about five years ago working with my colleagues on ways to try to make the system stronger so we were going to be better able to withstand the kind of pressures when this came apart, and we did some very important, powerful things, but many of the things didn’t have enough traction, and we share with really all parts of the financial oversight bodies here and around the world a deep responsibility for not having done more and a really deep obligation for trying to fix this quickly and put in place the kind of reforms to prevent this from happening again.”

“Our system was not designed to sustain a shock, a crisis of this magnitude. It’s the tragic failure of financial regulation in this country. It was just not designed to tolerate anything of this magnitude. The critical test of any financial system in some senses is how you deal with stress and shock because you want a system that’s going to be strong and resilient enough to handle almost anything it could face. And this system didn’t meet that test because we had a regulatory framework that was designed, largely, 90 years ago and did not adapt to take account of these huge changes in the structure of our financial system.”

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