Today’s papers reported that Tim Geithner, then head of the New York Fed, caved into demands from Goldman Sachs and other “counterparties” of failing insurance giant AIG. As a result taxpayers spent billions to keep Goldman and other Wall Street biggies from losing as AIG failed.
All this according to the report of Neil M. Barofsky, the special Inspector General for TARP, the Troubled Asset Relief Program, last fall’s $700-billion bailout of the financial markets.
In my days at the Defense Department IGs were likened to someone who went over the battlefield after the battle and shot the wounded. Barofsky’s report and the news coverage is in the best tradition of the wounded-shooting IG’s. What’s not in the headlines is that the world financial system was on the verge of collapse—within a few hours, according to Too Big to Fail, a new book about the crisis.
We should be praising Geithner and the entire Fed for rescuing the world, with little time to spare, from a repeat of the Great Depression, not quibbling that he might have done it better. Everyone could have done everything better. Big deal. I’m grateful that he did it effectively, and with no time to spare.