Stress Test

  I am recognizing here the individuals most central to the design of the financial rescue and the reforms, but we also had a superb group of colleagues managing the complexity of tax policy, our financial sanctions regime, the government’s payments system, the Treasury borrowing strategy, and a great deal of other important work. They are too numerous to mention, but I am grateful to them all and proud to have been their colleague.

  Richard Gregg, a thirty-five-year Treasury veteran and the most senior career official, who agreed to return from retirement as fiscal assistant secretary, once stopped in my office to tell me that this was the most impressive team at Treasury he had ever seen. What he found remarkable was not just their competence, but how effectively they worked together.

  As President Obama took office, in the eerie quiet of those empty hallways on the third floor of the Treasury building, twenty-two Obama appointees came to work at Treasury that first day, when I was still awaiting confirmation: Marti Adams, Sarah Apsel, Sara Aviel, Stephanie Cutter, Al Fitzpayne, Paige Gebhardt, Amias Gerety, Mary Goodman, Michelle Greene, Julie Herr, Matt Kabaker, Jenni LeCompte, Jacob Leibenluft, Pat Maloney, Andrew Mayock, Brian Osias, Mark Patterson, Lee Sachs, Ian Solomon, Gene Sperling, David Vandivier, and Kim Wallace.

  Six of them stayed at Treasury until the end of President Obama’s first term—Al Fitzpayne, Amias Gerety, Julie Herr, Jenni LeCompte, Pat Maloney, and Mark Patterson—and several have stayed into the second term.

  Steve Shafran, Neel Kashkari, and Seth Wheeler, who had all worked for Hank Paulson, did me and their country a great favor by agreeing to stay on for a time and continue the work they had begun in the fall of 2008.

  Lee Sachs left his work and family in New York to come to Washington in November 2008 and oversee the transition from the Bush to the Obama Treasury. He introduced me to Matt Kabaker, and together they formed the core of the group formulating that next stage of the financial strategy.

  Lee ran the coordinating process with the Fed and other regulators. He also managed the diplomacy with the rest of the economic team, so that they had the right sense of involvement without ceding too much influence. He oversaw the design of the full slate of new programs we deployed in 2009 to get the financial system working again. Careful and unassuming, always worried about what might go wrong, Lee was the decisive factor in the success of those programs.

  Mary Goodman, who worked for Larry Summers during the transition and then at the White House, was a great source of ideas and judgment.

  Lew Alexander, formerly of the Fed’s international staff, served as the economic conscience of the Treasury financial team.

  Jeffrey Goldstein and Mary Miller served successively as undersecretaries for Domestic Finance, and backing them up were Michael Barr, Matthew Rutherford, Cyrus Amir-Mokri, and Richard Gregg, the “dean” of the Office of Domestic Finance. I could not have had a better team of market experts as we dealt with so many difficult challenges, including the insanity of multiple debt-ceiling impasses.

  Also in Domestic Finance, Herb Allison ran the TARP programs in the first two years and was succeeded by Tim Massad; together they and their team earned four clean audits. They ably managed our investments, recovering every dollar and even generating billions of dollars of returns for the taxpayer.

  Sam Hanson, David Scharfstein, Jeremy Stein, and Adi Sunderam took leave from Harvard to advise Larry and me and were an enormously valuable source of ideas.

  George Madison and then Chris Meade led a very strong group of lawyers, including Peter Bieger, Bernie Knight, Laurie Shaffer, and Chris Weideman.

  The housing team, which over those four years included Michael Barr, Tim Bowler, Phyllis Caldwell, Darius Kingsley, Michael Stegman, and Seth Wheeler, designed and implemented a creative mix of programs that helped millions of struggling homeowners, despite the terribly frustrating constraints they faced.

  The auto team, led by Steve Rattner and Ron Bloom, with a lot of help from Brian Deese at the National Economic Council, conceived and executed a very successful restructuring of General Motors and Chrysler, saving hundreds of thousands of jobs and restoring both firms to profitability.

  Neal Wolin, who parachuted in at a fraught time as deputy secretary, was my closest adviser on the most important challenges we faced, all while helping to manage the vast Treasury empire. He ably represented Treasury around the world and across the street in the White House situation room, where the National Security Council met constantly.

  Neal led the financial reform negotiations on the Hill, with Michael Barr and Diana Farrell, aided by the extremely capable Amias Gerety as well as Laurie Schaffer’s excellent team of lawyers. And Neal oversaw the tortured, complicated Dodd-Frank implementation process, including building the new Financial Stability Oversight Council and the Office of Financial Research.

  Jim Millstein, Treasury’s chief restructuring officer, took on the seemingly impossible task of recovering the taxpayers’ investments in AIG. With his help, and that of the NY Fed team led by Sarah Dahlgren, the taxpayers ultimately made a $23 billion profit on those investments.

  Two distinguished economists, Alan Krueger from Princeton and Jan Eberly from Northwestern, served ably as assistant secretaries for economic policy. John Bellows, who had lent his economic genius to the 2008 Obama campaign, was a great source of advice on the fiscal wars.

  Lael Brainard, with her signature mix of toughness and skill, led Treasury’s international team, and in particular our policy toward the European financial crisis and China. Charles Collyns and Marisa Lago were her top lieutenants. Ted Truman and Mark Sobel came up with much of the G-20 strategy in the financial crisis and laid the groundwork for international coordination on regulatory reform. Christopher Smart and Brad Setser carried much of the burden of the European crisis.

  The relentless and amazing Gene Sperling was incredibly valuable to me, first as counselor at the Treasury for two years, and then after the President asked him to succeed Larry Summers as head of the NEC.

  After the fierce and talented Stephanie Cutter ascended to the White House, Jenni Engebretsen LeCompte led Treasury’s communications staff, with her wonderful combination of calm and skill, working under great duress to explain and defend our strategy to a skeptical public.

  Jake Siewert, who served as President Clinton’s last press secretary at the age of twenty-eight, lent us his remarkable talent as a counselor for twenty-six months, providing his exceptional candle power and creativity, and his wry humor, to everything consequential.

  Michael Mundaca served as my assistant secretary for tax policy, followed by Emily McMahon and Mark Mazur. They capably handled a vast and complex array of tax issues during the crisis and the fiscal debates, and in development of proposals for tax reform.

  Kim Wallace, later succeeded by Al Fitzpayne, served as assistant secretary for legislative affairs. They guided me around the dangers, toils, and snares of the Hill and absorbed nonstop incoming fire, yet in keeping with the Treasury way, they were always magnanimous and never let the stress show.

  Sara Aviel was my invaluable adviser for the most grueling part of the President’s first term. Self-appointed progressive conscience of the Treasury, she worked the longest hours, traveled on every trip, and brought her exceptionally high standards to helping to run the Treasury. After becoming deputy chief of staff, Wally Adeyemo later took on much of the travel burden with his characteristic cool efficiency.

  Shirley Gathers and Cheryl Matera ran my office, always present and thoughtful, extremely capable, with seventy years of combined history at Treasury. They took care of me, looked out for me, during endless days and weekends, with their special style of smiling, reassuring competence.

  Julie Herr, who had been a colleague in the Clinton Treasury Department, returned to run the busy scheduling and advance office. Her judgment, unflappability, mastery of logistics, and knowledge of protocol ensured that every foreign trip and every event we hosted at Treasury went off without a hit
ch. She was ably assisted by Daniel Balke, Bhumi Shah, Elizabeth Ashwell, and a team of terrific advance people whose work was unseen and unglamorous but deeply appreciated.

  Mark Patterson served as chief of staff—enforcer of the “no jerks, no peacocks, no whiners” regime, vital counselor on every issue, master of strategy on the debt limit and the fiscal wars, patient adviser and protector to me.

  I am particularly grateful to the men and women of the Secret Service who protected the employees of the Treasury during my tenure, and to those who served on my Secret Service detail. Sean McCarthy, Curtis Nelson, and Dan Connolly led the teams that stood with me twenty-four hours a day, in cities around the world, during those four years. Jim Gorman, Greg Ligouri, Chris Emery, Jay Nasworthy, Todd Rassas, and Chris Gaskell were all part of that capable team of protectors. George Morgenthaler, a former sniper, was at the helm of the armored Suburban most of my Treasury time. We had some fun together. I am deeply honored by their service to me and my family.

  A final thanks to some friends who offered me shelter and food during my first year away from home. Dan Zelikow and Marcelo Sanguinetti let me stay in their beautiful home for most of nine months. Merna and Joe Guttentag also lent me their apartment for several weeks. Blair Downing, who was the first person I met in my first job at the Treasury in 1988, brought me multiple dinners without ever being asked.

  Public service is filled with opportunities to make a positive difference, but it comes with challenges. I did it for twenty-five years because I believed in the cause and loved the craft of economic policy. But that would not have been true without the people around me who chose to devote some or all of their careers to serving their country. The commitment and the public spiritedness of my colleagues in government are, for me, what made it truly rewarding and worthwhile. I will always be grateful to them for their dedication and their friendship.

  My family at home in Bethesda, Maryland, around 1966. My parents, Deborah and Peter; my sister, Sarah; and my identical twin brothers, Jonathan and David. I went to Wood Acres Elementary School, in the same neighborhood where Carole and I later lived after we moved back from Japan, and the same school our children attended. (Courtesy of the Geithner family)

  Formative years in New Delhi, India, where we lived from 1968 to 1973. I attended the American International School from second through sixth grade. (Andrew Ward)

  With Carole Sonnenfeld at our Dartmouth graduation in June 1983. (Courtesy of the Geithner family)

  One of many summer vacations spent in Orleans, Massachusetts, on Cape Cod, with Carole and our children, Benjamin and Elise, 1996. (Courtesy of the Geithner family)

  Treasury Secretary Bob Rubin takes a break from the annual World Bank Group–International Monetary Fund meetings, September 1997 in Hong Kong, to swear me in as assistant Treasury secretary for international affairs, as Undersecretary David Lipton looks on. (Courtesy of the Geithner family)

  With international affairs colleagues Ted Truman (seated, foreground) and Mark Sobel (standing) in late 2000, in the Treasury Department’s Andrew Johnson Suite—my office as undersecretary for international affairs and the temporary executive office used by Andrew Johnson in 1865 after he assumed the presidency following the assassination of Abraham Lincoln. (Courtesy of the Geithner family)

  With Federal Reserve Chairman Ben Bernanke at the Fed’s annual economic symposium, Jackson Hole, Wyoming, August 22, 2008. (Andrew Harrer/Bloomberg via Getty Images)

  Meeting with Secretary Hank Paulson in his office at Treasury, after I had been named President-elect Obama’s nominee for secretary, during the transition between the Bush and Obama administrations, November 25, 2008. (Courtesy of the U.S. Department of the Treasury)

  The President’s marathon meeting on the financial strategy on Sunday, March 15, 2009, in the Roosevelt Room of the White House. With advisers, from left: Gene Sperling, Larry Summers, me, Christy Romer, Lee Sachs, Jeremy Stein, Sam Hanson, Mary Goodman, Stephanie Cutter, and David Axelrod. (White House/Pete Souza)

  Testifying before Congress amid the public outrage about the AIG bonuses, with Federal Reserve Chairman Ben Bernanke and Federal Reserve Bank of New York President and Chief Executive Officer Bill Dudley, March 24, 2009. (Associated Press)

  Briefing the President aboard Air Force One en route to London for the first G-20 Leaders Summit of his administration, with National Security Advisor Tom Donilon, March 31, 2009. (White House/Pete Souza)

  With President Obama in London at the meeting of the G-20, where the major economies of the world committed to avoid one of the central mistakes of the Great Depression by working together to address the crisis, April 2, 2009. (White House/Pete Souza)

  Larry Summers and I face the President in the Roosevelt Room of the White House, January 14, 2010. (White House/Pete Souza)

  President Obama congratulates Senator Chris Dodd (D-Conn.) and Representative Barney Frank (D-Mass.) after signing the Dodd-Frank financial reform bill in Washington, July 21, 2010. (Associated Press)

  Presenting Chinese Vice Premier Wang Qishan with an authentic New York City Fire Department hat—a reference to the “firefighter” nickname that the vice premier earned in China for being the “go-to guy” for handling tough issues like SARS, the Olympics, and Guangdong’s financial crisis in the 1990s, Washington, January 18, 2011. (Courtesy of the U.S. Department of the Treasury)

  Before the House Budget Committee on Capitol Hill—one of sixty-seven congressional hearings in which I testified as Treasury secretary, February 16, 2011. (Jim Watson/AFP/Getty Images)

  Meeting with the President in the Oval Office of the White House, April 9, 2012. (White House/Pete Souza)

  With the national security team at the arrival ceremony for South Korean President Lee Myung-bak on the South Lawn of the White House, October 13, 2011. (Kevin Dietsch–Pool/Getty Images)

  Meeting with German Finance Minister Wolfgang Schäuble during his vacation in Westerland, on the North Sea island of Sylt, July 30, 2012. (Associated Press)

  Gathered with the Treasury senior staff and a few special guests in the secretary’s small conference room for the final morning meeting of my tenure, January 25, 2013. Standing, left to right: Marisa Lago, Cyrus Amir-Mokri, Dick Berner, Wally Adeyemo, Charles Collyns, David Cohen, and Sara Aviel. Seated, left to right: Neal Wolin, Tim Massad, Leslie Ireland, Jenni LeCompte, Mark Patterson, Matt Rutherford, Gene Sperling, Mark Mazur, Jan Eberly, Carole Geithner, Chris Meade, me. (Courtesy of the U.S. Department of the Treasury)

  At my Treasury desk, August 21, 2009. (Courtesy of the U.S. Department of the Treasury)

  ACKNOWLEDGMENTS

  Charlie Rose asked me once when I was Treasury secretary if I was planning to write a book. I was thinking about it, but I was reluctant, and I told him then that I wasn’t the kind of person who liked to sit in a room alone and write. I also didn’t like the idea of writing in the first person about a set of decisions that so many others were involved with. I was concerned about the frailty of memory, the temptation to rely on the wisdom of hindsight, to reimagine events in a more favorable light. I did not think I had the patience to sit still long enough to do it. And I am not a natural writer.

  But I thought about it more and decided I should try to write something useful. I was fortunate to have a lot of help.

  Richard Haass gave me the great gift of an office at the Council on Foreign Relations and generous support for me and two colleagues. This was the second time I was able to benefit from the Council’s graces; the first time was in early 2001, when I left the Treasury after the end of President Clinton’s administration.

  Bhumi Shah—always calm and cheerful—agreed to come with me from Treasury and continue to apply her remarkable mix of management and organizational skills to my complicated life.

  Robert Barnett did me the favor of guiding me through the process of presenting a book to the publishing world and advising me on a range of other challenges, with his famous and rare mix of practical wisdom.
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  I am grateful to Molly Stern and Vanessa Mobley at Crown for agreeing to take on this book and to Vanessa for her support and guidance, and for her many valuable contributions as editor.

  Michael Grunwald agreed to join me as a collaborator, taking leave from Time, and worked valiantly to make the dark and complex mess of financial crises compelling and accessible. We didn’t know each other, and he had not covered the financial crisis from beginning to end, but I had read and admired his work. He was smart and wonderfully well-prepared, and brought a fresh and interesting perspective that was exceptionally valuable. He was relentless in pushing me to explain better the choices we made and the nature of our debates, and to add some life and color to our failures and our successes.

  Charlie Anderson, who had worked closely with me at Treasury, did extensive analysis and research on the economics and the politics of this financial crisis, and helped make sure we were grounded in fact, unpeeling the layers of myth and misperception. He ran the exacting, complicated process of producing a book with grace and skill.

  Charlie convinced two other talented former Treasury colleagues, Mike Schmidt and Ian Samuels, to join us. They provided excellent research support, with Schmidt delivering especially thoughtful insights on financial reform and Samuels bringing his oracular knowledge of financial markets to bear on disentangling the story of the crisis.

  Sam Hanson and Adi Sunderam, both professors at Harvard Business School, who had each spent a year in the administration working for Larry Summers and me, reviewed the book as we wrote it, assessing the economics of our explanations, helping to point out the weaknesses in my framework of lessons and ideas for better crisis prevention and response.