Midway through Timothy Geithners Stress Test, the former treasury secretary describes a late-2008 conversation with the then president-elect. Obama wanted to discuss what he should try to accomplish. Geithners reply was that his accomplishment would be preventing a second Great Depression. And Obama shot back that he didnt want to be defined by what he had prevented.
Timothy Geithner; drawing by John Springs
Its an ironic tale for Geithner to be telling, although its not clear whether he himself realizes just how ironic. For Stress Test is meant to be a story of successful policybut that success is defined not by what happened but by what didnt. America did indeed manage to avoid a full replay of the Great Depressionan achievement for which Geithner implicitly claims much of the credit, and with some justification. We did not, however, avoid economic disaster. By any plausible accounting, weve lost trillions of dollars worth of goods and services that we could and should have produced; millions of Americans have lost their jobs, their homes, and their dreams. Call it the Lesser Depressionnot as bad as the 1930s, but still a terrible thing. Not to mention the disastrous consequences abroad.
Or to use one of the medical metaphors Geithner likes, we can think of the economy as a patient who was rushed to the emergency room with a life-threatening condition. Thanks to the urgent efforts of the doctors present, the patients life was saved. But while the doctors kept him alive, they failed to cure his underlying illness, so he emerged from the procedure partly crippled, and never fully recovered.
How should we think about the economic policy of these past seven or so years? Geithner, while acknowledging the disappointments, would have us view it mainly as a success story, because things could have been much worse. And the middle third of his book, a blow-by-blow account of the acute phase of the financial crisis, carries the implicit and sometimes explicit message that things would indeed shave been much worse but for the heroic actions of a handful of high officials, himself included.