Geithner in Book Says Obama Aides Weighed Nationalizing Banks

Thursday, 08 May 2014 03:09 PM

 

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Former Treasury Secretary Timothy F. Geithner said in his new book that members of the Obama administration “talked openly” about nationalizing banks such as Citigroup Inc. in the aftermath of the financial crisis, according to an article in the New York Times Magazine.

Geithner also said he refused to fire Kenneth Lewis, then chief executive officer of Bank of America Corp., according to the report today. Geithner’s book, “Stress Test: Reflections on Financial Crises,” is to be published May 12.

Geithner, 52, was Treasury secretary in President Barack Obama’s first term and one of the key officials grappling with the worst financial crisis since the Great Depression. In 2008, as president of the Federal Reserve Bank of New York, he was instrumental in decisions to bail out insurer American International Group Inc. and allow Lehman Brothers Holdings Inc. to fail.

Geithner was concerned that then-Treasury Secretary Henry Paulson’s public insistence that taxpayers not bail out Lehman Brothers could undermine the government’s ability to pursue a rescue if one were needed, the Times reported, citing “Stress Test.” Geithner preferred to send a message that a bailout might be available, which might have made the investment bank more desirable to a potential buyer.

“Those disagreements did not turn out to be consequential,” Geithner wrote, according to the Times. He praised Paulson and then Fed Chairman Ben S. Bernanke for their “courage.”

Geithner, who joined private-equity firm Warburg Pincus LLC this year, said in the book that he and Lawrence Summers, then head of the president’s National Economic Council, initially opposed the Volcker rule ban on proprietary trading and his support was “certainly political.”

© Copyright 2014 Bloomberg News. All rights reserved.

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