You can’t accuse Treasury Secretary Tim Geithner of thinking small.
Last June, then Treasury Secretary Henry Paulson held a meeting of top policy makers, including Geithner, to discuss the worsening financial crisis.
Paulson asked the group what emergency powers the government might want to end the ongoing meltdown.
Geithner, then head of the New York Fed, shocked his colleagues by proposing that Congress be asked to give the president power to guarantee all debt in the banking system — trillions of dollars. That’s what two participants at the meeting told The New York Times.
Not surprisingly, the idea didn’t go anywhere, as others in the room pointed out it could require taxpayers to shell out the money and would amount to a political atom bomb.
“People thought, ‘Wow, that’s kind of out there,’” John Dugan, comptroller of the currency, who heard about the idea afterward, told The Times.
Geithner was a bit coy about his idea when The Times questioned him recently.
“I don’t remember a serious discussion on that proposal then,” he says.
Of course, the Federal Reserve and Treasury have taken steps since then to guarantee huge amounts of debt anyway, ranging from mortgage securities to credit card loans. And the government has since stepped in on insurance companies and automakers in a huge way, brokering reforms unthinkable in a normal economy.
So, in a sense, Geithner got his wish.
Some experts, have criticized all the government intervention, saying it merely bails out fat cats.
Propping up the current economy isn't working, and the Obama administration's moves to pump more billions into it will cause hyper-inflation and drive down the value of the dollar, says Euro Pacific Capital head Peter Schiff.
"As a nation, we go deeper into debt," Schiff told the Christian Science Monitor.
"What we need to do is get out of debt. We need to let the phony economy contract."
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