During an NPR interview Monday, former Treasury Secretary Timothy Geithner said he and other administration officials failed to communicate how the bailout of big banks benefitted the American people.
"I don't think anybody found a way to, in that moment, to explain and describe it. And I think that's because at its core the things we had to do — the work — was going to look like we were rewarding the arsonists," he said on All Things Considered.
"And it is, I think, impossible to expect a normal human to understand that the only way to protect them from that risk was to reward the people who had taken a lot of risk with their money."
Geithner, who is promoting his memoir, "Stressed Test: Reflections Of Financial Crises," said the genesis of the financial crisis was not the creation of risky new financial products, but the failure to adequately back the risk of those products with "sticker shock absorbers."
"This was not a crisis caused by financial innovation on a massive scale. It wasn't a crisis caused fundamentally by a set of new fancy things that, in retrospect seem very risky," Geithner said. "It was a crisis caused because we had a long period of confidence that it was safe to lend a lot of money, safe to borrow a lot of money relative to income, that your house prices would never fall, that recessions would be short and shallow."
Geithner defended the Treasury's actions in protecting the banks as the best option given the situation.
"You know, it's like you're in the cockpit of the plane, your engine's burning, smoke's filling the cabin, it's filled with a bunch of people that are fighting with each other about who's responsible, you have terrorists on the plane and people want you to come out of the cockpit and put them in jail. And you have to land the plane. That terrifying core objective in a crisis is to make sure you first put out the fire," Geithner said.
"People on the right and the left both believe that there was a way to save the country from disaster and still let the system fall apart, impose losses on creditors. But in a financial panic, as we saw in '08, it's the opposite of what makes sense to protect people. In some sense, the paradox of this is the only way to reduce damage to the innocent victims of a crisis is to make sure you keep the lights on. Because if you don't keep the lights on in a financial system, then you're going to face depression-level unemployment."