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5 takeaways on Geithner and the financial crisis

Timothy F. Geithner is finally going public. Since Mr. Geithner stepped down as Treasury secretary last year, he has remained largely out of the public eye. Now, with the publication of his book, "Stress Test: Reflections on Financial Crises," to be published next week, Mr. Geithner is breaking his silence. I caught up with him last month as he was putting the finishing touches on the book. We discussed — and debated — his tenure in government and his prescriptions for solving financial crises. During a series of interviews, he was surprisingly frank. The result of those interviews — and an early look at his book — appear as the cover story in the coming issue of The New York Times Magazine.

Here are several takeaways — and surprises — from my interviews with him, from those around him and from his book. (Some details go beyond the magazine article.)

U.S. Secretary of the Treasury Timothy Geithner testifies during a hearing July 25, 2012 on Capitol Hill in Washington.
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U.S. Secretary of the Treasury Timothy Geithner testifies during a hearing July 25, 2012 on Capitol Hill in Washington.

– Mr. Geithner revealed for the first time that he was initially at odds with Henry M. Paulson Jr., the Treasury secretary at the time, and Ben S. Bernanke, the Federal Reserve chairman, about whether to bail out Lehman Brothers before the famous weekend meeting at which they sought to find a solution before the firm collapsed. "This was one of the few times during the crisis when there was any distance between Hank and me. There was even some distance between Ben and me. I sensed their advisers pulling them toward political expedience, trying to distance them from the unpalatable moves we had made and the even less palatable moves I thought we'd have to make soon." Later in the book, however, he writes: ''These disagreements did not turn out to be consequential. Hank and Ben would have the courage to change course and do what needed to be done.''

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Mr. Paulson responded: ''While we discussed and sometimes debated tactics, we were unified in our resolve to avoid the failure of systemically important institutions and that certainly included Lehman Brothers, where we worked hard right up until the end to prevent a failure.'' In his own account of the financial crisis, "On the Brink," Mr. Paulson explained why he was so insistent that the public believe there was no bailout coming. ''The New York Fed would be inviting Wall Street C.E.O.'s for a meeting, and we didn't want them to arrive thinking that we would be there waving a government checkbook.'' Mr. Paulson's book explains his tactics, which he says were intended to attract private sector money and a buyer for Lehman to maximize the chances of preventing its failure.

– Mr. Geithner said that he had many regrets. "It's clear we didn't do enough," he writes. "Before the crisis, I didn't push for the Fed in Washington to strengthen the safeguards for banks, nor did I push for legislation in Congress to extend the safeguards to nonbanks," he writes. " I wish I had figured out a way to respond more aggressively to the initial panic, and to sustain the initial power of our fiscal stimulus. I wish we had expanded our housing programs earlier, to relieve more pain for homeowners."

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– Mr. Geithner's critics may latch on to this anecdote: He says he felt uncomfortable deriding Wall Street, so much so that when he was handed talking points for a press statement he was supposed to make while sitting next to President Obama in the White House to express outrage at banker bonuses, he refused. "I skimmed the outrage I was expected to express. I'm not very convincing as any angry populist, and I thought the artifice would look ridiculous. 'I'm not doing this,'" he wrote. "Instead, I sat uncomfortably next to the president while he expressed outrage." He later explained. "I feared that the tougher we talked about the bonuses, the more we would own them,'' Mr. Geithner writes, ''fueling unrealistic expectations about our ability to eradicate extravagance in the financial industry.''

– Mr. Geithner spent much of his time in the Treasury Department talking tough about ending "too big too fail" — eradicating the possibility of bank bailouts in the future — but he said he never believed it was a practical goal to eliminate it completely. "'Does it still exist?'' he said. ''Yeah, of course it does.'' Ending "too big to fail" was ''like Moby Dick for economists or regulators. It's not just quixotic, it's misguided.''

– Mr. Geithner says he never wanted to be the Treasury secretary, and it was a continuing struggle with his wife, Carole, who moved to Washington with the family only to move back two years later. "I remember the moment,'' Carole Geithner recounted about when she learned he was taking the job. ''He walked in the door, and I just saw it in his eyes. He couldn't tell me verbally, because we had a friend visiting who just before said, 'I don't think you need to worry, I really think [the job] is gonna go to Larry Summers.' And we had to wait till everyone went to bed, and he told me, but I could tell just when he walked in. And there's this pit in your stomach.'' She continued: ''I'd already had a taste of the fishbowl, and I'd also seen other peoples' relationships, what happens to them when they're in the fishbowl. So I really had a sense of dread.''

—By Andrew Ross Sorkin

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