‘Firefighting: The Financial Crisis and its Lessons’

 

Ben Bernanke, Timothy Geithner and Henry Paulson Jr., Penguin Books, 230 pages, $16. For a few months in 2008 and 2009 many people feared that the world economy was on the verge of collapse. “Firefighting” is a brief account of that critical moment by three of the most important actors. Ben Bernanke was the chairman of the Federal Reserve Board, then and now the most influential economic position in the world. Henry Paulson Jr. was President George W. Bush’s Treasury secretary. Timothy Geithner was president of the Federal Reserve Bank of New York — another key position in the Fed system — then became Paulson’s successor under Barack Obama. There are a number of forms a book by central players in a historic episode can take. “Firefighting” could have been a juicy tell-all; it could have been an exercise in boasting about how its authors saved the world; it could have been a litany of excuses. There is some of each in this book, but it is mostly a primer on why the crisis was possible (and why, even so, almost nobody saw it coming); a ticktock on how the crisis and the financial rescue unfolded; and a very scary warning about the future. Much of what Bernanke et al have to say here is familiar to economists, but perhaps less so to the general public. Should we be worried about another crisis? Yes, the authors say, in a final chapter that is downright scary. Banking, they argue, is actually less risky than it was, thanks to financial reforms, but crises will still happen, and when they do, the firefighting abilities of policymakers will have been gravely compromised by current policy.

New York Times