As president of the New York Fed, Geithner has in effect been the central bank's chief representative to Wall Street and the international financial community. As the crisis escalated over the last 15 months, he became one of the chief architects of the Fed's response.
In March, he helped orchestrate the shotgun marriage of investment house Bear Stearns to JPMorgan Chase & Co., a deal that required the Fed to take over the management and risk of nearly $30 billion of troubled assets. In September, he sought but failed to find a buyer for investment bank Lehman, paved the way for Bank of America Corp.'s abrupt purchase of Merrill Lynch & Co. and helped design what amounted to a government takeover of insurance giant AIG.
That deal was supposed to have the Fed lending AIG $85 billion in return for nearly 80% of the firm. But AIG's fortunes continued to sag, requiring a second and then a third infusion that has boosted Washington's commitment to the company to about $125 billion. Some outside observers had wondered whether problems with the AIG deal might sour Geithner's chances to lead Treasury.
Throughout the crisis, Geithner has consistently pushed for aggressive intervention in companies' troubles and forcefully defended the actions of Bernanke and Paulson, including in an exchange of speeches with Volcker, a former Fed chairman and Bernanke critic.
"The current episode has a basic dynamic in common with all past crises. As market participants have moved to reduce exposure to further losses, to step on the brake, the brake became the accelerator, amplifying the shock," Geithner said of the worsening credit impasse in March.
"The speed and agility with which public-policy makers and private financial institutions respond to the continuing pressures in a rapidly evolving environment will determine how quickly and how smoothly market conditions return to normal -- and how rapidly the risks to the economic outlook are mitigated."
Jan Hopkins, president of the Economic Club of New York, said Geithner has been "at the very center of the crisis."
"Every other player, whether banker or central banker or reporter, wants to talk with him," Hopkins said.
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jim.puzzanghera@latimes.com
peter.gosselin@latimes.com
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U.S. seizes S&Ls Downey, PFF
The Southland banks, felled by bad loans, will continue to operate as part of U.S. Bank of Minneapolis. BUSINESS, C1
