The man who engineered the Bear Stearns bailout
The Bear Stearns bailout was a major break with precedent — and not just because the Fed came to the rescue of an investment bank as opposed to a retail bank.
Now, it turns out the man who did the most to bring it about wasn't Ben Bernanke, or Hank Paulson, or even anyone with a banking or economics background, but rather — well, how else to put it? — an apparatchik within America's power elite. He's one Timothy F. Geithner, president of the New York Federal Reserve Bank. Kudos to Bob Novak for unearthing this story:
Quick action last week when Bear Stearns was going under contrasted
sharply with the normally lugubrious pace of the U.S. federal
government. Ben Bernanke, Alan Greenspan's scholarly successor as
Federal Reserve chairman, of course approved the bailout (as did
Treasury Secretary Henry Paulson). But the initiator was Geithner, who
as head of the New York Fed maintains a traditional intimate
relationship with Wall Street. Neither a banker nor an economist,
Geithner left Kissinger Associates in 1988 at age 27 to go to work at
the Treasury and begin an uninterrupted career in government service
(promoted in 1999 by Treasury Secretary Robert Rubin to under secretary
for international affairs).
Novak seems a bit disturbed, as well he should, that the extraordinary precedent set by here is getting so little attention. After Bear Stearns, who's next? Lehman? Fannie? Freddie? The sky's the limit, thanks to the machinations of Mr. Geithner.
The expense of such an intervention is not a problem because the Fed,
unlike the president and Congress, can print money. The Bear Stearns
bailout, approved in private by unelected officials, contributes to
paranoid grievances on the left and right that built support for Ron
Paul's presidential candidacy.
One might quibble with Novak's use of the adjective "paranoid," but otherwise he seems genuinely sympathetic to the concerns about the Pandora's box that's just been opened. Too bad there aren't more voices in the establishment media like his.