Tim Geithner

Tim Geithner gets the nod for the [Treasury] secretary job. Why him? ...

... I actually think he was the perfect choice. We were in the middle of the worst financial crisis since the Great Depression, and as far as I'm concerned and in my experience, there's nobody better to handle that crisis than Tim Geithner was at that time.

He had been one of the key people in wrestling with all the international financial crises back in the '90s. He had been the president of the New York Fed and dealing with these complicated problems from that seat. That experience is invaluable. These things are very hard to learn on the fly, frankly, and I think that experience couldn't be replicated.

What's the philosophy that Geithner has that sent him down this path?

I think it was what economists and sociologists call "cognitive capture." He thought along the mind-set of the banks, and if you're a banker, the most important thing in the world is the survival of your bank. Not the banking system, but your bank. That became the issue number one.

They were told: If you let the shareholders, the bondholders go, it will cause havoc, and we'll never be able to raise capital again. Nonsense. Countries have had their financial system go into turmoil. Banks have gone bankrupt. If it's a profitable activity to lend, which it is, money will come in. ...

How surprising is it to you when Obama takes power that he names Geithner as the Treasury secretary, and he brings back [Larry] Summers? ...

He was told that appointing this team would present a problem, because even if they gave the right advice, it will be tainted. People will see it as reflecting the interest of the banks and people who were linked to the deregulation, to the flawed policies. You're bringing in the same plumber that caused the problem. ...

Of course the real risk was that they would not give the right advice, and that would turn out to be the case. I wasn't surprised, because at that point it was already clear where he was getting his advice from, who he was listening to.

The only thing that was perhaps a little bit of a surprise was the disjuncture between "Change you can believe in," the slogan, and the team that was put in place, which was, yes, change a little bit from the Bush team, but only a little bit.

What happened? His Cooper Union speech, his speech that he did to NASDAQ the year before were all very progressive in tone, were very much on the fact that we had gone too far, that we had deregulated markets that need to be dealt with. ... Why the change? ...

Remember, the Cooper Union speech was made during the primary and before he became chosen as the Democratic nominee. It was also done before the collapse of Lehman Brothers, and it was at that juncture that the advice came in very strongly from Wall Street: Don't rock the boat. Don't do anything that would disturb the financial markets, because that will have dire consequences for the economy.

Not a surprise that [if] a majority of your advisers come from financial markets, you see things through the perspective of the financial markets. If you had as your advisers people from the real estate sector, if you had from a group of representatives of homeowners, you would have gotten a very different set of advisers who would say, "The first thing you need to do is to resuscitate the real estate market," or, "The first thing you do is to save homeowners from losing their homes." ...

Despite the fact that he's got [Former Fed Chair Paul] Volcker standing behind him, that [Austan] Goolsbee is his right-hand man, that [Former SEC Chair William] Donaldson is there, that [UBS CEO Robert] Wolf is there, that other people that seem to be more progressive in their attitudes are surrounding him. Why do you think that is? ...

I think there is a growing sense among people in a variety of different fields that his gut reaction is don't-rock-the-boat conservative. That doesn't mean that he's not liberal on many issues, but it's moving in the liberal tradition and a liberal direction in a very slow, step-by-step way. ...

[Treasury Secretary Tim] Geithner takes some of the blame from people that think that that is indeed the case, and that the rest of Main Street didn't receive the same benefits as Wall Street did. What was his philosophy? The way it's been defined is a do-no-harm philosophy. And some people say to some extent it was coddling the banks, because the necessity was to save the banks at that point.

I think Tim's kind of policy framework and views on this have not been well understood. It was never his view that we should bail out the banks to save Wall Street. His view was that it's very hard for Main Street to be successful if Wall Street is shut down.

There are credit flows from financial markets on Wall Street and across the globe to the smallest business on Main Street. The idea was always about those kinds of interconnections, that if the credit system is shut down, there's going to be some small, tiny manufacturer there off of Main Street who won't be able to roll over a loan and restock their inventory.

And I think that that fairly simple connection was never made such that it looked like all we wanted to do was to help these banks become profitable again. But the Wall Street/Main Street credit connection was always at the heart of our thinking.

Many of you leave in 2010. The team leaves. Geithner is the last man standing. ... What does it say that Geithner is still there?

I think he's got more stamina than anyone else I know. Honestly, I don't know how he does it. It was an exhausting time, a tense time, and the fact that he's able to stay there and continue to do what he does is remarkable and impressive.

And the fact that the president wanted him to stay on, ... what does it say about Obama's belief in the program and in Geithner?

... In all my interactions with them both, it was clearly quite a strong relationship. They obviously have a lot of respect for each other.

The president did say toward the end there that the results of this financial stability plan, which really was the secretary's plan, which had many more detractors than supporters to say the least, worked in ways that very few would have imagined.

I think that exercise and that result built a tremendous amount of confidence in the secretary. ... We, the secretary, the president set out to put in place a set of plans that would stop the economy from rolling over, help on the employment situation, that would make borrowing more affordable for households and businesses across the spectrum and then would have the least cost to the taxpayer.

On every one of those fronts, I think the results are much better than anyone anticipated. Now, unemployment is still way too high. No one is satisfied with that, and I wouldn't suggest for a minute that we should be. I know no one on the inside is resting on their laurels on that.

But if you take each one of those four criterion, borrowing costs are lower than they've been since well before the financial crisis struck. This is for households, businesses, municipalities, etc.

In terms of the cost to the taxpayer, the IMF [International Monetary Fund] did a study in 2009 or '10, and they examined the 42 systemic financial crises throughout the world between 1970 and 2007. The average cost to taxpayers in each of those situations was I think 13.3 percent of GDP [gross domestic product]. For us, that translates into something like $1.8 trillion.

This will end up costing zero in my judgment. Not a penny. And the programs for the banks will generate a meaningful profit in billions of dollars for the taxpayer. ...

Geithner's the last man standing. A lot of the folks from the economic team have left or were pushed out. What does that say to you?

It certainly suggests that there's a working relationship between the president and the secretary of Treasury, but it is also very consistent with the view of the president wanting to keep markets calm. Having found a secretary of Treasury that has developed a relationship with the banking system, given them most of what they wanted, and the economy still not recovered, one could understand that one wouldn't want to disturb the financial markets at this juncture. ...

... When did you first get to know [Tim Geithner]? What was his role in the Clinton administration?

He headed up the international side of Treasury and really was one of the key architects, if you will, of the United States government's response to the various global financial crises at the time. He and I ended up working together on some of that.

It's been written that he learned quite a bit from his time in Japan. Did he learn quite a bit that he used later on in this crisis?

Oh, sure. Each one of these financial crises has its own specific elements. They're all unique, but there are certain lessons which do translate. And one of the key lessons, one of the key takeaways was the sooner you act and the greater force with which you act, the better the outcome and the cheaper the cost to the taxpayer.

That's a hugely important lesson. It's very hard to execute in reality, because acting early, while it's clear that it's most effective and cheapest, it's also politically the most difficult, because the pressure hasn't built to the point where there's overwhelming popular demand for you to do some of the difficult things you have to do. But at the end of the day, it's clearly what works best.

I think as [Geithner] was involved with the other countries during that period, you could see that. ...

... There's this argument that the economists that were around Obama during the campaign -- the [Paul] Volckers, [Austan] Goolsbee and others -- were more progressive economists, and that once he got elected he brought into power Summers and Geithner and others, more conservative economists that would look at things in a different way. In fact, [he brought in] some of the team that had been involved during the Clinton years looking at deregulating, and the irony now was that this was the same team that was really looking at re-regulating.

... I can tell you that putting myself aside, the rest of the team that he brought in was an A-plus team. I don't think you could have had a better group to deal with the set of challenges that the president was facing at the time. ...

The riff is that the team would be more passive on pushing the banks too much, compared to folk that would have come in -- the [Paul] Krugmans or [Joseph] Stiglitzes of the world -- who would have come in and said, "This is our opportunity to change the financial system." Is there any truth at all to that? ...

We viewed every decision, and the president viewed every decision, and the secretary viewed every decision through the prism of, what is going to stop this from going off a cliff? How are we going to prevent Depression 2.0 with the least cost to the taxpayer, the least downside risk and the greatest chance of success? ...

There were tons of opinions about what we should do, different courses we should pursue, but I think the question that has to be asked is, "Would the outcome have been any better had we gone down a different path?" I think the answer to that is clearly no.

Different people were advocating that we act much more aggressively. Others were arguing the other side, that we were doing too much. The question was: What's the right balance?

It's not about did you push the banks hard enough. What we were dealing with was a house on fire. How do you put that fire out? If you want to reform the banking system, you do that through the regulatory, through things like Dodd-Frank [Wall Street Reform and Consumer Protection Act], but when you're putting out the fire, you need to put out the fire. It's not about whether you were hard or easy on the banks. ...

Was it surprising that in the end there was this turnover on the economic team and in fact that Geithner is the one that still remains?

I don't think so. I mean, actually if you look at the tenure of most of us, it's just about average for this kind of a political appointee. And Tim actually might have a hard time getting a job out there, so he's probably just better off staying where he is. [laughter]

The president has a great relationship with Tim Geithner. … Tim is very good at serving, I think, the president what he needs to make the choices in front of him. So it's not surprising that he's still there.

"Plan beats no plan."

Yeah, right.

Did that happen quite a bit?

Yeah, I mean, I vividly remember Tim pulling some disparate meetings together, saying: "Look, in a half an hour we have to give the president some solid advice. And we can present different views to him, but that's what's going to have to happen in a half an hour. So let's get to work."

And I would imagine that that kind of a person is very helpful to you if you're the president. So it doesn't surprise me that Tim's still there.

... Probably the low point for Geithner was the February [2009] speech. ... Tim Geithner goes before the cameras, and it's not one of his shining moments -- he has said so as well -- and it shakes confidence levels in the fact that there is no plan. ... Did you watch the speech? ...

I watched it kind of out of the corner on my eye on a TV, because we were preparing to do backgrounding with reporters after the speech, so we were preparing some notes.

Since I've been out of government, I went back and I actually looked at the speech. It's actually a pretty good speech, and it's unfortunate that the market didn't fully appreciate what was in it and what was behind it. ...

But did Obama understand that when he laid this responsibility in Geithner's lap?

There were a couple things that happened running up to that speech. One was the president's remark the day before which got people's attention. Also, the markets had run up quite substantially. Expectations got way out of control. We shouldn't have let that happen, frankly. I think with hindsight, we should have done a better job at managing those expectations.

There were leaks about different ideas that we were debating, some of which would have been like the Treasury walking into the markets with a wheelbarrow full of cash, handing it out to people.

I remember, maybe it was the week of the speech or the week before, there was a discussion of something called an aggregator bank, one of the ideas that we had been considering where the government would buy up all these legacy assets.

Many people read that as we're going to just take all this off the hands of the banks, so they bid up the prices of the assets, of the banks, the market overall. And we weren't going to do that. We just weren't going to transfer wealth to these institutions, but the market was expecting it. So the secretary gives his speech, and we got the reaction that we're all familiar with.

... Is it fair to say that the plan was still being developed and there wasn't the total plan that people were expecting, and that's why expectations were so high?

All the details were not worked out; we were still working through some of those. A lot of the details were there, but we hadn't settled on the final package until the week or two before the speech. ...

... This was not the best couple of weeks for Tim Geithner. ...

... It certainly wasn't the most pleasant, but during that period, he was unflappable. If you think about what was going on in the markets, what was going on in the economy, the pressure that you can imagine, he didn't miss a beat. It really was remarkable. I was very impressed. ...

How did Obama react?

... The president stuck with the secretary. He stuck with the plan that the secretary laid out, and he was under tremendous pressure to change course. We had announced this plan on Feb. 10. The markets reacted in a way that none of us would have hoped.

The crowd that was arguing that we should do more, that we're not being aggressive enough, was remarkably vocal, but the president stuck with it.

Why?

The plan was the best of a bad set of options. Every option had a downside, every one.

The secretary used to have a saying: "Plan beats no plan." We had a plan. Some outside voices had sound bites but not a plan, and as we were talking about earlier, these plans are very detailed, highly complex, interconnected, and not easily explained at a 60,000-foot level. Some of the other things sounded really good at a 60,000-foot level, but when you get down to 30,000 feet or closer to the ground, they just didn't hold up.

The president was excellent at pushing and making sure that the secretary and all of us thought we had the best plan possible, asked great questions, continued to push.

At the end of the day, ... I've got to believe that this decision to stick with this plan was one of the hardest decisions he had to make at that time. That's my own guess. ...

What was the role of the New York [Federal Reserve Bank] to begin with, and how did Tim Geithner, as head of the New York Fed, view this? Were they surprised when they saw the hole that existed at Bear?

The New York Fed had only a limited supervisory role over Bear, so I think they were surprised at the depth and the suddenness, even more so the suddenness of the problems.

But I also think that Tim Geithner understood that it was a vulnerable situation. He had only limited ability to take certain actions. And my guess ... is that he was urging even more significant actions than others in Washington wanted.

... Explain that.

I think he was looking for a program or programs whereby the Fed could inject more liquidity into the financial services industry, away from just the banks. He had all sorts of power to inject liquidity with respect to the banks, but less power with respect to the non-bank financial institutions.

It's said that he was fearful or knowledgeable of the problems with derivatives, that he was very involved in trying to clean up the paperwork aspects of it. How much were they concerned about the realities of what the market had become?

... Way ahead, Reserve Bank President Geithner was worried about derivatives. But it was ... focused on the paperwork problem, the clearance problems. It was less focused on the incredible amount of gambling which had been introduced into the market, and the incredible amount of risk which had been introduced.

That is one of the saddest stories of the events leading up to the 2008 crisis, that no regulator, nowhere, had the information necessary to be as responsive as they ideally would have been. Derivatives were the heart of the problem. No one knew who had written them, how much had been written, and who were the recipients.

Why?

There wasn't the mechanism in place at that time. I believe that another clear source of the problem was that some of the biggest writers of derivatives were simply not regulated by the Federal Reserve in any way. These included primarily the so-called insurance monolines -- that's a misnomer, but that's what they were called -- the most egregious example of which being AIGFP [AIG Financial Products], but also was MBIA, Ambac and several others. ...

When you heard [Lehman Brothers] going down Sunday night, did you figure big trouble in the future, in the immediate future?

I knew about it before that Sunday night.

And you knew how bad it was going to be?

I can't say again, as a member of a body of 18 people that I personally knew how bad it would be, but I did know, because you could see it in the numbers, and also you could hear it in our discussions. And we talked about these things, that there were others who were significantly exposed. And if you had been watching the marketplace, you could see the spreads and the cost of insuring against failure for these various institutions. And so Lehman wasn't alone. The complexity of Lehman was only found out after you pulled back all of those layers.

I do want to give the New York Fed enormous credit. In a very short period of just several days of peeling back all of the layers of that onion, the SEC [Securities and Exchange Commission] should have, because they were the supervisor, have understood all of the underlying risk. But the New York Fed staff, assisted by others from around the system, did an incredible job of actually wrapping their arms around the risk of what was actually Lehman Brothers.

So why'd we let it go? How did it go?

Well, that's something for the history books to document, but it is what happened.

In 2008, when you're talking to Tim Geithner at the Federal Reserve, what is motivating him? What's motivating the way he's looking at the crisis and the decisions that he's making?

First, we meet as a group. And we obviously would have sidebar conversations. I've known Tim a long time. …

In my bilateral conversations with Tim, but most importantly in our group conversations, he's trying to figure out the best way to keep a system stable. And I've probably known Tim Geithner longer, because we served in the Clinton administration, than most of my other colleagues. And so if you're asking did I doubt his sincerity or his integrity, I did not.

In fact, when he came under enormous public criticism, I sent him a little e-mail that said, "Illegitimi non carborundum," which is an old Harvard saying of "Don't let the bastards get you down." Interestingly, he said his grandfather had had that in tile I think in his kitchen. And so that sort of reinforced he was doing the best job he possibly could. He was on the front line of action at the New York Fed.

The question is what motivated Tim Geithner. That was the question you asked. And I would say trying to do the best he possibly could to contain what was a massive conflagration that just broke out. Yes, we should have been more aware of the risk that was in the system, but the other supervisors should have been as well. And Tim's job at the time was to try to stem the damage that could be done here. And I think what motivated Tim, I know what motivated Tim, was to do what's in the best interest of the American people. …

How scared on Wall Street were people that there was a completely new administration coming in?

There was a general view that the president-elect was a very smart person and was looked upon really as a source of hope. I think that some of the early nominations that he made were also comforting to Wall Street, such as Tim Geithner. I don't think that Wall Street at all looked upon the new administration coming in as a major threat.

Around [Sen. Obama] during the election were a lot of progressive economists. But then he picks Geithner and [Larry] Summers and holds on to Bernanke. Was that surprising? Explain how it was viewed by Wall Street.

I think that Wall Street viewed Geithner, Bernanke, Summers as a commitment by the incoming administration to balance a centrist view, not leaning way to the left. There were some of the economists -- they don't like to be reminded about it now -- who were strongly urging that the whole banking system be nationalized. That was a view which was I think short-sighted, but it was certainly loudly articulated. ...

Why do you think Geithner got the nod?

I think Geithner got the nod because of his superb performance during the crisis. ...

How different is this new administration and the policies that they're following? ...

... I would say the new administration has significant differences from the prior administration. ... The deregulatory ethos really which had existed for the prior nine or 10 years -- the new administration I think clearly sees the need for an enhanced regulatory system. ...

So as Bear Stearns melts down, what position did you take on what to do about it?

We, being the FDIC and my peers, were not involved.

I got a call on Friday, early in the morning, from one of my staff. He had been notified by somebody at the Fed that [Bear Stearns was] going to go into bankruptcy, and then when I got into the office the narrative had changed. Now there was going to be this government-assisted acquisition by JPMorgan Chase of Bear Stearns.

My reaction when he called me that morning and said they were going into bankruptcy was, "Well, investment banks fail." Because they do. That's the traditional model. Insured banks are supposed to take deposits.

I was surprised that the government had to assist with the acquisition and had taken on risk exposure to assist with the acquisition of an investment bank. It amazed me because the FDIC is the only agency with express legal authority to wind down financial institutions other than Fannie and Freddie. Their regulator has control, and of course ours only extends to insured banks.

So we have ... rules and procedures that we have to go through, and we are really forbidden from doing anything to help shareholders. … Our rules say if the place is going down, they go into receivership, which is just like a bankruptcy, and the shareholders and the unsecured creditors absorb the losses associated with that. ...

So I was very surprised that the New York Fed had found legal authority to go in there and arrange a deal. We auction things too. We never just call up an entity and say, "Will you buy this place?" We might call several entities and say, "Would you be interested," to get an auction going, but we never kind of just arrange marriages. ...

... Did you call up Tim [Geithner] and say, "What's going on?"

Again, it was an investment bank. I did not have any authority over Bear Stearns.

But you knew more than anybody else in the government about what it meant to take down a bank?

We did, and it would have been nice I think if we had been consulted at least on some of these issues.

You were never consulted?

Not outside insured banks, absolutely not. We had nothing to do with Bear Stearns, Lehman Brothers, AIG, none of that. ... We were consulted on Fannie and Freddie, but not the other ones. ...

I think that's regrettable, because I think there're some things where our insights and rules could have maybe helped with perhaps making the bailouts not so generous at least. Granted, government had to take some action. ...

It would have been at least nice for there to be some publicly available analysis. ... Why was it necessary for the government? What did the New York Fed see about Bear Stearns failing that convinced it that it was going to be systematic. Who was going to take losses? What would the knock impact of that been?

Throughout the crisis I was very frustrated that I just kept getting these arguments when we started being asked to participate in bailouts. When institutions like Citi got into trouble, I got very frustrated with these categorical statements: "Because they're big. They're systematic. And we've got to bail them out." That wasn't enough for me. Just because you're big doesn't mean you should get showered with government money.

I want more analysis of why. If I'm going to go in there and give exposure for the FDIC, which is a government agency, why am I doing that? Who am I protecting? I don't want to protect this institution. They were badly managed. They should fail. So who am I protecting? ...

Do you think there's real support for that by the president?

I hope so. I think he is, but I think he needs to make sure he's got an economic team that's also committed to that same agenda.

Geithner … is really the last man standing in the Obama economic team. What is it about him that makes him a permanent fixture of this administration?

I think he and the president have a very good working relationship. I think the president values his advice, and it's his job to pick his own advisers.

Do you think the president's been well served by Geithner?

I think you need to look at the objective effects about what's going on with our fiscal situation and our economy and make that decision based on that.

Well, that would--

Not say good things. No, it wouldn't.

The presumption was that if the banks get this money, they will lend it. Small businessmen will get the money. They will hire people. And the economy, which is dependent on consumer spending, will pick up.

Right.

It didn't happened.

It didn't happen. Not only that, but I think with the bailouts we propped up a bloated sector, and I think that they're a drag on the economy right now. ...

Other people raise the issue that they drain the best and brightest from our schools?

Now that's true. I'll give you an anecdote: When I was still a chairman at the FDIC, I went to an Ivy League school to give a presentation, and there was a nice reception afterwards for some students. There were five young women standing around me talking, and they were wonderful, bright, ambitious, optimistic young people. And three of the five we're going to go work for Goldman Sachs.

You've got to credit Goldman; they recruit very smart people. But it is that siren song of money and prestige and power. I would like those smart people to go find the next cure for cancer or more ways to do renewable energy, or increase our manufacturing base.

I want the smart people to go into the real economy and do all the things that we need smart people to do there too. It's hurt us. We didn't have a sustainable model. We had a hyperdrive model based on a juiced-up housing market and a juiced-up financial sector. ...

You're watching all [the Troubled Asset Relief Program negotiations] from the sidelines?

Pretty much. We were not really involved in their first attempt to get TARP passed. We got brought in later because they couldn't get the votes, and so one of the things they decided to do to get the votes was to increase the deposit insurance limit to $250,000. ...

So you had to agree to that?

Right. We had to buy in. They needed us to get the votes, so we got brought in at that point.

And that was throwing something out to Main Street?

That was the Main Street benefit. ...

I was summoned to a meeting. ... It was at Hank Paulson's office. I kept asking him what it was about. Nobody would tell me what it was about. I thought it was about TARP and how to spend the TARP money. ...

I go into the room, and there's Hank sitting there, Ben [Bernanke] sitting there, and Tim Geithner's on the phone. And they basically hand me a piece of paper that would have the FDIC announcing that they're going to guarantee pretty much all of the liabilities in the financial sector. So all the debt we're going to guarantee for banks and bank holding companies.

That was quite a thing, and I didn't want to do that. ... So I told them that I would have to think about that.

On the one hand, it's hard for the chairman of the FDIC to go in a meeting and be pointedly asked by the secretary of the Treasury and the chairman of the Fed to do something and to say no. But I bought for time. I played for time. ...

Was that a tense meeting?

I don't know if it was tense. I was so flabbergasted. At that point I didn't even have the wherewithal to fight back. I just played for time. I said, "I have to go talk to my board about it." ...

So anyway, I went back, talked to the board, my internal directors. They had the same reaction I did. They were incredulous.

What is that they're asking you to do?

... I didn't bring the text with me, but it basically said the FDIC would guarantee all the creditors of banks and bank holding companies, including the investment banks.

So they want your budget?

They want my budget. They wanted my legal authority ... to guarantee debt, guarantee bondholders. It's all about the bondholders.

Where was that money going to come from?

... That what was one of my questions.

One of the criticisms I got during the crisis was that all I cared about was the FDIC, and I didn't care about broader financial stability.

Well the FDIC was holding things together. … If people had lost confidence in the FDIC and started pulling their money out of banks, we would have been back in the Stone Ages. It would have been cataclysmic. I don't even want to think about what would have happened.

So this idea that by caring about the FDIC I wasn't caring about system stability I thought was ludicrous. I was very concerned about the credibility of the FDIC doing what it was supposed to do, which was insure deposits.

Now if I go out and insure all the debt and $13 trillion financial system, what kind of credibility was I going to have? Insured depositors are going to be saying, "They can't do all that."

So I told them that, and that was one of the many arguments I used subsequently to tell them we weren't going to do that. ...

So you're insuring, at the FDIC, Main Street?

Right.

But you're being asked by these three guys to insure Wall Street?

Pretty much. To insure the bondholders, and these are big Wall Street firms, pension funds, big bondholders, mutual funds.

Which props up Wall Street, but this is not your mandate?

... It's not anywhere close to our mandate. It was a real stretch in terms of legal authority, and it was a huge stretch in terms of our financial capability to make good on this. ...

So did you say no?

... We entered into a negotiation. Throughout the crisis ... another criticism was that I wasn't a team player, I was always difficult. I tried very hard to meet these folks halfway, even though I didn't agree with a lot of what was going on. ...

The markets were freezing up. Nobody wanted to lend to anybody after the Lehman failure, and I agreed there was a problem with the ability of financial institutions to roll expiring debt. ...

So ... we said we'll guarantee new debt. We will not guarantee the existing debt. That's there for loss absorption if these institutions go down. And then we're also going to charge money for it."

You wanted some moral hazard?

Yeah. Actually our original proposal was we'd only guarantee 90 percent of it. We wanted them to take 10 percent, and that was just a non-starter with both the Fed and the Treasury. They said that wouldn't work. They just refused. ...

So you signed?

We did. I think at the peak of the program it was about $330 billion worth of debt. Have not taken any losses on it so far. I don't think we will. And we did make money off of it.

I don't think that justifies that. There's so much of this, "Oh, we made money off of the bailout." I'm not sure overall we did make money off the bailouts because you have to look at Fannie and Freddie and AIG and GM and some of the other places where the government's still in pretty deep.

We also printed a lot of money, which could come back to bite us.

That’s true. This could have tremendous inflationary pressures down the road. ...