Kevin Duffy on the legacy of the 2008 financial bailouts

In his recent interview in Barron's (“Hank Paulson Says the Financial Crisis Could Have Been 'Much Worse’,” September 17, 2018), former Treasury Secretary Henry Paulson claimed, “The timing, cause, and severity of the next financial crisis are impossible to predict.  Of course someone will get it right and will be credited with doing so, but he or she won’t spot the next one.”  Having warned about the late ‘80s Japan bubble, late ’90s tech bubble and mid ‘00s credit bubble (“For Whom Do the Bells Toll?,” June 18, 2007), I’ll take that as a challenge.  The root cause is always artificially low rates set by central banks.  Since this period of low rates was longer (7 years vs. 2 ½ from 2002-04), deeper and more global, the next crisis will be more widespread and prolonged.  As for timing, it’s anyone’s guess but with rising rates, narrowing leadership (just 5 of 35 country stock markets up on the year), investor euphoria (record low cash levels at Schwab), and wild speculation (first cryptocurrencies, now cannabis stocks), the lights are flashing red.

There are plenty of areas of fragility.  Within the U.S., since the end of 2008 student loan debt is up 127%, auto loan debt 57%, corporate debt 76%, public debt 98%.  Margin debt has more than tripled.  Outside the U.S., Canada and Australia are experiencing housing bubbles while emerging market debt has gone from 110% of GDP to 194% according to the Bank for International Settlements.  Other potential landmines: Chinese corporate debt has increased by 64% of GDP, Italian government debt by 40% of GDP, and Japanese government debt by 61% of GDP.

Unlike the tech and credit bubbles, which were sector-specific, the bubble today is in “everything.”  This is the true legacy of Paulson, Geithner, Bernanke, Frank & Co.

~ Kevin Duffy, September 21, 2018

Tim Geithner on our proximity to another big financial crisis

It will come again. There will be another storm. But it's not going to come for a while.

It's not going to be possible for people to capture risk with perfect foresight and knowledge.

~Tim Geithner, US Treasury Secretary, in a speech given at the Time Warner Center screening of the new film, "Too Big To Fail", May 18, 2011

Tim Geithner on sustaining the unsustainable

European leaders face the difficult challenge of trying to restore sustainability to an unsustainable system.

~ Timothy Geithner, US Secretary of the Treasury, remarks at the U.S.-China Strategic and Economic Dialogue, Beijing, China, May 25th, 2010

Jim Cramer flip-flops on his Dow 9,000 price target, embraces change

This morning several people asked me if my Dow 9,000 price target was still on because I did hint about that last week and the answer is: no.

See, remember what I said, I said, we could go back there if Trichet, the head of the European Central Bank, continued to do nothing to solve the euro's problems and the disaster that is Greece. But that's not what happened. I said I was negative because Trichet had left the building, remember I had said he had left the building-- he came back in Friday night! Dragged by other countries' ministers, particularly France and Germany.

He and his fellow European finance ministers did something, and not just anything. They did amazing things this weekend along with the EU and in coordination with our Fed Chairman Ben Bernanke and Treasury Secretary Geithner, they understand these problems we're facing better than any other people in the world. And you know Ben Bernanke is the best central banker in the world, I said that on Friday.

Now, when that European contagion risk is taken off the table, what am I supposed to do, just stay negative? I can't! When a plan that basically delivers all the things I was calling for and crying for on Thursday and Friday comes along, I can't fight it and say, "Uh uh, nope, it's not what I want, gotta stay negative, uh uh!" I can't. The plan was exactly what I wanted.

In the words of the late, great economist and investor, maybe the best of both, John Maynard Keynes, who would have absolutely approved of Europe's solution, and I quote, "When the facts change, I change my mind. What do you do, sir?"

~Jim Cramer, "Embracing Change", Mad Money, May 10th, 2010

Timothy Geithner on putting out the economic forest fire

To stand back and let it burn is irresponsible. It's what happened in the Great Depression.

~ Treasury Secretary Timothy Geithner, testifying about AIG bailout, January 27, 2010

Tim Geithner asks to raise debt ceiling

Congress has never failed to raise the debt limit when necessary. Because members of both parties have long recognized the need to keep politics away from this issue, these actions have traditionally received bipartisan support. This is clearly a moment in our history that calls for continuation of that tradition.

~ Timothy Geithner, Treasury Secretary, "Geithner asks Congress for higher U.S. debt limit", Washington Post, August 7, 2009

Timothy Geithner on his plans for sweeping financial regulations and expanded power for the Fed

Every financial crisis of the last generation has sparked some effort at reform, but past efforts have begun too late, after the will to act has subsided. We cannot let that happen this time.

~ Treasury Secretary Timothy Geithner, "Geithner Defends Plan to Give Fed Stepped-Up Powers," June 18, 2009, Bloomberg.com

Treasury Secretary Timothy Geithner on bank bailout

Congressman this plan will work. This plan because of the authority provided not just by Congress but the treasury and the Fed gives us broad ability to do what you need to do to get through a financial crisis like this. It just requires will; It's not about ability. We just need to keep at it. We just need to work with Congress to make sure we do this on a scale that will make it work.

~ Treasury Secretary Geithner speaking to Congress, Bloomberg TV, March 23, 2009