Jon Stewart Timothy Geithner Extended Interview

Last night Jon Stewart had Timothy Geithner on. The full interview was 42 minutes long and is on the web: Timothy Geithner Extended Interview Video. It's both really good and really frustrating. Stewart doesn't through in the easy joke all the time but he does cut himself off in the middle of a question to unnecessarily rephrase it and sometimes go to a different question. Geithner has never been particularly relaxed on camera though he does get better here about 20 minutes into it.

The tl;dr version is Stewart wants to know why we bailed out the banks so extensively but didn't do so for Main Street (with underwater mortgages). Geithner agrees that bailing out the banks was unfair, but also (I think rightly) says the alternative was worse. He also just states that they couldn't bail out the homeowners. It takes the two of them way too long to get to this point and while they start to explore why or if that's true they don't really cover it. By the end, Geithner is saying that administration wanted to do more but couldn't. Stewart kind of asks why they couldn't but never gets to saying that if they wanted to do more, it wasn't made public and therefore it doesn't seem like they tried.

The part that really shocked me was their description of the cause of the crisis. Geithner just kept repeating how the scale was bigger than anything previously and that the root cause was the belief that housing prices wouldn't fall. Stewart brings up the unregulated derivatives market but Geithner dismisses it as not the root cause. I thought it was well accepted that while the housing crash was the precipitous event, the reason the scale was so huge was that the banking industry was exposed to a housing crash to an extent no one fully understood because some huge percentage of their capital (half or more) was in an unregulated highly interlinked derivatives market. When housing crashed everything froze because no one (meaning the banks) actually had faith in their balance sheets because they could no longer count on the valuations of their derivatives (aka insurance contracts). This is the reason the housing crash threatened the world economy and the tech bust a few years prior didn't. It seemed to me that Geithner didn't accept this but if the interview went longer he might have conceded it too (that's a pattern in the interview).