Treasury Secretary Timothy Geithner has used an op-ed column in the Wall Street Journal to dismantle arguments that the Dodd-Frank Act is counterproductive to achieving financial reform.
In a column entitled ‘Financial Crisis Amnesia,’ Geithner claimed that the 2008 economic crash occurred because the nation had forgotten about the downsides of risky investments.
‘These problems were partly the result of amnesia,’ he wrote. ‘There was no memory of extreme crisis, no memory of what can happen when a nation allows huge amounts of risk to build up outside of the safeguards all economies require.’
Geithner claimed that existing laws in 2008 were ‘tragically antiquated and weak,’ thus preventing a vigorous federal response to the crisis. ‘The failure to modernize the financial oversight system sooner is the most important reason why this crisis was more severe than any since the Great Depression, and why it was so hard to put out the fires of the crisis,’ he added.
Geithner did not use his op-ed piece to detail whether he made any attempt in his work as president of the Federal Reserve Bank of New York to push for financial reforms prior to the 2008 crash, although he summarized his reaction to the collapse of Bear Stearns.
He also used the op-ed column to defend the Dodd-Frank Act against charges that it was onerous, costly and too complex, arguing that those opposed to the legislation forgot the circumstances that led to the law's passage.
‘Are these reforms complex?’ he asked. ‘No more complex than the problems they are designed to solve. And, it should be noted, most of the length and complexity in the rules is the result of the care required to target safeguards where they are needed, not where they would have a damaging effect.’
Geithner acknowledged the Dodd-Frank Act's reforms ‘are not perfect, and they will not prevent all future financial crises.’ However, he pointed to his wife's alleged confusion over why anyone would want to repeal the law.
‘My wife occasionally looks up from the newspaper with bewilderment while reading another story about people in the financial world or their lobbyists complaining about Wall Street reform or claiming they didn't need the Troubled Asset Relief Program,’ he wrote. ‘She reminds me of the panicked calls she answered for me at home late at night or early in the morning in 2008 from the then-giants of our financial system. We cannot afford to forget the lessons of the crisis and the damage it caused to millions of Americans. Amnesia is what causes financial crises. These reforms are worth fighting to preserve.’