History will bear out President Barack Obama’s controversial decision to bail out America’s biggest banks, outgoing Treasury Secretary Timothy Geithner says.
"There's no explanation powerful enough to soften the inevitable fear and anger and resentment that's going to come with a crisis that did so much damage to the innocent," Geithner told the Wall Street Journal.
He said while the move appeared “deeply unfair,’’ government intervention was absolutely necessary to prevent a financial collapse.
But he said many voters will continue to blast the shoring up of banks with untold millions, viewing it as if "you're giving aid to the arsonist."
Geithner, in a separate interview, told The Economist that doing nothing would have had dire consequences.
“You will end up having to socialize much more risk and [create] much more future moral hazard,” he said.
“You have to design the crisis response to mitigate moral hazard to the extent you can, and then change the rules of the game going forward to undo some of the damage you’ve caused.”
Geithner noted that the banks supervised by the Fed withstood the crisis better than most institutions.
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