Timothy Geithner reportedly says “we’re having a major financial crisis in part because of failures of supervision” — despite the fact that he ‘regulated’ major U.S. banks before becoming the U.S. Treasury Secretary. Now Geithner allegedly wants to clean up the mess he helped create.
In September 2005, Geithner started a process that helped streamline an antiquated system that threatened Wall Street’s boom. Billions of dollars worth of credit derivatives were being traded daily as banks and investors worldwide tried protecting themselves from losses on increasingly complex and risky financial bets.
Geithner, then head of the Federal Reserve Bank of New York, pressed 14 major financial firms to build an electronic network that would make the market easier to monitor. By the Fall of 2006, the new system helped the derivatives trade become more efficient. During this streamlining process, clear signs of a catastrophe in the making were missed.
Once the housing market collapsed, derivatives stoked the fires that ignited inside some of the biggest banking companies that failed to assess an array of risks they were taking that emerged as a key element in the multitrillion-dollar meltdown of the global financial system.