Timothy Geithner claims bailouts necessary to save U.S. from economic collapse

Despite the staunch criticism that the United States government has received over bailing out Wall Street at the height of the economic collapse in 2008 and 2009, it was a necessary measure, according to former U.S. Treasury Secretary Timothy Geithner, who published an op-ed in the Wall Street Journal on Tuesday.

Geithner wrote that without the financial bailouts then the United States economy would have collapsed and fallen into a depression, though evidence has shown that the major financial institutions didn’t need bailouts whatsoever and that most of what Bush and Obama administration officials said was nothing but fear mongering and fallacious statements.

“What one has to do in a panic is the opposite of what seems fair and just,” stated Geithner. “In a financial crisis, the natural instinct is to let creditors suffer losses, let firms fail, and protect taxpayers from any risk of loss. But in a financial panic, a strategy based on those instincts will lead to depression-level unemployment.”

In order to keep the financial system from imploding, Uncle Sam and the Federal Reserve needed to intervene and provide “a massive injection of cash.” In the end, according to the president of Warburg Pincus, the bailout turned out to be a very good endeavor for all parties involved.

“Because two presidents were willing to put politics aside and deploy a massive and creative rescue, we prevented economic catastrophe and got the economy growing again in about six months,” Geithner noted.

Although he conceded that there are still major economic problems facing the country, such as unemployment rates and income inequality, ultimately government intervention was “essential” to avoid a second Great Depression.

If the banks were in such financial disarray then these institutions should have went down, but as David Stockman, the former Reagan budget director and author of “The Great Deformation,” put it: the esteemed leaders lacked economic insight and misunderstood the nature of markets throughout the “Blackberry panic.”

Here is what Stockman has said about the former Treasury Secretary:

“He has basically been a bag carrier for Wall Street – in fact, his shoulders are a little stooped. I don’t think he’s really fit to occupy the office he’s in. He has no real philosophy. I don’t see any evidence that he’s understood financial history or public policy going back decades and decades. It’s all seat-of-the-pants, make judgments on the fly: Try something, and if it doesn’t work, try something else…He might make a third-rate investment banker, but he certainly shouldn’t be Secretary of the Treasury.”

A few years have passed since the economic upheaval, but the U.S. economy is still in shambles: unemployment remains high, public and private debt continues to be astronomical, wages are stagnant, price inflation is rampant and the elements of the stock market are in yet again another bubble.