Robert Giroux/Getty Images
US Treasury Secretary Timothy Geithner
Treasury Secretary Tim Geithner has an op-ed in the Wall Street Journal today in which he makes the case for financial reform based on a "It's déjà vu all over again" argument. We had "financial crisis amnesia" when the financial crisis struck in 2008 — and in 2012, we the amnesia has returned.
But Geithner has his own form of amnesia. Specifically, he's forgotten his role in bringing the financial crisis about in the first place. Here's an excerpt:
Regulators did not have the authority they needed to oversee and impose prudent limits on overall risk and leverage on large nonbank financial institutions. And they had no authority to put these firms, or bank holding companies, through a managed bankruptcy that wound them down in an orderly way or to otherwise adequately contain the damage caused by their failure. The safeguards on banks were much tougher than those applied to any other part of the financial system, but even those provisions were not conservative enough.A large shadow banking system had developed without meaningful regulation, using trillions of dollars in short-term debt to fund inherently risky financial activity. The derivatives markets grew to more than $600 trillion, with little transparency or oversight. Household debt rose to an alarming 130% of income, with a huge portion of those loans originated with little to no supervision and poor consumer protections.
Michael Wuertenberg/World Economic Forum/Flickr
Rep. Barney Frank (D-Mass), speaking at 'The Next Global Crisis' session of the Annual Meeting 2010 of the World Economic Forum in Davos, Switzerland, Jan. 27, 2010, at the Congress Centre.
The World Economic Forum — often described as a gathering of the world's business, government, and financial elites — will touch down in Davos, Switzerland this week. It's currently being much discussed and blogged about, especially given that the repercussions of the financial crisis are still being felt. Unemployment in the U.S. is still alarmingly high, at 8.5 percent. Europe still seems pretty far from fixing the deep problems of the euro and of averting a wider sovereign debt crisis. Growth in the developing world is slowing.
So in a way, Davos 2012 isn't about elitist hobnobbing but rather about Davos saving...itself. The pressing problems of the world aren't on the agenda. The ongoing economic travails of the West are. Writing for Reuters, former White House official Larry Summers offers the following: