2008 saw one of the worst financial crises in generations, the global implications of which are still being felt today. Ten years later Ben Bernanke, Timothy Geithner and Hank Paulson reflect on the causes of the crisis, why it was so damaging, and what it ultimately took to prevent a second Great Depression.
Firefighting is a brief account of [a] crucial moment by three of the most important actors ... What Bernanke et al. — I’m going to call them BGP for short — have given us...is a primer on why the crisis was possible (and why, even so, almost nobody saw it coming); a ticktock on how the crisis and the financial rescue unfolded; and a very scary warning about the future. Much of what BGP have to say here is familiar to economists, but perhaps less so to the general public ... It’s an intricate story, one whose details probably seem a lot more interesting to those who were involved than they will to a broader readership. And I don’t think there are any shocking new revelations ... But should we be worried about another crisis? Yes, the authors say, in a final chapter that is downright scary ... In other words, we seem to have learned the wrong lessons from our brush with disaster. As a result, when the next crisis comes, it’s likely to play out even worse than the last one. Isn’t that a happy thought?
The tragedy of this slim, self-satisfied little memoir about the 2007–2008 financial crisis is not what it gets wrong. Indeed, four of its central arguments are important and exactly right ... The problem with Firefighting, a justly pessimistic, three-headed lament...is what it fails to say, refuses to acknowledge, and is too timid (or blissfully unaware) to look in the eye ... This is a book whose authors take turns politely praising each other in the third person, but it has nothing to say about the gilded revolving door between Washington and Wall Street, or the role of the inbred legal corruption that riddled the financial sector...nor are Bernanke, Geithner, and Paulson much inclined to take a hard look at their own missteps along the way ... Despite a hand-waving acknowledgment that the financial crisis 'inflicted tremendous pain,' the central takeaway of Firefighting is, basically, 'We saved the world. You’re welcome.' Which is true and should be appreciated — as far as it goes ... yes, the public is wrong to think that the bailouts failed or that they were not essential. But Main Street was force-fed the Great Recession that inevitably followed the financial crisis, while the bankers who caused it continued to dine at the Four Seasons — often in the company of once and future firefighters.
Firefighting is mercifully short and succinct, yet all the key elements of the chronicle are here ... The book is also surprisingly well-written ... However, for those who followed the crisis more closely the interest does not lie in new information, of which there is really none, but in how the authors assess their own efforts with the benefit of hindsight. Needless to say, they think they got it mostly right, while honourably admitting they had to scramble and improvise given the opacity of the financial sector when the crisis started and the speed at which previously unthinkable events unfolded ... No doubt these policymakers did a solid job in extraordinarily challenging circumstances. Their policies worked, and they worked rather well. But they were not the only policies available, nor do their choices have a strong claim to being the best ones...What they do not seriously consider is whether their policies to restart credit flows could have worked even with a less bailout-friendly approach, saving both money and political anger. These are the ideological blind spots revealed by reading Firefighting between the lines.